William H. (William Homer) Spencer.

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in this section clearly specifies the only causes for which a discharge
can be denied, and leaves to the court the sole duty of deciding, after
due hearing, whether such causes exist.

A discharge releases only the bankrupt's personal liability. In
accordance with this underlying principle, section 16 of the act
provides:

"The liability of a person who is a co-debtor with, or guarantor
or in any manner surety for, a bankrupt shall not be altered by the
discharge of such bankrupt."

The theory of a discharge, as well as this express provision of
the act, forbids that the secondary liability of the directors of a
corporation, under the Massachusetts statute, should be affected by
the corporation's discharge in bankruptcy.

The petitioning corporation having duly filed its application for
a discharge under section 14, and not having been adjudged guilty of
any of the offenses therein mentioned, we are of the opinion that it
was entitled to a discharge.

Decree refusing discharge reversed, with an order to enter decree
discharging the Marshall Paper Company.



PRIVILEGES OF DEBTORS 601

QUESTIONS

1. In bankruptcy proceedings what debts, in general, may be proved
against the debtor?

2. In what manner are creditors notified of bankruptcy^ proceedings ?
What is the effect of an adjudication of bankruptcy upon the claim of a
creditor who has not been given proper notice of the proceedings ?

3. Who may file a petition against a debtor to force him into bankruptcy ?
How many creditors must join in the petition ?

4. What control does the debtor have over his property and affairs after a
petition for involuntary bankruptcy has been filed against him and
before a trustee has been selected ?

5. In what manner can creditors protect themselves against fraudulent
dealings with the property by the debtor after the petition has been filed
and before a trustee has been appointed ?

6. At what stage in the proceedings is the trustee selected? How is he
selected? What control over the property and affairs of the debtor
does he enjoy ? What are his duties in connection with the administra-
tion of the debtor's estate ?

7. When and under what circumstances is the debtor entitled to a discharge
in bankruptcy ?

8. What is the effect of a discharge in bankruptcy ?

9. What is the effect of a promise after the discharge by the debtor to pay
discharged debts ?



APPENDIX A
UNIFORM SALES ACT 1

PART I
FORMATION OF THE CONTRACT

SECTION i. Contracts to sell and sales, (i) A contract to sell goods is
a contract whereby the seller agrees to transfer the property in goods to
the buyer for a consideration called the price. (2) A sale of goods is an
agreement whereby the seller transfers the property in goods to the buyer
for a consideration called the price. (3) A contract to sell or a sale may be
absolute or conditional. (4) There may be a contract to sell or a sale
between one part owner and another.

SEC. 2. Capacity liability for necessaries. Capacity to buy and sell is
regulated by the general law concerning capacity to contract, and to transfer
and acquire property. Where necessaries are sold and delivered to an
infant, or to. a person who by reason of mental incapacity or drunkenness is
incompetent to contract, he must pay a reasonable price therefor. Neces-
saries in this section mean goods suitable to the condition in life of such
infant or other person, and to his actual requirements at the time of delivery-

FORMALITIES OF THE CONTRACT

SEC. 3. Form of contract or sale. Subject to the provisions of this act
and of any statute in that behalf, a contract to sell or a sale may be made
in writing (either with or without seal), or by word of mouth, or partly in
writing and partly by word of mouth, or may be inferred from the conduct
of the parties.

SEC. 4. Statute of frauds, (i) A contract to sell or a sale of any goods
or choses in action of the value of five hundred dollars or upwards shall not
be enforceable by action unless the buyer shall accept part of the goods or
choses in action so contracted to be sold, or sold, and actually receive the

1 The draft of an "Act to Make Uniform the Law of Sales" prepared by
Professor Samuel Williston, of Harvard University, at the request of the National
Conference of Commissioners on Uniform State Laws. The draft was adopted by
the Commissioners in 1904 and recommended to the various states for enactment.
It has been adopted by the territory of Alaska and by the following states: Arizona,
Connecticut, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada,
New Jersey, New York, North Dakota, Ohio, Pennsylvania, Rhode Island, Utah,
Wisconsin, Wyoming, and Tennessee.

