CHAPTER VIII. Personal Property

Personal Property

PROPERTY DEFINED.--Property in the strict legal sense, is the aggregate of rights which one may lawfully exercise over particular things to the exclusion of others. "If a man were alone in the world," says Kant, "he could properly hold or acquire nothing as his own; because between himself, as Person, and all other outward objects, as Things, there is no relation. The relation is between him and other people, whom he excludes from the thing." All things are not the subject of property, because, the sea, the air, light, and similar things, cannot be appropriated.

ILLUSTRATION.--An illustration that gives us the idea of property will make our definition clear. A takes his shoes to a cobbler to be repaired. When he calls for them, he does not have the price for the work, and the cobbler refuses to give them up. Both A and the cobbler have a property right in the shoes. The right to absolute ownership is in A, that is his property right. The temporary possession, however, is in the cobbler, and he may hold the shoes under the lien for repairs indefinitely and until he receives his compensation. The lien is his property right. When we use the term property in its lowest form we mean by it the right of possession. In our illustration, the cobbler's lien gives him the right of possession. When we use the term in its highest form, we mean the right of exclusive ownership; in our illustration, A's shoes after he has paid the repair bill and secured the shoes again.

THE RIGHTS OF OWNERSHIP.--Exclusive ownership implies:

1. The right of exclusive possession for an indeterminate time.

2. The right of exclusive enjoyment for an indeterminate time.

3. The right of disposition.

4. The right of recovery if the thing be wrongfully taken or withheld.

But, you say, this is not the idea one ordinarily has of the term "property." One speaks thus of his watch: "I own this watch. It is my property." The answer is, property is a term with a double meaning. In the ordinary sense "property" indicates the thing itself, rather than the rights attached to it. Therefore it is that we have a law of personal property, and a law of real property.

PERSONAL PROPERTY AND REAL PROPERTY DISTINGUISHED.--Real property has been defined to be co-extensive with lands, tenements, and hereditaments; to put it more simply, we may say that it consists of land and anything that is permanently affixed to the land. Personal property embraces all objects which are capable of ownership except land. One fundamental difference between the two is that real property is generally considered to be immovable, while such property as is movable is usually termed personal property. It is important that the distinction between the two forms of property be kept in mind because different results follow where the property is held to be one or the other. For example, on the death of the owner of real property, it passes to his heir or devisee, while in the case of personal property, it goes to the personal representative, the executor or the administrator, and through him to the legatee or distributee. Again, in settling the estate of the deceased person, personal property is always to be used first to pay the decedent's debts. The modes of transferring personal property and real property differ. Real property is transferred by deed. Personal property may be transferred without any writing and even in the case of a transfer of personal property, by a bill of sale, the requirements for recording it are generally quite different from those relating to the recording of deeds. Again, the transfer of real property is governed by the law of the place where the real property is situated, whereas the transfer of personal property is governed by the law of the domicile of the owner. Taxation is another subject where the distinction is most important.

SALES OF PERSONAL PROPERTY.--The most important branch of the law of personal property, in the field of commercial law, is that relating to the sale of personal property. We shall confine the balance of this chapter to a consideration of that subject. As we have a uniform Negotiable Instruments Law, so we also have a Uniform Sales Act which has now been adopted in many of the States. The Sales Act defines a sale and a contract to sell as follows: (1) 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.

SALES AND CONTRACTS TO SELL.--Sales are to be distinguished from contracts to sell. A sale is an actual transfer of property, whereas a contract to sell is an agreement to make a sale in the future. Sales at a shop, for instance, are made without any contract to sell, but orders for goods at a distance, and agreements to ship them, frequently precede the actual sale of the goods, which is made in pursuance of the prior contract to sell. The sale of personal property is subject to different rules from the sale of real estate. In the transfer of real estate, formalities of deed and seal are necessary, which are not required in personal property, and the subjects must be considered separately.

