A contract of sale may be conditional, for example, that the property shall not be transferred until the price is paid. Though the property is transferred by the sale, promises or obligations may still be unperformed by the seller. Or the transfer of the title may be conditional on payment of the price. In such sales the goods are delivered to the buyer, but the title is retained by the seller until payment.
The capacity to buy and sell is regulated by the general law concerning the capacity to contract, transfer and acquire property. When necessaries are sold and delivered to a minor, or to an insane or drunken person, or to a married woman, who is lacking in mental capacity to make a contract, he must, by the general Sales Act, pay a reasonable price therefor. Necessary goods by this act mean those suitable to the condition of the life of the minor or other persons above mentioned at the time of their purchase and delivery.
As we have seen (See Minor) a minor may avoid his contracts. The right to do this is given for his protection, and should not be stretched beyond his needs. Therefore the right is confined to himself or his legal representatives. Neither creditors, nor trustees, nor assignees in bankruptcy can do this, but his heirs can do this, and probably his guardian. By the common law a purchaser for value who did not know that the seller bought them of a minor could not retain them if the minor wished to reclaim them as his own. This rule has been changed by the Sales Act, and a bona fide purchaser is therefore safe in purchasing such goods even though the seller did buy them from a minor.
As a minor may disaffirm his contract, any act clearly showing this intent is sufficient. "It was early settled," says Williston, "that an infant's conveyance of realty could be avoided only after he attained his majority. In the case of personal property a sale may be avoided during his minority by an infant seller or buyer. Though an infant may thus avoid his sales, purchases or contracts during infancy, he can make no effective ratification until he becomes of age, for an infant's ratification clearly can be no more effective than his original bargain."
In the Sales Act the Statute of Frauds (See Statute of Frauds) has been reënacted, and provides that in a sale or contract to sell goods amounting to five hundred dollars or more, it cannot be enforced unless the buyer shall accept a part of the goods, or give something in earnest to bind the contract, or in part payment, or makes some note or memorandum in writing of the sale which is signed by the party or his agent against whom the other party seeks enforcement.
This statute applies to a contract for goods that may be intended for future delivery, but not to goods that are to be manufactured by the seller especially for the buyer and are not suitable for sale to others in the ordinary course of the seller's business.
The Sales Act contains an important section relating to the sale of an undivided share of goods. If the parties intend to effect a present sale, the buyer becomes an owner in common with the owner of the remaining shares. How important is this section may be easily learned. The grain of many owners is often mingled in an elevator. It is delivered to those who call for it, the kinds and quantities mentioned in the receipts given to them at the times of storing it. The grain in the elevator may be delivered many times before a particular depositor makes his demand. The elevator company must keep on hand enough grain to meet all outstanding receipts. Each depositor thus retains title to some portion of the grain in the elevator. The company is the bailee with the power to change the bailor's separate ownership into an ownership in common with others of a larger mass, and back again. At any given moment all the holders of receipts for the grain are tenants in common of the amount in store, each owning a share and all owning the entire amount, each having the right to sell his share and demand its separation and delivery in accordance with custom and the terms of the receipt.
When a party has specific goods which, without his knowledge, have perished partly or wholly, the buyer may treat the sale as avoided, or as transferring the property in all of the existing goods and as binding him to pay the full agreed price if the sale was indivisible, or if divisible the agreed price for the goods in which the property passes. One can readily imagine trouble when none of the goods have been destroyed but all are in a condition inferior to that supposed at the time of the bargain. In such a case the "only question is whether the article has been so far destroyed as no longer to answer the description of it given by the contract."
The price may be fixed by the contract or in such a manner as the parties may agree, and may be made payable in personal or real property. When the price is not determined in the way mentioned in the Sales Act, the buyer must pay a reasonable price. This is a question of fact in each case. Usually, the price, either in an executed sale or in a contract to sell, is fixed by the parties at the time of making the bargain. In the agreement to sell there must be a consideration on both sides to sustain it. Sometimes the parties agree that the amount of the price shall vary according to the happening, or failure to happen, of a future event. Such a contract may be a wager, which is forbidden by law, or it may be legal, as we shall soon learn. Whenever no price has been fixed the law has established a rule, a reasonable price. It is the intention and understanding of the parties that a buyer who orders a barrel of flour from his grocer will pay a reasonable price. Likewise a buyer who orders a carriage to be made for him and says nothing about the price.
