PRACTICAL SUGGESTIONS

If You Are a Surety or Guarantor. Protect yourself by limiting the agreement of suretyship as much as possible. Require notice of acceptance and default within a reasonable time, and limit your liability to a maximum amount. Otherwise, you will assume a much greater liability than you would as a partner.

Never sign an agreement of suretyship without carefully investigating the person whom you are guaranteeing. Make a specific request for information from the creditor. Never become surety for a man with whom you would hesitate to enter into a partnership agreement.

If You Are a Creditor Relying on an Agreement of Suretyship or Guaranty. Require that the agreement be in writing and signed by the surety. Also require that it state the consideration. Be careful to conform to all the requirements of the agreement, and to protect yourself against all possible question give notice within a reasonable time of acceptance and of any default of the principal. Disclose all material facts to the surety regarding the principal. Do not alter the agreement, or vary its terms, or surrender any securities in your hands to the principal, without the consent of the surety.

The court will never enlarge the liability of the guarantor or surety, by construction. Contracts of guaranty and suretyship are always construed strictly according to their wording.

REVIEW QUESTIONS

1. A went into B's clothing store with C and said to B, "You fit C out with a suit of clothes and I will pay for them." B furnished C a suit and sent the bill to A, who ignored it. B thereupon sued A, who defended the action on the ground that his promise was not in writing. May B recover against A? Why?

2. Jones owes Smith $100, Brown owing Jones a similar amount. Brown promises to pay Smith $100 for Jones if Jones will release him (Brown) from his debt of $100, and this is agreed to by Jones. What, if any, defense would Brown have to a suit by Smith against him for $100?

3. Steele and Newson both signed a promissory note, on which money was to be loaned by Wood to Newson, Steele signing as a surety. Newson later, with the knowledge of Wood, altered the date from September 11 to October 11 and delivered it to Wood. It being unpaid, Wood sued Steele, who claimed that these acts had served to discharge him. May Wood recover against Steele? Why?

4. Jones, an employe of Railton, requested Matthews to execute a bond for the performance of his duties as Railton's cashier. Matthews made inquiries regarding Jones, and was informed by Railton that Jones was considered a reliable man. As a matter of fact Jones had ten years previously

embezzled $560 of his employer's money, but had repaid the amount and had been guilty of no misconduct since that time. Railton failed to inform Matthews of any of these facts. Matthews executed a surety bond to Railton for Jones' fidelity. Two months later Jones absconded with $10,000 and Railton sued Matthews on the bond. May he recover? Why?

5. Ames, a surety on a note that was due and unpaid, was sued. His defense was that the maker of a note was an infant. Was Ames liable?

6. The Fidelity Bond Company gave a cash bond of $10,000 to the State of Wyoming for the faithful performance of contract by the National Bridge Co. The bridge contracted for collapsed a week before the date when it was to have been completed. Two weeks later the officers of the National Bridge Co. left the country for parts unknown, after realizing all they could from the assets of the company. The State then notified the Fidelity Bond Company that its bond was forfeited. What rights had the bond company? Why?

CHAPTER XXIII

SALES OF PERSONAL PROPERTY

I. Essentials

The Contract of Sale

1. Competent parties
2. Mutual assent

3. Consideration

4. Legal subject matter
5. Conformity to Statute of
Frauds

1. Between

II. Transfer of Title

2.

a. Ascertained goods buyer and (b. Unascertained seller

goods

As to third (a. Subsequent
parties

purchasers

b. Creditors

3. By conditional sale

4. By chattel mortgage

5. By docu- (a. Straight receipts ments of b. Negotiable

title

receipts

245. Introduction. The ownership of personal property would be of little value to the business man unless he also had the right to transfer it to others. The transfer of property in goods forms the basis of the majority of the transactions of commerce. The law applicable to such transfer is called the Law of Sales of Personal Property, or of Goods.

There are three phases of the Law of Sales which must be understood by a business man who seeks to transfer his property in goods to another intelligently. These are:

1. Manner and time of effecting a transfer of title to personal property from buyer to seller.

2. The express and implied warranties incident to a contract of sale.

3. The respective remedies of the buyer and seller.

These three points, viz., transfer of title, warranties, and remedies, are separately discussed in Chapters XXIV-XXVII.

Sales and Contracts to Sell. A contract to sell is one in which the seller agrees to transfer the property in goods to the buyer at some other time for a consideration called the price. When the seller has transferred the property in the goods to the buyer, the transaction is called a sale. Prior to the transfer it is merely a contract to sell.

EXAMPLES

1. A, a coal dealer, says to B, "I will sell you your next year's coal supply for $8 a ton, if you will agree to buy fifteen tons." B says, "I accept that offer." This is a contract to sell. B acquires the right to demand the transfer of fifteen tons of coal at a future date. Meanwhile A bears the risk of loss and the coal is subject to levy and execution for his debts.

2. C goes to D's grocery store, asks for a bag of flour, receives it and pays the price. This is a sale, because the property in the goods is transferred. If D should become a bankrupt his creditors could not reclaim the bag of flour from C.

246. Essential Elements of Contract to Sell. A contract to sell goods must possess every element essential to the validity of a simple contract. It must be made between competent parties, must by its terms evidence a mutual assent, must be made for a valuable consideration, and must concern a legal subject matter. Furthermore, it must comply with the Statute of Frauds.

In a contract to sell goods the parties are the seller and the buyer; the consideration is the price which the buyer agrees to pay; and the transfer of the ownership in the goods which the seller agrees to sell forms the subject matter of the sale.

247. Who May Sell. Only the true owner of goods or his legal agent may sell them so as to transfer a valid title to the buyer. Herein is the difference between the transfer of title to negotiable instruments and the transfer of title to other articles of personal property. While the thief or finder of a negotiable instrument which is payable, on its face or by indorsement, to bearer, or the thief or finder of money, may transfer it to a holder in due course so as to give him a title valid against the whole world, and even against the person from whom it has been stolen or who has lost it, the thief or finder of other personal property can transfer no title, because he has none himself. The true owner may reclaim it even from an innocent purchaser who has paid value. A person, therefore, however innocent, who buys goods from one not the owner, obtains no property in them as against the true owner; nor does anyone to whom he ever sells them obtain good title as against the true owner.

EXAMPLE

Soltau sued Gerdau to recover a quantity of rubber. In the trial of the case it was shown that Gerdau had bought the rubber from Smith, a broker in Boston, who had acquired it from Soltau under circumstances which the court held amounted to theft. Therefore Soltau, as the true owner, was allowed to recover the rubber from Gerdau. Soltau vs. Gerdau, 119 N.Y. 380.

248. The Thing Sold. Strictly speaking, a person cannot sell goods which he does not own. He may contract to sell them, but he cannot sell them.

When one contracts to sell that which he does not own at the time, the contract is for the sale of "future goods." Any attempt to sell such "future goods" has the effect only of a contract to sell, and has not the effect of a present sale. Even if the seller in such a case should attempt to make the sale as a present owner, such an attempt has no effect, as the title remains with the true owner. It does have the effect, however, of making the supposed seller liable to the supposed buyer as on an executory contract, giving the buyer the right to exact performance or collect damages.