602



APPENDIX 603

same, or give something in earnest to bind the contract, or in part payment,
or unless some note or memorandum in writing of the contract or sale be
signed by the party to be charged, or his agent in that behalf. (2) The
provisions of this section apply to every such contract or sale, notwith-
standing that the goods may be intended to be delivered at some future
time, or may not at the time of such contract or sale be actually made,
procured, or provided, or fit or ready for delivery, or some act may be
requisite for the making or completing thereof, or rendering the same fit
for delivery; but if the goods 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 provisions of this section shall not apply. (3)
There is an acceptance of goods within the meaning of this section when
the buyer, either before or after delivery of the goods, expresses by words
or conduct his assent to becoming the owner of those specific goods.

SUBJECT-MATTER OF CONTRACT

SEC. 5. Existing and future goods, (i) The goods which form the
subject of a contract to sell may be either existing goods, owned or possessed
by the seller, or goods to be manufactured or acquired by the seller after
the making of the contract to sell, in this act called "future goods." (2)
There may be a contract to sell goods, the acquisition of which by the seller
depends upon a contingency which may or may not happen. (3) Where
the parties purport to effect a present sale of future goods, the agreement
operates as a contract to sell the goods.

SEC. 6. Undivided shares, (i) There may be a contract to sell or a
sale of an undivided share of goods. If the parties intend to effect a present
sale, the buyer, by force of the agreement, becomes an owner in common
with the owner or owners of the remaining shares. (2) In the case of
fungible goods, there may be a sale of an undivided share of a specific mass,
though the seller purports to sell and the buyer to buy a definite number,
weight, or measure of the goods in the mass, and though the number, Weight,
or measure of the goods in the mass is undetermined. By such a sale the
buyer becomes owner in common of such a share of the mass as the number,
weight, or measure bought bears to the number, weight, or measure of the
mass. If the mass contains less than the number, weight, or measure
bought, the buyer becomes the owner of the whole mass, and the seller is
bound to make good the deficiency from similar goods unless a contrary
intent appears.

SEC. 7. Destruction of goods sold, (i) Where the parties purport to
sell specific goods, and the goods without the knowledge of the seller, have
wholly perished at the time when the agreement is made, the agreement is
void. (2) Where the parties purport to sell specific goods, and the goods
without the knowledge of the seller have perished in part or have wholly
or in a material part so deteriorated in quality as to be substantially changed



604



LAW AND BUSINESS



in character, the buyer may at his option treat the sale (a) as avoided, or
(6) as transferring the property in all of the existing goods or in so much
thereof as have not deteriorated, and as binding the buyer to pay the full
agreed price if the sale was indivisible, or to pay the agreed price for the
goods in which the property passes if the sale was divisible.

SEC. 8. Destruction of goods contracted to be sold, (i) Where there is a
contract to sell specific goods, and subsequently, but before the risk passes
to the buyer, without any fault on the part of the seller or the buyer, the
goods wholly perish, the contract is thereby avoided. (2) Where there is a
contract to sell specific goods, and subsequently, but before the risk passes
to the buyer, without any fault of the seller or the buyer, part of the goods
perish, or the whole or a material part of the goods so deteriorate in quality
as to be substantially changed in character, the buyer may at his option
treat the contract (a) as avoided, or (b) as binding the seller to transfer the
property in all of the existing goods or in so much thereof as have not
deteriorated, and as binding the buyer to pay the full agreed price if the
contract was indivisible, or to pay the agreed price for so much of the goods
as the seller, by the buyer's option, is bound to transfer if the contract was
divisible.

THE PRICE

SEC. 9. Definition and ascertainment of price, (i) The price may be
fixed by the contract, or may be left to be fixed in such manner as may be
agreed, or it may be determined by the course of dealing between the
parties. (2) The price may be made payable in any personal property.
(3) Where transferring or promising to transfer any interest in real estate
constitutes the whole or part of the consideration for transferring or for
promising to transfer the property in goods, this act shall not apply. (4)
Where the price is not determined in accordance with the foregoing pro-
visions the buyer must pay a reasonable price. What is a reasonable price
is a question of fact dependent on the circumstances of each particular case.

