policy require a written application, in which the party must make answer to a large number of questions with regard to his health, occupation, etc. Those questions must all be truthfully answered. No deception can be practiced in any way, or the policy is void.

CHAPTER XXXIV.

INTEREST AND USURY.

1. Interest is MONEY PAID FOR THE USE OF MONEY. Where one borrows money of another promising to repay it with an additional amount, the sum borrowed is called the principal, the additional amount interest. It is usually stated as so much per cent, i.e., so many dollars of interest for every hundred dollars of principal. All profits are not interest. It must be a return for another's money lent or retained. Thus the profits upon money invested in a business, or dividends on stock, are not interest. One may receive profits or dividends to any amount.

2. On What Allowed.-There are three general classes of cases in which interest accrues: (1) where it is expressly contracted for, (2) many cases where such an agreement is implied, and (3) where a debt has become due but remains unpaid. The most common instance in the first class is where money is borrowed by one of another. The debtor usually expressly agrees to pay the debt and interest. But in many cases where the money of one is borrowed or detained by another, the agreement to pay interest is implied from the nature of the business or the usual custom. That is the second class. The third class relates to the interest accruing after the debt becomes due, and it is a general rule

CHAPTER XXXV.

PLEDGING OF PROPERTY.

1. Security.-A creditor is said to have security for his claim or debt when he has something to rely upon besides the mere promise of the debtor. That security may be the guaranty of some third person, as, for instance, when some one beside the maker indorses a note. It may also be some particular property of the debtor appropriated to secure that particular debt. If it is real property it is done by way of mortgage (p. 225); if personal property, by way of pledge.

2. A Pledge is therefore security for the payment of a debt. We may define it thus: A PLEDGE IS AN AGREE

MENT BETWEEN A DEBTOR AND CREDITOR BY WHICH THE FORMER GIVES THE LATTER CERTAIN PERSONAL

PROPERTY AS SECURITY FOR THE DEBT. The word pawn means nearly the same thing, and both words are often used to mean the property pledged, as well as the agreement. Thus we see a pledge is a contract. These three elements are essential to it: (1) a debt, (2) an actual delivery to the creditor of the property pledged, and (3) an agreement that it shall stand as security.

3. Collateral.-The words collateral or collateral security are often used in the sense of pledge. Thus, when banks loan money they often require security, and government bonds, the stock and bonds of railroads, etc., are often used as pledges for the debt, and are then called collateral. The bank is said to loan on collateral.

4. Creditor's Rights. -THE CREDITOR MAY KEEP THE PROPERTY PLEDGED TO HIM UNTIL THE DEBT IS PAID, OR IF NOT PAID WHEN DUE HE MAY SELL THE PROPERTY.

Thus he has two rights, the right to keep (i.e., a lien) and

selves. Their rights and duties are those of parties with whom property is pledged. They are often allowed by law to charge more than the ordinary rate of interest for the money they loan.

9. Chattel Mortgages.*-Property cannot be pledged. without being delivered into the possession of the creditor. Yet a person will often desire to use his personal property as security and yet retain it in his possession, as, for instance, if it is a stock of goods from which he is selling. This may be done by his giving a chattel mortgage (form 34), which must be filed in a certain public office. A chattel mortgage is like a pledge in that the debtor may become entitled to the property by paying the debt: they are unlike in that in a chattel mortgage, if the debt is not paid, the property becomes the creditor's, and the debtor is not entitled to any surplus. A chattel mortgage is a conditional sale of the property to the creditor, the property becoming the creditor's if the debt is not paid. (See p. 87, sec. 3.) A pledge is not a sale to the creditor, but only gives him the right to sell the property to some one else if the debt is not paid.

CHAPTER XXXVI.

BANKING.

1. In General.-Banking as a business, is dealing in money. It consists mainly of two branches, (1) the receiving of money on deposit, and (2) the loaning of money at interest. Thus A, B, and C deposit some money with the bank; the bank takes that money and lends it to D and

*A chattel means a piece of personal property.