A SALE DISTINGUISHED FROM SIMILAR TRANSACTIONS.--At the outset, a sale must be distinguished from several other similar transactions. The law of sales is a branch of contract law, hence consideration is necessary in a sale. A gift, on the other hand, which may result in the transfer of personal property in practically the same manner as a sale, does not require any consideration. Hence, an agreement to sell goods is unenforceable if not supported by consideration. A promise to make a gift is always unenforceable because the very idea of a gift negatives any idea of consideration. A sale and a bailment must also be distinguished. A bailment is the rightful holding of an article of personal property by one, for the accomplishment of a certain purpose, with an obligation to return it after the completion of that purpose. Where there is a sale, the entire property right passes to the new buyer, and if the article is destroyed, providing title has passed, the new buyer must pay the purchase price if he has not already done so, although he gets nothing for it. In a bailment, the title does not pass. The case of the cobbler repairing the shoes is an illustration of a bailment. If, while the shoes are in his possession, his shop is burned, through no fault of his, the owner of the shoes would stand the loss. If I borrow a person's automobile, and while using it the car is struck by lightning and totally destroyed, the loss falls on the owner because this also is a bailment. On the other hand, had I bought the car and temporarily kept it in the seller's garage, awaiting the completion of my own garage, and it is burned while in his garage, the loss is mine. By such a transaction, I become the owner when the sale is made, and the former owner becomes the bailee.

FORMALITIES NECESSARY FOR THE COMPLETION OF A SALE.--The Sales Act provides in section 3, subject to a few provisions, that "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." The main qualification of the right to make an oral sale or contract to sell is found in the next section (Section 4) which is virtually a copy of a similar provision in the English Statute of Frauds in regard to the sale of personal property. Section 4 reads as follows:

"(1) 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, and actually receive the 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, notwithstanding 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."

THE CAPACITY OF PARTIES.--The Sales Act provides in section 2 that "capacity to buy and sell is regulated by the general law concerning capacity to contract, and 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. Necessaries 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."

IMPORTANCE OF DISTINGUISHING SALE AND CONTRACT TO SELL.--Why is it important to distinguish between a contract to sell and a sale; what difference does it make whether title has passed or not? The primary reason that it makes a difference is because as soon as the title has been transferred from the seller to the buyer the seller is entitled to the price. Prior to the transfer of title, if the buyer refused to take the goods, the seller would be entitled only to damages, which would be the difference between the value of the goods which the seller still retained and the price which was promised. If the goods were worth as much or more than the amount of the price promised, the seller would not be entitled to any substantial damages. But after title has passed the buyer must pay the full price, and the seller may recover it if the buyer refuses to accept delivery. Another consequence flowing from the transfer of title is that the goods are thereafter at the risk of the buyer. If they are destroyed by accident the buyer must nevertheless pay the price, for the right to the price accrued before the goods were destroyed, and when they were destroyed they were at the buyer's risk. Bankruptcy is another circumstance which makes it important to determine who holds title to the goods. If the buyer becomes bankrupt, after title to the goods has passed to him, his trustee in bankruptcy takes the goods for his creditors, but if he becomes bankrupt before title has passed that would not be true. The bankruptcy of the seller would make a similar difference.

WHEN TITLE IS PRESUMED TO PASS.--There are several presumptions in the law as to when title will be presumed to pass if there was no specific agreement between the parties as to when it should pass. If they simply bargain for the goods without saying anything about the time when the buyer is to become the owner, the first presumption is that title passes as soon as the goods are specified and the parties are agreed on the terms of the bargain, even though no part of the price has been paid and though the goods have not been delivered. It is often assumed that delivery is essential to transfer title to goods, but that is not so, though delivery is strong evidence of intent to transfer title. If the parties have made their bargain, and definitely agreed on the terms of the bargain, title passes even though possession of the goods still remains in the hands of the seller. The seller, however, has a lien for the price though he has parted with title. As long as the goods are in his possession he may refuse to surrender until he is paid the price, unless he agreed to sell on credit.

TITLE PASSES WHEN PARTIES AGREE.--It is only a presumption that, where the terms of a bargain are fixed and the goods are specified, title passes at once, for if the parties agree that title shall not pass at once it will pass when and as they agree. Their intention in regard to the transfer of title may not be stated in express terms, and it may be gathered only from the acts or words of the parties. If something remains to be done to the goods by the seller, to put them in a deliverable condition, that indicates an intent that title shall not pass until they are in the condition agreed upon. If the parties provide that the goods shall be stored at the expense of the seller, for a time or at the risk of the seller, that indicates title is not intended to pass, for if they are at the seller's expense and risk, presumably they are still his goods. On the other hand, delivery of the goods indicates an intent to pass title, although it is possible, if the parties so agree, that title does not pass even though the goods are delivered. Again, payment of the price is evidence tending to show an intent to pass title, for buyers do not ordinarily pay the price in advance. It is not uncommon for credit to be given by the seller, but it is uncommon for the buyer to pay first; but even that is not impossible, and therefore, though payment of the price is evidence of an intent to transfer title immediately, it is not conclusive evidence.