SEC. 10. Sale at a valuation, (i) Where there is a contract to sell or a
sale of goods at a price or on terms to be fixed by a third person, and such
third person, without fault of the seller or the buyer, cannot or does not
fix the price or terms, the contract of the sale is thereby avoided; but if
the goods or any part thereof have been delivered to and appropriated by
the buyer, he must pay a reasonable price therefor. (2) Where such
third person is prevented from fixing the price or terms by fault of the
seller or the buyer, the party not in fault may have such remedies against
the party in fault as are allowed by Parts IV and V of this act.

CONDITIONS AND WARRANTIES

SEC. ii. Effect of conditions, (i) Where the obligation of either party
to a contract to sell or a sale is subject to any condition which is not per-
formed, such party may refuse to proceed with the contract or sale, or he



APPENDIX 605

may waive performance of the condition. If the other party has promised
that the condition should happen or be performed, such first-mentioned
party may also treat the non-performance of the condition as a breach of
warranty. (2) Where the property in the goods has not passed, the buyer
may treat the fulfillment by the seller of his obligation to furnish goods as
described and as warranted expressly or by implication in the contract to
sell as a condition of the obligation of the buyer to perform his promise to
accept and pay for the goods.

SEC. 12. Definition of express warranty. Any affirmation of fact, or any
promise of 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.
No affirmation of the value of the goods, nor any statement purporting to
be a statement of the seller's opinion only, shall be construed as a warranty.

SEC. 13. Implied warranties of title. In a contract to sell, or a sale,
unless a contrary intention appears, there is: (i) an implied warranty on
the part of the seller that in the case of a sale he has a right to sell the goods,
and that in the case of a contract to sell he will have a right to sell the goods
at the time when the property is to pass; (2) an implied warranty that the
buyer shall have and enjoy quiet possession of the goods as against any
lawful claims existing at the time of sale; (3) an implied warranty that the
goods shall be free at the time of the sale from any charge or encumbrance
in favor of any third person, not declared or known to the buyer before or
at the time when the contract or sale is made. (4) This section shall not,
however, be held to render liable a sheriff, auctioneer, mortgagee, or other
person professing to sell by virtue of authority in fact or law goods in
which a third person has a legal or equitable interest.

SEC. 14. Implied warranty in sale by description. Where there is a
contract to sell or a sale of goods by description, there is an implied warranty
that the goods shall correspond with the description, and if the contract or
sale be by sample, as well as by description, it is not sufficient that the bulk
of the goods corresponds with the sample if the goods do not also correspond
with the description.

SEC. 15. Implied warranties of quality. Subject to the provisions of this
act and of any statute in that behalf, there is no implied warranty or condi-
tion as to the quality or fitness for any particular purpose of goods supplied
under a contract to sell, or a sale, except as follows: (i) Where the buyer,
expressly or by implication, makes known to the seller, the particular
purpose for which the goods are required^ and it appears that the buyer
relies on the seller's skill or judgment (whether he be the grower or manu-
facturer or not), there is an implied warranty that the goods shall be reason-
ably fit for such purpose. (2) Where the goods are bought by description
from a seller who deals in goods of that description (whether he be the
grower or manufacturer or not), there is an implied warranty that the goods



6o6 LAW AND BUSINESS

shall be of merchantable quality. (3) If the buyer has examined the goods,
there is no implied warranty as regards defects which such examination
ought to have revealed. (4) In the case of a contract to sell or a sale of a
specified article under its patent or other trade name, there is no implied
warranty as to its fitness for any particular purpose. (5) An implied
warranty or condition as to quality of fitness for a particular purpose may
be annexed by the usage of trade. (6) An express warranty or condition
does not negative a warranty or condition implied under this act unless
inconsistent therewith.