What is a reasonable price? Generally the market price at the time and place fixed by the contract or by law for delivering the goods, but not always. Under unusual conditions the market price does not furnish the only test. Said the court in one of these cases: a reasonable price may or may not agree with the current price of the commodity at the place of shipment at the precise time of making it. The current price of the day may be highly unreasonable from accidental circumstances, by the action of the seller himself in purposely keeping back the supply.
With respect to warranties the Sales Act provides that when the sale is made on a condition which is not performed, the party for whose benefit the condition was made may refuse to proceed with the contract or sale, or may waive performance of the condition. The nonperformance may be treated as a breach of warranty. Thus time may be an important element in a contract, and an agreement to deliver goods by a specified time is a condition or warranty. And if there is a delay in delivering, unless it may be a trifling one, the buyer may refuse to accept the goods.
A common condition in more recent times qualifying the obligation of the buyer is that the goods shall be satisfactory to him. By this is meant the satisfaction of the buyer after the exercise of an honest judgment. In New York and some other states a somewhat different rule prevails. Unless the things covered by the contract involve personal taste, the contract imposes on the seller the requirement only that a reasonable man would be satisfied with performing it, thus not leaving the question of its satisfactory performance entirely to the buyer. This, Williston says, is an arbitrary refusal of the court to enforce the contract that the parties made and seems unwarranted.
Warranties may be express or implied. By the Sales Act any affirmation of fact or any promise by the seller relating to the goods is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the goods, and if the buyer purchases the goods relying thereon.
In a contract to sell or a sale, unless a contrary intention appears, there is an implied warranty on the part of the seller that in the case of a sale he has the right to sell the goods, also, in the case of a contract to sell them, he will have the right to do this at the time of passing the property. More briefly the seller warrants the title to the property which is the subject of sale. Whether the seller is in or out of possession of the property, he can by appropriate words sell such interest as he may have therein. But persons also sell property not owned by themselves by authority of others or of the law. Unless they expressly warrant the title they are not liable for lack of it. Sales of this nature are made by a sheriff, or other judicial officer, auctioneer or mortgagee, assignee in bankruptcy, executor or administrator, guardian, or simply an agent.
When there is a contract to sell, or a sale of goods by description, there is an implied warranty that they shall correspond with the description; and if the contract or sale is by sample, as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if these do not also correspond with the description. The Sales Act contains elaborate provisions relating to implied warranties of the quality of things sold. There is no implied warranty of the quality or fitness of goods for any particular purpose unless the buyer makes known to the seller the purpose for which they are required, and he also relies on the seller's judgment of their fitness for the use he intends to make of them. Again, if the buyer has examined the goods there is no implied warranty of the defects which such an examination ought to have revealed. An implied warranty as to quality or fitness for a particular purpose may also be annexed by the usage of trade. There is an implied warranty that the bulk shall correspond with the sample in quality, and that the buyer shall have a reasonable opportunity of comparing the bulk with the sample.
When does the transfer of ownership occur? When there is an unconditional contract to sell them the property therein passes to the buyer on the making of the contract, regardless of the time of payment or delivery or both. When goods are delivered to the buyer "on sale or return," giving the buyer an option to return them instead of paying the price, the property passes to the buyer on delivery, but the property may go back to the seller by returning or tendering the goods within the time specified in the contract. When the goods are delivered to the buyer on approval or on trial or other similar terms, the property passes to the buyer, (1) when he signifies his approval or acceptance of them, (2) or if he retains them beyond the time fixed for their return, or if none has been fixed, beyond a reasonable time.
It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, the seller, therefore, must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be willing and ready to pay the price in exchange for the possession of the goods.
Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer, is a question depending in each case on the contract, express or implied, between the parties. Apart from contract, or usage of trade to the contrary, the place of delivery is the seller's place of business, if he have one, and if not, his residence. Again, when by the contract of sale of goods no time for sending them has been fixed, the seller must send them within a reasonable time.
Vast quantities of goods are bought and sent forward to buyers, which are not to be delivered until payment. The Sales Act provides that where goods are shipped and by the bill of lading that is given for them they are to be delivered to the order of the buyer or of his agents, but possession of the bill of lading is to be retained by the seller or his agent, he thereby reserves his right to the possession of the goods as against the buyer. Very often a buyer of wheat, for example, will draw a bill of exchange on his principal or company living in the place where the goods are to be delivered and will have it discounted by a bank using the money to pay the seller. The wheat may be in an elevator, or it may be in transit. In either case the bank receives a document, elevator receipt, or bill of lading, and thus becomes the real owner of the wheat, and can control it afterward until it is actually delivered to the consignee, whoever he may be. This is the bank's security for making the loan. The bank sends forward the bill of exchange to its correspondent bank in the place where the consignee lives and the wheat is to be delivered with instructions to deliver it when the bill is paid.