TRANSFER OF TITLE BY SUBSEQUENT APPROPRIATION.--Suppose title does not pass immediately, which may be due to the fact that the parties so agreed, or to the fact that the goods were not specified at the time the bargain was made. That is a common case. A and B contract for the sale of 100 cases of shoes to be made by A. At the time the parties make their bargain the shoes have not yet been made, but the parties expect that they will be made later, and appropriated to the bargain, as the legal phrase is. Or title may not pass at the time the bargain is made, although the goods are specified. The parties may have expressly agreed that title should not pass; or though the goods are specified, something may remain to be done to them by the seller to put them in a deliverable condition. Now, if title for any of these reasons does not pass when the bargain is made, it may pass by an express agreement of the parties, made later, that the buyer shall take title and that the seller shall give title; or frequently it may pass by what is called an appropriation of the goods by the seller to the buyer, without any express later assent of the buyer, by virtue of an implied assent of the buyer given in the original agreement that the seller should appropriate the goods. What is meant will be understood by one or two illustrations.

APPROPRIATIONS BY DELIVERY TO A CARRIER.--Suppose A contracts to sell and ship to the buyer 100 cases of shoes, and B contracts to receive and pay for them. That shipment to the buyer is an appropriation of the goods. The very 100 cases with which the seller intends to fulfill the bargain are indicated by the delivery of them to the carrier, and the buyer, since he agreed in the first place that they should be shipped, has assented to the appropriation. Therefore, in such a case, as soon as the goods are delivered to the carrier the presumption is that title passes to the buyer. This is by far the commonest case of appropriation by the seller in accordance with authority given by the buyer in his original agreement, and it is so common that it deserves a little further treatment.

ILLUSTRATION.--This kind of appropriation can be very well illustrated by the case of a supposed sale of tobacco to a minor. A, a minor, lives in an outlying suburb of Boston where the sale of tobacco to a minor is not permitted. He buys goods of S. S. Pierce Company in Boston and wants to buy some cigars from them. He can buy cigars of them in Boston and send them out to his home, but the title must pass to him in Boston. If the title passes in the suburb it is an illegal sale by S. S. Pierce Company, and consequently they do not want to make it. Of course the buyer can go and get the goods and pay for them in Boston and send them himself to his residence. But suppose he sends an order by mail; if S. S. Pierce Company are willing to charge goods to him, giving him credit, they can send the goods by express, because on their shipment of the goods the title will pass and the buyer will become a debtor for the price of the goods in Boston; but they must not send the goods by their own wagon, as their carrying the goods themselves out to the buyer's residence leaves them in their possession until delivery, and the delivery does not take place until the goods are delivered from their wagon at his house. That would not do. Whereas if the goods are delivered to a public carrier in Boston the carrier would be the buyer's agent and title would pass in Boston.

THE SELLER MUST FOLLOW EXACTLY AUTHORITY GIVEN HIM.--Suppose the buyer specified that the goods are to be shipped by a given route, and the seller shipped them by a different route. Title would not pass then because the buyer had not authorized the seller to appropriate them to him, the buyer, in that way. It may be that the seller's way of sending them was better than that originally assented to by the buyer, but the seller, if he wishes to hold the buyer, as owner of the goods from the time of shipment, must get his approval of that better way. Still more important than the method of shipment is the character of the goods themselves. The seller cannot, by putting any goods on the train, transfer title. He must put on the train the very kind of goods which the buyer agreed to receive, and that will mean not simply, in the case supposed, that the goods must be shoes, but they must be merchantable shoes of the character and sizes which the buyer agreed to take. The goods must be properly packed and all usual precautions in regard to them taken. In so far as the original agreement specified what was to be done, those things must be done. In so far as the original agreement does not specify how the goods are to be shipped, or what shall be done in regard to them, the seller has discretion to do anything which is customary and proper for a careful business man.