SALE BY SAMPLE

SEC. 16. Implied warranties in sale by sample. In the case of a contract
to sell, or a sale by sample: (a) There is an implied warranty that the bulk
shall correspond with the sample in quality, (b) There is an implied
warranty that the buyer shall have a reasonable opportunity of comparing
the bulk with the sample, except so far as otherwise provided in section
47 (3)- ( c ) If tne seller is a dealer in goods of that kind, there is an implied
warranty that the goods shall be free from any defect, rendering them
unmerchantable, which would not be apparent on reasonable examination
and sample.

PART II
TRANSFER OF PROPERTY AS BETWEEN SELLER AND BUYER

SEC. 17. No properly passes until goods are ascertained. Where there is
a contract to sell unascertained goods no property in the goods is transferred
to the buyer unless and until the goods are ascertained, but property in an
undivided share of ascertained goods may be transferred as provided in
section 6.

SEC. 18. Property in specific goods passes when parties so intend, (i)
Where there is a contract to sell specific or ascertained goods, the property
in them is transferred to the buyer at such time as the parties to the contract
intend it to be transferred. (2) For the purpose of ascertaining the inten-
tion of the parties regard shall be had to the terms of the contract, the
conduct of the parties, usages of trade, and the circumstances of the case.

SEC. 19. Rides for ascertaining intention. . Unless a different intention
appears, the following are rules for ascertaining the intention of the parties
as to the time at which the property in the goods is to pass to the buyer:

Rule i. Where there is an unconditional contract to sell specific goods,
in a deliverable state, the property in the goods passes to the buyer when
the contract is made, and it is immaterial whether the time of payment or
the time of delivery or both be postponed.

Rule 2. Where there is a contract to sell specific goods and the seller is
bound to do something to the goods, for the purpose of putting them into
a deliverable state, the property does not pass until such thing be done.



APPENDIX 607

\

Rule 3. (i) When goods are delivered to the buyer "on sale or return,"
or on other terms indicating an intention to make a present sale, but to
give the buyer an option to return the goods instead of paying the price,
the property passes to the buyer on delivery, but he may revest the property
in the seller by returning or tendering the goods within the time fixed in the
contract, or, if no time has been fixed, within a reasonable time. (2) When
goods are delivered to the buyer on approval or on trial or on satisfactien,-
or other similar terms, the property therein passes to the buyer (a) when
he signifies his approval or acceptance to the seller or does any other act
adopting the transaction; (b) if he does not signify his approval or accept-
ance to the seller, but retains the goods without giving notice of rejection,
then, if a time has been fixed for the return of the goods, on the expiration
of such time, and, if no tirne has been fixed, on the expiration of a reasonable
time. What is a reasonable time is a question of fact.

Rule 4. (i) Where there is a contract to sell unascertained or future
goods by description, and goods of that description and in a deliverable
state are unconditionally appropriated to the contract, either by the seller
with the assent of the buyer or by the buyer with the assent of the seller,
the property in the goods thereupon passes to the buyer. Such assent may
be expressed or implied, and may be given either before or after the appro-
priation is made. (2) Where, in pursuance of a contract of sale, the seller
delivers the goods to the buyer, or to a carrier or other bailee (whether
named by the buyer or not) for the purpose of transmission to or holding
for the buyer, he is presumed to have unconditionally appropriated the
goods to the contract, except in the cases provided for in the next rule and
in section 20. This presumption is applicable, although by the terms of
the contract the buyer is to pay the price before receiving delivery of the
goods, and the goods are marked with the words "collect on delivery,"
or their equivalents.

Rule 5. If the contract to sell requires the seller to deliver the goods to
the buyer, or at a particular place, or to pay the freight or cost of trans-
portation to the buyer, or to a particular place, the property does not pass
until the goods have been delivered to the buyer or reached the place
agreed upon.