With respect to speculative sales of stock, so well known by every one, a contract, says Williston, giving one party or the other an option to carry out the transaction or not at pleasure, is not a wager, unless forbidden, as in some states is done by statute. A contract to sell goods in the future, which the seller does not own at the time is, aside from the statute, not only legal but common. "The test," says Williston, "adopted in the absence of statute, distinguishes between contracts to buy and sell in which the actual delivery of the property is contemplated, and similar contracts in which it is contemplated merely that a settlement shall be made between the parties based on fluctuations in the market price. A contract of the former kind is legal; one of the latter kind is a wagering contract, and illegal."
Shipping.– The federal statutes require that every ship or vessel of the United States shall be registered or enrolled in the office of the collector of customs of the district that includes the home port of the vessel. None but citizens of the United States can have their vessels registered. Consequently the sale of a vessel to a foreigner denationalizes her. If sold to an American, she must be registered anew. On arriving at a foreign port masters of vessels must deposit their registers with the consul or commercial agent at that port.
Enrollment is the term used to describe the registry of a vessel engaged in coastwise or inland navigation or commerce. Registration is applied to vessels engaged in foreign commerce. License means the same as enrollment, but is applied to small vessels of twenty tons burden or less. The federal laws on this subject do not apply to vessels that are used on nonnavigable waters of the country.
The title to a vessel may be acquired by purchase or building. If a vessel is built for a party no title thereto passes until she is ready for delivery and has been approved and accepted by him. This, however, is no arbitrary rule, and is often modified especially when payment is made in installments and during the construction of the vessel.
Nowadays many vessels are owned by corporations, and the rules that apply to corporations of course determine the ownership of their property. In other cases the several owners of a vessel are tenants in common, and not co-partners, unless by agreement they have established other relations among themselves. They may, of course, become partners and be governed by the rules that apply to persons thus related. When they are related as tenants in common one part owner has no power to bind the others in any way beyond the necessary and regular use of the vessel. He cannot sell or mortgage the interests of the others, draw drafts or notes in their name, apply the freight money earned to pay his individual debt, or procure insurance for the other owners.
The majority rule governs in employing the vessel. The majority therefore have the right to control the use of the vessel on giving security to the minority, if required, to bring back and to restore to them the vessel, or if lost to pay them for the value of their shares. The minority owners in like manner may use the vessel if the majority are unwilling to employ her. A court of admiralty will in such a case act for the parties.
Each part owner is entitled to his share of the profits, and is also liable for the expenses of the vessel unless he has dissented from the voyage. But part owners who dissent from the voyage and take security for the safe return of the vessel are not entitled to share in the profits, nor are they liable for the expenses.
A part owner may bind the others for necessary supplies and repairs required that are procured on credit, unless his general authority to do this has been restricted. The ship's husband or managing owner has authority to do whatever is necessary for the prosecution of the voyage and earning the freight money. For such purposes he is the agent of the owners and can bind them by his contracts, unless his authority is revoked or modified.
Any owner can sell his interest whenever he pleases, and all of them may authorize the sale of the entire vessel. A writing is required to pass the title, but as between the parties an oral sale and delivery will suffice, at common law. In many cases a bill of sale is required by statute. The writing should describe what things are transferred, but general terms such as appurtenances and necessaries have a fixed meaning which are understood. Intention is the guide to determine what passes in such a sale, as in cases of fixtures already considered.
When the bill of sale is executed the purchaser becomes entitled to all the benefits of ownership, and incurs all the liabilities. If the sale is unconditional, the purchaser is liable for supplies though he may never have taken possession of the vessel, and neither the master nor the merchant furnishing the supplies knew of the sale. The purchaser is not liable for repairs made and supplies furnished before the sale, unless he has agreed to pay for them, or the vessel was at sea at the time. If she was, the purchaser takes her subject to all encumbrances on her, and to all lawful contracts made by the master before learning of the purchase.
A vessel may be mortgaged, and the federal statutes state how this shall be done. A shipbuilder may make a contract whereby he mortgages the vessel to be built in advance of its construction, and a lien attaches as it comes into existence. Such a mortgage is postponed or comes after a maritime lien, that will soon be explained, but comes before the debts of general creditors.