SHIPMENT OF GOODS C. O. D.--There has been considerable litigation in regard to the effect of shipping goods C. O. D. Suppose goods were ordered and goods of the sort ordered were shipped in accordance with the directions in the order, but were marked C. O. D. Those letters mean, as you know, collect on delivery, and two possible explanations may be given of their effect. One, that the seller retains not only control of, but also title to, the goods until they are delivered and the price paid. According to that view the carrier is made the seller's agent, to hold the title to the goods and transfer it to the buyer when he pays for the goods. But the better view is that the carrier merely retains a hold on the goods, a lien on behalf of the seller, while title to the goods passes on shipment.

EFFECT OF THE FORM OF A BILL OF LADING.--One cannot speak of title passing or being retained on shipment of goods without referring to bills of lading, for the general rules which have been given must be qualified by this statement, that by means of a bill of lading the title may be at will retained or transferred (if the buyer has authorized a transfer). The proper way to indicate a transfer of title when goods are shipped is to have the buyer named as consignee in the bill of lading. A bill of lading is very much like a promissory note; the carrier promises to deliver the goods to somebody who is called the consignee, and who corresponds to the payee of a note. There is this further feature in a bill of lading: the carrier acknowledges receipt of the goods from the consignor, that is, the shipper, and the carrier promises to deliver them.

ILLUSTRATIONS.--Now, when S. S. Pierce Company decide to ship goods to a buyer, it may consign them to the buyer or it may consign them to itself; that is, the same person may be consignor and consignee. That is very common in business, in order that the shipper may retain title to the goods until he receives payment. He takes the bill of lading in his own name and then, generally, attaches a draft on the buyer of the goods, and sends the bill of lading and the draft together through a bank. The bank notifies the drawee of the draft, who is the man who has agreed to buy the goods, that the bill of lading with the draft are at the bank, and that the buyer may have the bill of lading when he pays the draft. The buyer pays the draft and gets the bill of lading, and then for the first time does he become the owner of the goods. On the other hand, if the shipper--S. S. Pierce Company--had consigned the goods directly to the buyer, the buyer would have become the owner of the goods on shipment, provided the buyer had authorized that shipment. The seller cannot, however, by naming a buyer consignee, make the buyer owner of any goods which he has not agreed to receive. So much for appropriation of the goods to the buyer by shipment. In another chapter fuller reference will be made to bills of lading as documents of title and as bank securities. In this connection they are referred to merely as indicating an intention to transfer or retain title as between buyer and seller.

IMPORTANCE OF DELIVERY IN SALES OF GOODS.--Title to chattel property, it has been said, may pass without delivery. This is true as between the parties, but as against creditors and third persons delivery is necessary. Suppose A sells a horse to B and does not deliver the horse, and A afterwards sells the horse to C and does deliver the horse to C. B comes around to C and says, "That is my horse. I paid A the full price." C may say, "I bought him in good faith. I thought it was A's horse. I have got him and I am going to keep him." C may keep him.

PLACE OF DELIVERY.--Certain contractual rights between the buyer and seller are implied from the nature of the bargain of sale. A seller is under an implied obligation not only to transfer title to the buyer, but to deliver possession to him. Where must the seller deliver possession? If the contract states the place, the terms of the contract decide that question. If the contract does not expressly state where the place is to be, the place of the seller's residence is the place where the seller is bound to deliver, unless the goods are too heavy for easy transportation, and in that case the place of delivery is the place where the goods are at the time of the bargain. That may be the seller's place of business, and it may not.

DELIVERY AND PAYMENT ARE CONCURRENT CONDITIONS.--Concurrently with the seller's duty to deliver possession, the buyer is under a duty to pay the price, unless the contract provides for a period of credit. The delivery and the payment of the price are, in the absence of contrary agreement, concurrent conditions. The seller must offer to deliver if he wants to get a right of action for the price, and the buyer must tender payment if he wants a right of action for the goods. The tender of price and delivery must be at the place where payment and delivery is due. It may be asked, how is the seller to tender the goods at the place delivery is due if that is the seller's place of business and the buyer does not appear? The answer is, that it is in effect a tender for the seller to have the goods in the place where they are to be delivered, he being ready and willing to deliver them. If the buyer does not come there the buyer must, nevertheless, pay the seller. By the seller's readiness to perform, at the place where performance is due, and deliver, if the buyer with his money is at the place where payment is due, there is in effect a tender.