SEC. 20. Reservation of right of possession or property when goods are
shipped, (i) Where there is a contract to sell specific goods, or where
goods are subsequently appropriated to the contract, the seller may, by
the terms of the contract or appropriation, reserve the right of possession
or property in the goods until certain conditions have been fulfilled. The
right of possession or property may be thus reserved notwithstanding
the delivery of the goods to the buyer, or to a carrier or other bailee for the
purpose of transmission to the buyer. (2) Where goods are shipped, and
by the bill of lading the goods are deliverable to the seller or his agent, or
to the order of the seller or of his agent, the seller thereby reserves the



6o8 LAW AND BUSINESS

property in the goods. But if, except for the form of the bill of lading, the
property would have passed to the buyer on shipment of the goods, the
seller's property in the goods shall be deemed to be only for the purpose
of securing performance by the buyer of his obligations under the contract.
(3) Where goods are shipped, and by the bill of lading the goods are deliver-
able to the order of the buyer or of his agent, but possession of the bill of
lading is retained by the seller or his agent, the seller thereby reserves a
right to the possession of the goods, as against the buyer. (4) Where the
seller of goods draws on the buyer for the price and transmits the bill of
exchange and bill of lading together to the buyer to secure acceptance or
payment of the bill of exchange, the buyer is bound to return the bill of
lading if he does not honor the bill of exchange, and if he wrongfully retains"
the bill of lading he acquires no added right thereby. If, however, the bill
of lading provides that the goods are deliverable to the buyer or to the order
of the buyer, or is indorsed in blank, or to the buyer by the consignee named
therein, one who purchases in good faith, for value, the bill of lading or
goods from the buyer will obtain the property in the goods, although the
bill of exchange has not been honored, provided that such purchaser has
received delivery of the bill of lading indorsed by the consignee named
therein, or of the goods, without notice of the facts making the transfer
wrongful.

SEC. 21. Sale by auction. In the case of a sale by auction (i) where
goods are put up for sale by auction in lots, each lot is the subject of a
separate contract of sale. (2) A sale by auction is complete when the
auctioneer announces its completion by the fall of the hammer, or in other
customary manner. Until such announcement is made any bidder may
retract his bid, and the auctioneer may withdraw the goods from sale unless
the auction has been announced to be without reserve. (3) A right to bid
may be reserved expressly by or on behalf of the seller. (4) Where notice
has not been given that a sale by auction is subject to a right to bid on
behalf of the seller, it shall not be lawful for the seller to bid himself or to
employ or induce any person to bid at such sale on his behalf, or for the
auctioneer to employ or induce any person to bid at such sale on behalf of
the seller or knowingly to take any bid from the seller or any person em-
ployed by him. Any sale contravening this rule may be treated as fraudu-
lent by the buyer.

SEC. 22. Risk of loss. Unless otherwise agreed, the goods remain at the
seller's risk until the property therein is transferred to the buyer, but when
the property therein is transferred to the buyer the goods are at the buyer's
risk, whether delivery had been made or not, except that (a) where delivery
of the goods has been made to the buyer, or to a bailee for the buyer, in
pursuance of the contract, and the property in the goods has been retained
by the seller merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the time of such



APPENDIX 609

delivery, (b) Where delivery has been delayed through the fault of either
buyer or seller the goods are at the risk of the party in fault as regards any
loss which might not have occurred but for such fault.

TRANSFER OF TITLE

SEC. 23. Sale by a person not the owner, (i) Subject to the provisions
of this act, where goods are sold by a person who is not the owner thereof
and who does not sell them under the authority or with the consent of the
owner, the buyer acquires no better title to the goods than the seller had,
unless the owner of the goods is by his conduct precluded from denying the
seller's authority to sell. (2) Nothing in this act, however, shall affect
(a) the provisions of any factors' acts, recording acts, or any enactment
enabling the apparent owner of goods to dispose of them as if he were the
true owner thereof; (b) the validity of any contract to sell or sale under
any special common-law or statutory power of sale or under the order of a
court of competent jurisdiction.

SEC. 24. Sale by one having a voidable title. Where the seller of goods
has a voidable title thereto, but his title has not been voided at the time of
the sale, the buyer acquires a good title to the goods, provided he buys them
in good faith, for value, and without notice of the seller's defect of title.

SEC. 25. Sale by seller in possession of goods already sold. Where a
person having sold goods continues in possession of the goods, or of negoti-



Online LibraryWilliam H. (William Homer) SpencerLaw and business → online text (page 63 of 70)