American Commercial Law Series Negotiable Paper

Author : Samuel Williston
Publisher : American Institute of Banking
ISBN 13 :
Total Pages : 481 pages
Book Rating : 4./5 ( download)

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Download or read book Commercial Law written by Samuel Williston and published by American Institute of Banking. This book was released on 1921 with total page 481 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commercial Law Commercial law is a general term used to cover the legal rules which relate most directly to everyday commercial transactions. It is a term of no exact boundary, but most commercial law is based in one way or another on the law of contracts, which is one of the largest subjects in the law. Bills and notes, for instance, are special forms of contracts. In order to understand business law at all, therefore, it is necessary at the outset to have some knowledge of the fundamental principles of the law of contracts. DEFINITION OF CONTRACTS.—What is a contract? Simply a promise or set of promises which the law enforces as binding. Any promise, if it is binding, is a contract or part of a contract. So the law of contracts in their formation resolves itself into this: What promises are binding? A man may make all sorts of promises, but when has he a right legally to say "I have changed my mind, I am not going to do what I said I would," and when will he be liable in damages if he fails to do as he agreed? CONTRACT TERMS EXPLAINED.—There are certain terms in contracts which the student will find repeatedly mentioned and with which he should be familiar at the outset. For example, contracts are spoken of as express contracts, and implied contracts. By an express contract we mean a contract the terms of which are fully set forth. Implied contracts are[Pg 25] contracts the terms of which are not fully stated by the parties. There is a mutual agreement and promise, but the agreement and promise have not been expressly put in words. If I say to a man, "I will buy your horse, Dobbin, for $100" and he replies, "I will sell you the horse at that price," there is an express contract. I step into a taxi and simply say to the driver, "Take me to the Union Station." The driver says nothing, but takes me there. Here is an implied contract. By my conduct I impliedly agree to pay him the legal rate for the distance carried. FORMAL AND INFORMAL CONTRACTS.—Contracts are sometimes also divided into formal contracts, and simple or parol contracts. There are three kinds of formal contracts recognized in our system of law: (1) Promises under seal. (2) Contracts of record, such as judgments and recognizances. (3) Negotiable instruments. Of the three, it may be most difficult to understand why a judgment is included as a form of contract, because a judgment is simply a judicial termination of a fact entered in the office of the county clerk, and generally a lien on the real property owned by the judgment debtor. The sole reason, apparently, for calling a judgment a contract, is that an action of debt may be brought in a court of law upon such a judgment. Sealed contracts and negotiable paper will be taken up in a later chapter. Simple, or parol contracts, are those not embraced in the three previous classifications which constitute the formal contracts. The term parol is a little ambiguous, as it is sometimes used as opposed to a written[Pg 26] contract, meaning simply an oral one, and at other times it is used as opposed to the three previous formal contracts. UNILATERAL AND BILATERAL CONTRACTS.—Contracts are also divided into unilateral and bilateral contracts. In a unilateral contract, the contract imposes obligations on one party only. A promissory note is an example of a unilateral contract. In a bilateral contract, obligation is imposed on both parties. John and Mary become engaged to each other. This is a bilateral contract, and either may sue the other for a breach. Most important results flow from the distinction between unilateral and bilateral contracts. This we shall consider later. VOID, VOIDABLE AND UNENFORCEABLE CONTRACTS.—Contracts are also divided into void, voidable and unenforceable contracts. Strictly speaking, a void contract is no contract at all. Some statutes provide that no action shall be brought on certain contracts, and declare them absolutely void. A voidable contract is one which is good until the option of avoiding it is availed of by the party who has the option. For example, an infant with an income of $2000 a year contracts for the delivery of a Packard automobile on June 1. The car, being a luxury, makes the contract with the infant voidable on his part, and he may, before June 1, repudiate the contract and not be liable in a suit for breach of contract, or he may, if he choses, abide by the contract, take the car, and pay the purchase price when it is delivered. An unenforceable contract is one which in itself is perfectly[Pg 27] good as a contract, but because of some rule of law cannot be enforced. For example, A agrees, orally, with the owner of 1 Broadway, to buy that property for $1,000,000. The terms of the contract are understood by both parties. This contract is not enforceable, because, as we shall see later, the Statute of Frauds requires every contract for the sale of real property to be in writing. CONTRACTS UNDER SEAL.—There are two ways of making promises binding, and unless the promisor fulfils the requisites of one or the other of these two ways his promise will not be binding. The first of these ways relates to the form in which the promise is made; the second relates to the substance of the transaction, irrespective of the form. The way to make a promise binding by virtue of its form is to put it in writing and attach a seal to the writing. It is often thought that written promises are binding in any event, or that a promise that is not written is not binding in any event. Neither of these propositions, however, is true. A promise is not binding merely because it is in writing; it is necessary that something more shall be done. Not only must it be written, but a seal must be attached in order to make the promise binding by virtue of its form. Everyone is familiar with the common ending in written contracts—"witness my hand and seal," that is, my signature and seal.