RIGHT OF INSPECTION.--The buyer and seller have certain other implied rights and duties. A right which the buyer always has, in the absence of agreement to the contrary, is a right to inspect the goods, to see that he is getting what he bargained for, before he accepts title and pays the price. He may, however, waive this right of inspection; he may agree to pay the price without seeing what he is getting, and in modern business this is not uncommon. One sort of bargain frequently made contains this term: "Cash against bill of lading." That means the buyer is to pay the price of the goods on receiving the bill of lading. The bill of lading will usually reach him before the goods, and, therefore, before he has a chance to inspect; and by the terms of his bargain he has agreed to pay cash against the bill of lading and he must do so. Of course, if the goods when received turn out not to be what he bargained for, he has a right to sue for breach of contract or recovery of the price paid. But in the first place, when the bill of lading comes he has to assume that the goods are going to be right and pay for the bill of lading. Another case where a right of inspection is waived is where goods are sent C. O. D. You order goods to be sent in that way and the expressman brings them. You say you want to open the package and see if the goods are right. You will find the expressman will not let you. He will say, "No, you must pay for the sealed package," and until you do so, you will have no right to the possession of the goods. If the goods are not all right you have redress by suing the seller, but you must pay your money first.

WARRANTIES.--Another and most important right which the buyer has is the enforcement of warranties. Warranties of a chattel may be either express or implied. An express warranty is a promise or an obligation imposed by the law because of a representation which the seller has made in regard to the goods. The simplest form of warranty is where the seller says, "I warrant this horse is sound," or, "I warrant this piano will stay in tune for a year." These warranties are promises and are subject to the same rules as other promises. They are contracts for consideration, the consideration for the promise being in each case the purchase of the goods. But we have warranties which are not based on promises, strictly so called, and yet are express. A tries to sell a horse. He says the horse is perfectly sound, four years old, broken to harness, and has trotted a mile in three minutes. Those are in form representations rather than promises; they are assertions of fact, and when A makes them it is possible he does not understand that he is binding himself for the truth of his statements; and yet if they are made as positive statements of fact, the seller is held to warrant the truth of those statements.

REPRESENTATIONS OF FACT AND OF OPINION.--The great distinction, between warranties by representation and statements in regard to property which do not amount to express warranties, is that between statements of opinion and statements of positive fact. If the buyer said, "I believe the horse can trot a mile in three minutes any day," it is not a warranty; even the statement, "The horse can trot a mile in three minutes" would probably not be a warranty; but the statement, "The horse has trotted a mile in three minutes," is a direct assertion of fact, and the element of opinion does not occur, and therefore that would be a warranty. Statements of value do not amount to warranties. Those are necessarily to some extent matters of opinion. General statements of good quality do not, ordinarily, amount to warranties. The courts, however, are getting stiffer and stiffer in regard to these matters. It used to be the law that a seller could represent nearly anything he chose in regard to his goods, and not be bound, so long as he did not expressly say, "I warrant," or make a promise in terms in regard to them. That was called the rule of "caveat emptor"--"let the buyer beware"--but this rule is almost wiped out so far as representations of fact are concerned. Now, the seller had better beware of what he says, for he may find himself liable as a warrantor.

NO WARRANTIES IMPLIED IN SALES OF REAL ESTATE.--There are certain warranties implied, although the buyer does not bargain for them and although the seller makes no express representations regarding them. In this respect sales of personal property differ entirely from sales of real estate. In the case of real estate you get no warranty but what you bargain for. If you get a deed without words of warranty, and it turns out that the seller had no title, in the absence of fraud you have no redress; you cannot get your money back though you have no title to the land.

WARRANTY OF TITLE IMPLIED IN SALES OF PERSONAL PROPERTY.--In the case of personal property it is otherwise. The first implied warranty that exists in the case of a sale of personalty, unless the contrary is expressly agreed, is the implied warranty of title. The seller impliedly warrants that he has title to the property and will transfer title to the buyer. The only exception to this is where a sale is made by a person in a representative capacity, as by a sheriff or an agent. In that case the person making the sale does not impliedly warrant title. In the case of an agent, however, if the agent was authorized to make the sale, the principal would be liable as an implied warrantor of title; and if the agent was not authorized to make the sale, the agent would be liable as warranting his authority--not as warranting title to the goods, but warranting that he had a right to bind his principal. Even in the case of a sale by an agent, therefore, the purchaser gets substantial redress if the title turns out to be defective. It is possible, of course, by express agreement, for a buyer to buy and a seller to sell merely such title as the seller may have; but there must be an express agreement, or very special circumstances, indicating that such was the intention of the parties, in order to induce a court to give this construction to a bargain.