The mortgagor, so long as he retains possession, has all the rights of ownership, and all contracts made by him are valid which do not impair the security of the mortgage. When the mortgagee takes possession of the vessel he is entitled to all the earnings that accrue, but not to those which the mortgagor has reserved, even though they are for the current voyage. Furthermore, his interest may be attached by his creditors. The discharge and foreclosure of mortgages on vessels are governed for the most part by the rules that apply to chattel mortgages. A mortgage on a vessel should be recorded, and many of the rules and usages that apply to the recording of deeds apply also to such mortgages.
A contract may be made for a loan of money on the bottom of a vessel at a rate much greater than the usual rate of interest. Such a loan is sanctioned to enable the master to obtain money for supplies or repairs at some foreign port where they could not be otherwise obtained. The loan is on the security of the vessel and if she never arrives, the lender loses his money. If she does arrive at the port of her destination, the borrower personally, as well as the vessel, is liable for the repayment of the loan with the agreed interest thereon. This maritime loan is highly regarded in legal tribunals, and is liberally construed by them to carry into effect the intention of the parties.
Such a loan or bond can be given by the master of the vessel only in case of necessity and great distress in a foreign port, where the owner is not present and has no representative with funds, and where the master has no other means of getting money. The master has a large discretion. "The necessity must be such as would induce a prudent owner to provide funds for the cost of them on the security of the ship, and that if the master did not take the money the voyage would be defeated or at least retarded." The general purpose of the loan is to effectuate the objects of the voyage and the safety of the ship.
The appointment and employment of a master is wholly within the discretion of the owners. On his death or removal in a foreign port a successor may be appointed by the consul resident there of the country to which the vessel belongs, or by an agent of the owners, or by the consignees of the cargo who have advanced money for repairing the vessel. The registry acts of the United States require the putting of the master's name in the register, but if this is not done his authority is not impaired; and the one to whom the navigation and control of a vessel is entrusted is considered her master, although the name of another appears on the register. His contract may contain any stipulation to which the parties may agree. The right of a master to command his vessel is personal to him; and a sale by a master who is part owner of the vessel of his interest therein transfers no right to the command of the vessel which the other owners are bound to respect. Whenever he becomes incapable of commanding by reason of sickness, insanity, or other reason, the command with the duties pertaining thereto devolves on the first mate until the appointment of another master; should he be absent or incapable of acting, then the second mate and so on down the rank of officers.
The master must do all things for the protection and preservation of the several interests entrusted to him, the owners, charterers, cargo owners, underwriters. He must render a full and satisfactory account to the owners of the vessel of moneys secured and his disbursements before demanding any wages. At sea he is the supreme officer, has sole authority over both officers and crew to do justice to all persons under his command, and to protect passengers and seamen from bad treatment while they are on board. It is said that in respect to passengers he owes a higher and more delicate duty than he owes to the crew, but at the same time he has the necessary control over his passengers and may make proper regulations for their government to ensure their safety, promote their comfort and preserve decent order.
He has authority to bind the owners when they are not present for expenditures needful in the way of repairs, supplies and other necessaries reasonably fit and proper for the safety of the vessel and the completion of the voyage.
As the seamen who serve on a vessel are generally ignorant and improvident, the execution of shipping articles are required by federal statute where the vessel is bound on a foreign voyage, or from a port in one state to a port in another. If these articles are not made seamen have the right to leave the vessel at any time, and may recover the highest rate of wages paid at their shipping port. The articles must be signed by the seaman and by the master, and the contract must be executed before the vessel proceeds on its voyage. The seaman is not bound by any new or unusual stipulation put into the articles affecting his rights without full knowledge of it, and especially when he cannot read and the stipulation is not read and explained to him. Once executed, the articles cannot be varied by a verbal agreement between master and seaman.
The articles must specify clearly and definitely the nature of the intended voyage, the port at which it is to end and its duration. Indefinite articles, leaving to the option of the master whether the voyage shall be long or to one or more foreign ports, or short to nearby domestic ports, are void. The articles must also state the amount of wages each seaman is to receive. Articles are void that fix a forfeiture of wages in excess of the amount named in the statute, or restrict the time in which seamen must sue for their wages. The contract may be dissolved by cruel treatment by the master and by an abandonment of the vessel without the master's consent, but not by the death, disability, removal or resignation of the master and the substitution of another. Besides the wages a seaman may recover, should the master break the contract, are his expenses in returning to the port of shipment including also general damages.
Claims for wages are "highly favored in admiralty courts," and discharges are not justified for trivial causes, nor for a single offense unless it is an aggravated one. Such causes are continued disobedience or insubordination, rebellious conduct, gross dishonesty, embezzlement or theft, habitual drunkenness, habitually stirring up quarrels, or by his own fault rendering himself incapable of performing duty. The master must receive back a seaman when he has thus been discharged who repents and offers to return to his duty and make satisfaction, unless the offense was of an aggravated character. This is the general rule, though from its nature there is much room for its application.
Statute of Frauds.– Some contracts must be in writing to comply with a statute called the Statute of Frauds, which has been enacted with variations in all the states. One of the most important sections relates to the conveyance of real estate. This requires that the agreement for its sale must be in writing. (See Agreement for Sale of Land.)
Another section relates to the sale of goods, wares and merchandise. This has not been enacted in every state. If the amount is above that mentioned in the statute, thirty to one hundred dollars, there must be a written contract or delivery and acceptance of the goods to constitute a contract. If A sells a bill of goods to B, who declines to receive them, and the contract is wholly verbal, he can shield himself behind this statute wherever it prevails. Many questions therefore arise, what is a delivery and acceptance? A delivery of a key of a building containing the property is sufficient. The delivery of a bill of lading of goods properly indorsed, making entries of the goods sold, pointing them out or identifying them is enough to comply with the statute. Whenever there has been a transfer of possession and control by the seller to the purchaser to which the latter has assented there has been a sale. Or, more broadly, whenever there has been such action as to show clearly an intention to sell and accept the property the sale is complete. Part payment of the purchase money for personal property is generally regarded as showing such intention.
To a contract for the manufacture of a thing the statute does not apply. Simple as this answer may be, the law soon gets into difficulties in deciding whether a contract is for the making of a thing, or for the thing itself; whether the important element is the skill or labor that is to be expended, or the thing without regard to the process of making. Thus, if a contract is with one to paint a portrait, the statute would not apply, for the skill of the artist is the important thing purchased, and not the canvas, paint, etc., he must use. To a contract for a locomotive the statute would apply. "If the contract states or implies that the thing is to be made by the seller, and also blends together the price of the thing and compensation for work, labor, skill and material, so that they cannot be discriminated, it is not a contract of purchase and sale, but a contract of hiring and service, or a bargain by which one party undertakes to labor in a certain way for the other party," and the statute does not apply to it.
Statutes of Limitation.– In all the states statutes have been enacted which provide that if the rights of parties to legal redress are not enforced within a specified period, the courts are closed to them. Thus, in most states a statute provides that a holder or owner of a promissory note who neglects to sue the debtor within six years from its maturity cannot do so afterwards. The note is not absolutely void, though the law presumes it has been paid. As the note is not void, payment may be effected as we shall soon learn.
Suppose one is indebted to a merchant, if the debt is not paid within six years in most states and nothing has happened, the debt in popular language is outlawed, in other words cannot be collected by resort to law. The time begins to run as soon as the debt has accrued; if it be a debt to a merchant, as soon as one has stopped trading with him. To the operation of this rule are some important exceptions. It does not run in favor of a minor, married woman or insane or imprisoned person; or not whenever or wherever they are not capable of contracting. But a disability arising after the statute has begun to run in his favor will not prevent it from running.
The Statute of Limitations generally bars the remedy or right to pursue the debtor in a court of law, it does not extinguish the right or debt, and therefore the right to pursue a debtor may be revived by a new promise to pay. One may ask, is not a debtor a foolish man to acknowledge that he is a debtor after the law has released him from his debt? Yes, from a purely selfish point of view. Nevertheless, the moral obligation remains, and happily all morality has not yet fled from the world. One may ask, is not such a promise void because there is no consideration received for it? No, for the reason that there was a consideration for the original obligation, and this is sufficient to sustain the renewed promise to pay it. In some states the statutes provide that such an acknowledgment to pay a debt after the statute has barred it, must be in writing, and signed by the debtor or his agent. The most general rule is, to remove the bar of the statute, there must be either an express promise to pay, or an acknowledgment of the debt accompanied by an expression of willingness to pay it. To simply acknowledge the existence of a debt is not enough, there must be indicated or expressed a willingness to pay.