IMPLIED WARRANTY OF QUALITY IN SALES BY DESCRIPTION.--Not only are there implied warranties of title, but there are also implied warranties in regard to the quality of goods. The fundamental principle at the bottom of implied warranty of quality of goods is this: if the buyer justifiably relies on the seller's skill or judgment to select proper goods, then the seller is liable if he does not deliver proper goods. We may distinguish in regard to implied warranties of quality, sales of specific goods--that is, sales of a particular thing--and sales of goods by description. In the case of sales by description there is always an implied warranty that the buyer shall have not only goods which answer that description, but merchantable goods which answer that description. Suppose a seller contracts to sell so many hogsheads of Manila sugar. The law formerly was that the seller could tender to the buyer, in fulfillment of that contract, the worst article that he could find which bore the name of Manila sugar. The law at present is that the seller must furnish to the buyer merchantable Manila sugar; that is, Manila sugar of average and salable quality. It does not have to be the best, but it must be ordinarily salable as merchantable Manila sugar.

IMPLIED WARRANTY IN SALES OF SPECIFIED GOODS.--Contrast with that case a contract to sell a specific identified lot of Manila sugar before the buyer and seller. Is the buyer bound to take without objection that specific lot, whether or not it turns out to be merchantable? Or suppose you go to a shop where they sell bicycles and buy a bicycle; you pick out a specific bicycle, and it turns out that, owing to defects in manufacture, it is not good for anything. It breaks down the first time you ride it. May the seller say, "You looked at what we had in stock and this is the machine you agreed to buy"? It is in this class of cases that the question of justifiable reliance by the buyer on the seller's skill and judgment becomes important, and in determining whether the buyer justifiably relied on the seller's skill and judgment several things must be considered.

INSPECTION AS AFFECTING IMPLIED WARRANTY.--Was the defect open to inspection and was there opportunity to inspect the goods? If there was, there is less reason to suppose that the buyer was relying on the seller's skill and judgment than if the defect was latent and not open to inspection.

IMPLIED WARRANTY WHERE THE SELLER IS A MANUFACTURER.--What was the nature of the seller's business? Was he a manufacturer of the goods in question? The strictest rules of implied warranty of quality are applied against manufacturers, and this is, you will see, reasonable, because the manufacturer ought to know about the goods and the buyer naturally relies on the manufacturer, as knowing about the character of the goods, to give goods of proper quality. Therefore, unless the buyer pretty clearly assumes the risk himself of picking out what is satisfactory to himself, a seller who is a manufacturer will be held to warrant the merchantable quality of the goods which he makes and sells.

IMPLIED WARRANTY WHERE THE SELLER IS A DEALER.--The next grade below a manufacturer is a dealer in that sort of goods. He cannot have the same knowledge as a manufacturer, but still, a dealer in goods of a particular kind is much more competent to judge of their quality than an ordinary buyer and therefore a dealer also, unless there is special reason to suppose the buyer did not rely on his own judgment, will be held to warrant that the goods are merchantable.

IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.--Sometimes there is a warranty of still greater scope than a warranty of merchantability; that is, a warranty of fitness for a particular purpose. A buyer agrees to buy glue of a manufacturer. The buyer is, as the glue manufacturer knows, a furniture manufacturer. The glue manufacturer sells the buyer glue which is merchantable glue, but it not good furniture glue, as furniture glue must be of unusual tenacity. The seller is liable here under an implied warranty. He knew that furniture glue was wanted. He was a glue manufacturer, and he ought to have understood that the buyer was looking to him to furnish glue of a sort that would not only be salable as glue but would fulfill the purpose which the buyer had in mind when he made the purchase.

KNOWN, DESCRIBED AND DEFINITE ARTICLES.--On the other hand, if the buyer orders what is called a known, described and definite article, he takes upon himself the burden of determining whether the thing which he buys will fulfill his purpose or not. For instance, a buyer in Missouri ordered of a boiler manufacturer two boilers selected from the catalogue of the boiler manufacturer, describing them by number. The boilers were good boilers, under ordinary circumstances, but the amount of mud in the Missouri River, on the banks of which the boilers were to be used, was so great that they could not be successfully used there. The buyer had no redress against the seller in that case. He had taken upon himself to specify the particular kind of boilers he wanted; he got them and they were merchantable boilers. The only trouble was that they were not fit for use in the place where the buyer was intending to use them. If the buyer had simply ordered boilers for a factory on the Missouri River, the result might well have been the other way, for that would have put the duty on the seller to furnish something that was suitable for that purpose.

RELIANCE ON THE SELLER IS THE ESSENTIAL ELEMENT.--The great thing to remember throughout the whole subject is that the implied warranty of quality depends on the justifiable reliance of the buyer on the seller's skill. If the goods are not merchantable under circumstances where the buyer does rely, he can recover from the seller, even though the seller was not guilty of negligence. A warranty is not dependent on negligence of the seller.

REMEDIES FOR BREACH OF WARRANTY.--One of the remedies, allowed in many but not all States, for breach of warranty, is to return the goods and demand the purchase money back; but that is only one remedy. Another remedy, which is universally allowed, is to sue for whatever damage the breach of warranty may have caused, and one or two cases will show how serious these damages may be. A seller sells a pair of sheep to a buyer with a warranty, express or implied, of their soundness. They have an infectious disease, and when put with a large flock of the buyer's sheep they infect the whole flock, and the damage is the loss of the whole flock. Another actual case was based on an implied warranty of the quality of rags sold to a paper manufacturer. The rags came from Turkey and were infected with smallpox. They gave smallpox to the operatives in the buyer's mill, and the mill had to be closed down, which caused great loss to the manufacturer. All that loss can be recovered from the seller of the rags, even though he was not negligent in bringing the result about.

ONLY ORIGINAL BUYER CAN RECOVER ON A WARRANTY.--Nobody, however, can recover on a warranty except the original buyer. For instance, the operatives who caught smallpox could not sue the seller unless the seller was negligent. If he had been careless or negligent in disregarding their safety, they could sue him in an action of tort, though they had no contractual relation with him. And if the buyer resells the goods the purchaser from him cannot sue on a warranty given to the original buyer.

EFFECT OF ACCEPTING DEFECTIVE GOODS.--Another matter that has caused considerable litigation in regard to warranty and the obligation of the seller in regard to the quality of goods, is the effect of acceptance by the buyer of goods which are offered to him. Suppose a certain quantity of Manila sugar is offered to one who has agreed to buy, and he takes from the seller that quantity of sugar, but finds it is not of as good quality as it ought to have been. The buyer subsequently objects, but the seller says, "You should have objected to that at the outset and refused to take it. Your taking it is an assent or acceptance of it as a fulfillment of the contract, and any right you may have had is now gone." It is settled law that if the defect was not observable with reasonable care, the buyer does not lose any right by taking the goods, provided he gave prompt notice of the defect as soon as it was discovered. Further, even though at the time of delivery the buyer observed the defect or might have observed it, it is the law of most but by no means all States, that taking the goods does not necessarily indicate assent to receive them as full satisfaction of the seller's obligation. The buyer may receive the defective goods as full satisfaction, but the mere fact of taking them does not prove it. It is advisable, however, for the buyer as soon as he sees the defect to protest against it. He may in most States safely take the goods if he says in taking them, "These goods are defective and I do not take them in full satisfaction;" or, if he does not discover the defect immediately on taking the goods, he ought to give notice as soon as he does discover that the goods are defective, and state that, though he proposes to keep them, he does so subject to a claim for their defective quality.

SELLER'S RIGHTS WHERE BUYER FAILS TO ACCEPT GOODS.--Now the seller has some rights, also, that should be referred to. In the first place, if the buyer refuses to take title to the goods when they are tendered to him, the seller has a right to recover damages. The amount of damages will be the difference between the value of the goods which the seller still retains, because the buyer will not take them, and the contract price which was promised. If the goods are worth as much as the price promised for them, the seller's damages will be only nominal, for he still has the goods and may sell them to somebody else for as good a price as was stipulated in the original bargain.

SELLER MAY RECOVER PRICE WHERE TITLE HAS PASSED.--If the title to the goods has passed, the seller may sue for the price. This right to the price is secured by a lien on the goods as long as the seller retains possession of them. If the seller has parted with possession and with title, he cannot get the goods back except in one narrow class of cases.

STOPPAGE IN TRANSIT.--If the goods are in the hands of a carrier, or other intermediary between the seller and buyer, even though title passed on delivery to the carrier, the seller may stop the goods in transit if the buyer becomes insolvent before they are actually delivered to the buyer. The right is exercised by notifying the carrier to hold the goods for the shipper since the buyer has become insolvent. The right of lien and of stoppage in transit is given the seller to enable him to secure the price, which is the thing of interest to him in the contract.

LEGAL AND EQUITABLE TITLES.--A legal title is a full right of ownership against everybody. The legal owner can take his goods wherever he finds them. An equitable title is a right to have the benefit of the goods or property, and, also, it frequently involves a right to have the legal title transferred to the equitable owner, making him full legal owner. The peculiar feature of an equitable title, however, is that it is good only against the particular person who, as the phrase goes, is subject to the equity, and also against any person who has acquired the property, either without giving value or with knowledge of the equity. To put the matter conversely, an equitable title is not good against a purchaser for value without notice, or, in the language of the Negotiable Instruments Law, against a holder in due course.

FRAUDULENT SALES.--This principle is important in other branches of the law besides that governing negotiable instruments. The most common case of equitable rights in sales arises in fraudulent sales. Where a sale is induced by fraud of the buyer, he gets the legal title to the goods, but the seller has an equitable title or right to get the goods back. Let us see how this works out. The buyer procures goods by fraud and he sells them to A. Now, the defrauded seller cannot get the goods back from A if A paid value for them in good faith. If A did not pay value in good faith, then the defrauded seller may get the goods from him or anybody who stands in the same position. If the defrauded seller can reach the goods before they have left the hands of the fraudulent person, he may replevy them or he may seize them if that is possible. It is not worth while to go into the various kinds of fraud that may be practiced in the sale of goods, but there is one specific kind that comes up very commonly which is worth mentioning; that is, buying goods with an intention not to pay for them. Generally, in order to create a fraudulent sale, it is necessary that the fraudulent person shall have made some misrepresentation in words, but here is a case where, though it may be said there is a misrepresentation, it is not put in words. It may be said there is a misrepresentation, for it is fair to say that every buyer when he buys goods not only promises to pay but represents that his intention is to pay for the goods, and perhaps that his financial condition is not so hopeless as to make the expectation utterly impossible of fulfillment. If the situation actually was that the buyer either had a positive intention not to pay, or was so hopelessly insolvent that any reasonable person would know he could not pay for the goods, the transaction is fraudulent; the seller still retains an equity, and may reclaim the goods from the buyer who has acquired a legal title or from any other person except a bona fide purchaser. (A draft of a statute to punish the making or use of false statements to obtain property or credit, jointly prepared by the General Counsel of the American Bankers Association and Counsel for the National Association of Credit Men, has been enacted in the form recommended, or with more or less modification, in a majority of the States. This statute provides, in substance, that "any person who shall knowingly make or cause to be made any false statement in writing, with intent that it shall be relied upon, respecting the financial condition, or means or ability to pay, of himself, or any other person, for the purpose of procuring in any form whatsoever, either the delivery of personal property, payment of cash, making of a loan, extension of credit, etc., for the benefit of either himself or of such other person, shall be guilty of a felony, and punishable, etc.") This question often arises in bankruptcy: Suppose the buyer goes bankrupt and the goods come into the hands of the buyer's trustee in bankruptcy. The trustee in bankruptcy is in legal effect, in such a case, the same person as the bankrupt; he is not a bona fide purchaser from him, and thus the seller may reclaim the goods from the trustee in bankruptcy just as he might from the bankrupt. In the case supposed the seller has been fraudulently induced to part with his title and may reclaim it. A case may be supposed, however, where the seller fraudulently retains his title, and here the buyer's creditors may seize the goods as if the title were in the buyer. Thus it is a fraud to make a conditional sale of goods to a person who intends, and who is understood to intend, to sell the goods again. The reason why it is a fraud is because it is inconsistent on the part of the wholesaler to say, "I retain title to the goods until paid for, yet I give them to you, knowing that you are going to put them in your stock of trade."

DESTRUCTION OF GOODS SOLD.--The question sometimes arises as to the effect of the destruction of the goods sold or contracted to be sold. The Sales Act in Sections 7 and 8 governs this: