Putnam's Handy Law Book for the Layman Part 12

If, however, one signs as agent without disclosing his princ.i.p.al, he is personally liable. Thus, a husband signed a note in his own name without adding more. As he had disclosed no princ.i.p.al, he was personally bound, and his wife, for whom he claimed to have signed the note, was not liable. The maker of a note added to his signature, "Pastor of St. Frances' church." This was regarded as his personal note, all besides his name were words merely of description. A person signed a note thus: "Estate of William R. Clark by William R. Clark, Jr., Trustee." As he was not authorized to borrow on behalf of the trust and give a note as trustee, he was individually liable notwithstanding the form of the note.

Where the signature is forged or made without the authority of the person whose signature it purports to be it is wholly inoperative.

Thus A cashed a number of drafts and checks payable to B's order on a forged indors.e.m.e.nt of B's name by B's bookkeeper, who appropriated the money to his own use. Nevertheless, B recovered the amount of the drafts and checks from A, nor was his negligence in not examining the bookkeeper's books or accounts a good defense. In another case before a note was delivered to and accepted by the payee, A, whose name appeared on the back, was shown the note who said, "Everything is all right." Afterward he resisted payment on the ground of forgery. As the payee was induced to take the note on A's statement of its genuineness, he could not escape payment.

Every negotiable note is deemed to have been issued for a valuable consideration, and every person, whose signature appears thereon, to have become a party for the value. An accommodation party is one who has signed the note as maker, drawee, acceptor or indorser without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the note to a holder for value, though the latter knew he was only an accommodation party.

What is meant by negotiating a note? By transferring it in a way whereby the transferee becomes the holder or owner. If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by indors.e.m.e.nt and delivery. An indors.e.m.e.nt may be either special or in blank; and it may also be either restrictive, or qualified, or conditional. A special indors.e.m.e.nt specifies the person to whom, or to whose order the note is payable. An indors.e.m.e.nt in blank specifies no indorsee, and a note thus indorsed is payable to bearer and may be negotiated by delivery. The holder may convert a blank indors.e.m.e.nt into a special one by writing over the signature of the indorser in blank any contract consistent with the character of the indors.e.m.e.nt. By a qualified indors.e.m.e.nt the indorser becomes a mere a.s.signor of the note, and is made so by adding to his signature the words "without recourse," or others of similar import. Such an indors.e.m.e.nt does not impair the negotiable character of the note. When a note is payable to the order of two or more payees or indorsers who are not partners, all must indorse unless the one indorsing has authority to indorse for the others. Again, where a note is drawn or indorsed to a person as cas.h.i.+er or other fiscal officer of a bank or corporation of which he is the officer, it may be negotiated by either the indors.e.m.e.nt of the bank or corporation or by the indors.e.m.e.nt of the officer. And where the name of a payee or indorser is wrongly designated or misspelled he may indorse the note as therein described, adding, if he thinks fit, his proper signature. The holder may at any time strike out any indors.e.m.e.nt which is not necessary to the t.i.tle.

When this is done, he and all subsequent indorsers are thereby relieved from liability on the note.

The holder of a negotiable note may sue thereon in his own name; and payment to him in due course discharges it. Who is a holder in due course? One who holds a note on the following conditions: (a) that it is complete and regular on its face; (b) that he became the holder before it was overdue and without notice that it had been dishonored; (c) that he took it in good faith and for value; (d) that at the time of its negotiation to him he had no notice of any infirmity in the note or defect in the t.i.tle of the person negotiating it. A note therefore, providing that any delinquency in the payment of interest "shall cause the whole note to immediately become due and collectable"

is made overdue by the maker's failure to pay the interest when due, and a subsequent taker cannot be a holder in due course.

To const.i.tute notice of an infirmity in a note or defect in the t.i.tle of the person negotiating it, the person to whom it is negotiated must have had such actual knowledge of the infirmity or defect that his action in taking the note amounted to bad faith, but merely suspicious circ.u.mstances are not enough to put a prudent man on inquiry.

On the other hand if the purchaser does suspect and fails to investigate, lest a defense be disclosed to the maker of the note, he is not a purchaser in good faith. The maker of a note engages that he will pay it according to its terms and admits the signature of the payee and his capacity to indorse, and engages that on due presentation the draft will be accepted or paid or both, according to its terms, and that if it is dishonored, and the needful proceedings in consequence are taken, he will pay the amount. A person placing his signature on a note otherwise than as maker, drawer or acceptor is deemed to be an indorser unless he clearly indicates his intention to be bound in some other way. The Negotiable Instruments Act fixes the liability of a person who is not a party to a note, and who indorses it before delivery. The law was in great confusion before this act established a definite rule. Such a person is now liable as indorser in accordance with the following rules: (a) if the note is payable to the order of a third person, he is liable to the payee and to all subsequent parties; (b) if payable to the order of the maker or drawer, or if payable to bearer he is liable to all parties subsequent to the maker or drawer; (c) if he signs for the accommodation of the payee he is liable to all parties subsequent to the payee.

Presentment for payment is not necessary in order to charge the person primarily liable on a note, but if it is payable at a mentioned place and he is able and willing to pay it there at maturity, such action is equivalent to a tender of payment on his part. Presentment for payment, of course, is needful to charge the drawee and indorsers.

When the note is not payable on demand, presentment must be made on the day it falls due. When it is payable on demand, presentment must be made within a reasonable time after its issue. This rule does not apply to all bills of exchange. Thus unreasonable delay in presenting a check will discharge the indorser whether such delay is a cause of loss to him or not. Likewise a certificate of deposit payable on demand must be presented for payment within a reasonable time after its issue in order to hold the indorser. "The usage of trade or business includes the usage of banks relating to presentment of checks for payment. It is sufficient diligence to charge an indorser if a check on the bank in another place is forwarded through various banks for collection in accordance with the regular usage of the business, although presentment might have been more promptly made if a more direct course had been taken." Presentment for payment must be made by the holder or by some person authorized by him to receive payment, at a reasonable hour on a business day and at a defined place, and to the person primarily liable thereon. And if he is absent or inaccessible then to any person who is at the place where presentment is made. If a note is payable at a bank the payor has until the close of banking hours to pay it, and if, before the close of the bank day, he deposits money enough to pay it a demand earlier in the day is premature. Delay for presenting a note for payment is excused where the delay is caused by circ.u.mstances beyond the holder's control, and he is in no way negligent. Nor need presentment for payment be made when after using reasonable diligence it cannot be made, or where the drawee of a bill is a fict.i.tious person, and lastly where presentment, express or implied, has been waived.

Every negotiable note is payable at the time fixed therein. When the day of maturity falls on Sunday or a holiday, the note is payable on the next succeeding business day. Notes falling due on Sat.u.r.day are to be presented for payment on the next succeeding business day, except that notes payable on demand may, at the option of the holder, be presented for payment before twelve o'clock noon on Sat.u.r.day when that entire day is not a holiday.

When the note is payable at a fixed period after the date, after sight, or after the happening of a specified event, the time of payment is determined by excluding the day from which the time is to begin to run, and includes the date of payment. And where a note is made payable at a bank it is equivalent to an order to the bank to pay it for the account of the princ.i.p.al debtor thereon. In accordance with the notation on the margin of a note the holder sent it for collection to a bank which held, as a special deposit, the maker's money. The cas.h.i.+er at maturity notified the maker who directed the cas.h.i.+er to pay the note. The cas.h.i.+er said "All right, your note is paid." The note was regarded as paid.

When a negotiable note has been dishonored by non-acceptance or non-payment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged. A written notice need not be signed and an insufficient notice may be supplemented by verbal communication. Nor does misdescription of the note vitiate the notice unless the party to whom the notice is given is in fact misled thereby. The notice may be in writing or merely oral, and may be given in any terms which sufficiently identify the note and indicate that it has been dishonored by non-acceptance or non-payment. It may be delivered personally or through the mails. Where the parties to be notified are partners, notice to any one of them is notice to all even though there has been a dissolution. But notice to joint parties who are not partners must be given to each of them, unless one of them has authority to receive the notice for the others.

When the person giving, and the person who is to receive notice reside in the same place, it must be given within the following times: (a) if given at the place of business of the person who is to receive notice this must be done before the close of the business hours on the day; (b) if given at his residence it must be given before the usual hours of rest on the day following; (c) if sent by mail it must be deposited in the post office in time to reach him in usual course on the day following. If the parties reside in different places the notice must be sent within the following times: (a) if sent by mail it must be deposited in the post office in time to go by mail the day following the day of dishonor, or if there be no mail at a convenient hour on that day by the next mail thereafter; (b) if given otherwise than through the post office then within the time notice would have been received in due course of mail if it had been deposited in the post office had it been deposited in the post office as above described.

If a party had added an address to his signature the notice must be sent to that address, if he has not, then the notice must be sent as follows: (a) either to the post office nearest to his place of residence or to the post office where he is accustomed to receive his letters, or if he lives in one place and has his place of business in another, notice may be sent to either place, or if sojourning in another place, the notice may be sent there. In any event if he receives the notice within the time specified, it will satisfy the law.

Of course notice may be waived; sometimes, also, it is quite impossible to give notice; whenever this happens the law does not require notice to be given.

Something should be added concerning alterations that are made occasionally in negotiable instruments. Any alteration which changes the date, the sum payable either of princ.i.p.al or interest, the time or place of payment, the number or the relations of the parties, the medium or currency in which payment is to be made, or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect is a material one and ought not to be made. To add the words "with interest," with or without a fixed rate, is a material alteration. But the insertion by the payee of the words "interest"

after the making of a note by authority of maker will not vitiate it.

And if a note had the clause, "interest at __ per cent," the insertion of the legal rate would not be a material alteration since the legal import would not be changed.

The position of a writing on a note is not important, for the effect of the contract is to be gathered from the four corners of the paper.

The general rule is, if a memorandum written on an instrument in the margin or at the foot is made before or at the time of its execution, it is considered a part thereof, and if it affects the operation of the terms of the body of the instrument it is a material part. It follows that words written by a party on the margin of an instrument after its execution and delivery, const.i.tute an alteration if intended to affect the terms of the instrument and would have such effect if they were there when the instrument was executed.

A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed determinable future time a certain sum of money to order or bearer. A bill of itself does not operate as an a.s.signment of the funds in the hands of the drawee available for its payment, nor is the drawee liable on a bill until he accepts or agrees to pay it. An inland bill is one drawn and payable within a state. Any other is a foreign bill.

An indorsed promissory note and an accepted bill are very much the same thing, and that is why the law always treats of both together.

The maker of a note incurs the same obligations as the acceptor of a bill, both are the parties primarily liable thereon, and the indorser of a note and the drawer of a note are both secondarily liable on proper notification of the failure of the primary parties to pay, as we have learned. The payees in both cases are the same. The acceptance of a bill is the signifying by the drawee that he has a.s.sented to the drawer's order, and must be in writing. An unconditional promise in writing to accept a bill before it is drawn is deemed an actual acceptance in favor of every person who on the faith thereof receives the bill for value. The drawee is allowed twenty-four hours after presentment to decide whether or not he will accept the bill; but the acceptance, if given, dates from the day of presentation. Furthermore, an acceptance may be qualified as to time, acceptance of payment in part only and in other ways. When a foreign bill is not accepted it must be protested, which must specify the time and place of presentment, and other particulars, and is usually made by a notary public, though this can be done by other persons.

=Parent and Child.=--A parent is legally as well as morally bound to support his children who are incapable to care for themselves. Should a wife be divorced from her husband his duty to maintain the children would not fall on her, unless she also had the custody of them. A father's obligation to maintain his child continues until he is able to provide for himself. The legal obligation ceases by common law as soon as a child attains majority, however helpless he may be or great may be his father's wealth.

A child that has property of his own, while his father's means are not enough, may be supported from his own means. Even the princ.i.p.al may be used in this manner. Generally if the father has ample means, he must use them to educate his child. When the father can use the child's fortune and how much, is sometimes a difficult question to answer. The education of a child is now largely regulated by statute.

A parent may protect his child, even a homicide is justifiable. A parent can also correct his child. Says an excellent authority: "The rights of parents result from their duties. As they are bound to maintain and educate their children, the law has given them such authority, and, in support of that authority, a right to the exercise of such discipline as may be requisite to the discharge of the sacred trust." See _Adopted Child_; _Husband and Wife_.

=Partners.h.i.+p.=--There may be a partners.h.i.+p in a single transaction, for example, to buy and sell a load of potatoes. Persons may be liable as partners to others who had no intention of creating that relation.

If A acts in such a way by speech or deeds as to create the belief in B that he is a partner, and thus believing B sells goods to the partners.h.i.+p, A is liable as a partner for them. On the other hand if B knew that A was not a partner, he could not hold him as one. In many cases it is difficult to determine whether one is a partner or not.

Many tests have been applied. The most general is that of intention.

Simply sharing in the profits and losses will not always suffice. This was long considered a proper test but it broke down after many applications. Thus, suppose a clerk is paid by giving him a fixed percentage of the profits as a compensation, is he a partner? He was so regarded on one occasion, and the firm having failed he was made liable for all its debts. That is one of the consequences attending the relation, every partner is liable for the entire indebtedness of the amount he may have contributed. The clerk contributed nothing, nevertheless he was liable like the others. Today the courts would decide such a case differently. It would inquire whether the partners intended to make him a partner, or only gave him a share of the profits as a mode of paying him for his service. The recent Partners.h.i.+p Act contains this test.

A partners.h.i.+p may usually hold any kind of property, real and personal, and not infrequently is formed to cultivate or deal in land.

A partner is a general agent. Hence the risk of creating the relation.

Being a general agent he can bind his partners.h.i.+p for any acts within the scope of his authority. Yet there are limitations. If a partners.h.i.+p was engaged in selling dry goods, a partner could hardly bind his partners by making a contract with a person for a quant.i.ty of iron, unless it was needed in rebuilding the store, or in some other connection with the business. He can make and indorse negotiable paper that is used in connection with the business. Suppose he borrows money on his own note and he gives the money to his firm, is it responsible for the amount? This has proved a hard question for the courts. If the money though loaned on his note was for the benefit of the partners.h.i.+p, and it was known at the time that it was to be used in that way, the partners.h.i.+p would be liable; but if the money was to be used by the borrower and this was known and believed by the lender he could look only to the borrower for payment.

The receiving of a new member const.i.tutes a new partners.h.i.+p. It may reorganize the old partners.h.i.+p and become responsible for its debts, or it may not. Unless recognized in some way by paying interest on them and the like, the new member does not become responsible for them.

A partners.h.i.+p is formed usually by a definite agreement that is put in writing. Yet it may be simply an oral agreement with very general terms about the contribution of capital or skill of the respective partners and their division of profits. They may and usually do have distinct fields of employment, each doing the thing for which he is, or supposed to be, best prepared. By reason of their general liability, in the olden days persons who wished to thus engage and yet not be responsible, were kept in the background, and were known as secret and dormant partners. If found out they were liable because they were to share in the profits. The fact that they were unknown when credit was given to the partners.h.i.+p at the time of selling goods to the concern did not s.h.i.+eld them from liability after the discovery of their relation.

The difficulty has since been removed in two ways, by incorporating the partners into a corporation whose powers and liabilities are fixed by law and therefore known to all, and by forming limited liability partners.h.i.+ps. These consist of two or more general partners, also special partners who contribute an amount of capital, of which the public is publicly informed. If such an a.s.sociation is unsuccessful, the special partners may indeed lose all, or a part of the capital they have contributed, but are liable for no more. This is a great improvement over the secret and dormant methods of getting the capital needed for partners.h.i.+p purposes. One of the matters that should be carefully guarded in forming a limited liability partners.h.i.+p is to contribute the full amount of capital advertised. If any deception is practiced, or mistake made, whereby a smaller amount is contributed, should the partners.h.i.+p not succeed, the special partners become liable as general partners for the full amount. Once such a partners.h.i.+p was formed with three special partners who contributed each $100,000, and at the end of two years were told that their profits individually were $60,000. Each was asked to contribute $100,000 more, and feeling happy over his venture, he put in $40,000 more, which, added to his profits, made up the required amount. When the concern failed a few years afterwards the books showed that neither special partner was ever ent.i.tled to $60,000 as profits. Though innocent, for they had never examined the books, they were held as general partners for the entire indebtedness of the concern.

An illegal contract made by a partner will not bind his partners.h.i.+p, for all parties are supposed to know the law, and an illegal bargain cannot be enforced, for example, an agreement to pay usurious interest.

How may a partners.h.i.+p be dissolved? Unless the time is fixed by agreement, it may be dissolved by any member whenever he pleases to do so, though he cannot act wantonly to the manifest injury of the others without making himself responsible for their loss. And if a partner should attempt to transfer his interest before the time fixed for ending the relation without good reason, to the manifest injury of the other partners, he can be legally restrained from taking such action.

The death of a partner causes a dissolution. Nor can executors or administrators succeed to his place, though they often do so for a short period to prevent the interruption of the business and to enable all parties to fare better than they would by its sudden ending. Yet it is awkward for these officials to thus act, and in so doing they incur an unpleasant personal responsibility. To relieve them from this some states have pa.s.sed statutes permitting them to thus act with the other partners under the direction and orders of the court having charge of the estate.

A partner who retires should give notice of his retirement to relieve himself from future liability. For, should he neglect, and persons continued to sell on credit to the firm, supposing he was a member, he would be liable as before. The statutes in some states regulate his duty in this regard; it is one that he cannot safely omit.

Should a partners.h.i.+p fail, the general rule with respect to the a.s.sets is the partners.h.i.+p property must be used to pay partners.h.i.+p debts, and the individual property of partners to pay their individual debts. If a partner has anything left after paying his individual debts, it must be devoted to paying the partners.h.i.+p debts. If the partners.h.i.+p has anything left after paying its debts, this belongs to the partners in accordance with their agreement in contributing it and the earnings, and must be devoted to the payment of their individual debts.

Lastly concerning the authority of a liquidating partner. He can do many things, give renewal notes, make indors.e.m.e.nts, collect debts due the partners.h.i.+p, and even revive an outlawed debt. Of course the affairs of a partners.h.i.+p may be settled by some other person than a partner; not infrequently a receiver is appointed who acts under the order of the court that appointed him.

An agreement between a liquidating partner and the other partners, to take all the property and pay all the debts, is limited in its effect to themselves and does not affect others. After the partners.h.i.+p a.s.sets have been transferred to a liquidating partner, or to any other person for liquidation, a debtor who has notice of the transfer is not justified in making a settlement with any one else. And if he should do so, the liquidator could require him to pay again to himself.

=Patent.=--In the United States the thing patentable is a new and useful art, machine, manufacture or composition of matter, or new and useful improvement thereof, or new, original and ornamental design for an article of manufacture. An idea, principle or law of nature is not patentable, but only the means for utilizing the idea or principle.

Many a great discovery has slipped away from the inventor or discoverer, because he sought to hold the discovery or invention of the principle as his own, instead of limiting his claim to the means or methods of putting his principle into use. Morse's invention of telegraphy is one of them. An art or process is patentable as well as machinery, though the inventor may not know the abstract principles involved in his art. But he must know and describe the steps by which the result is accomplished. A composition of matter is a mechanical mixture or chemical combination of two or more substances; and an improvement is an addition to, or change in, a known art, machine, manufacture or composition of matter, which produces a useful result and is patentable if it amounts to invention. Lastly "a patentable design may consist of a new and ornamental shape given to an article of manufacture, or of an ornamentation to be placed upon an article of old shape." It is said that the law relating to this subject intends that the patentability of a design shall be determined by its appeal to the eyes of the ordinary man, and not to the eyes of a jury of artists. Design patents are granted for different periods, three years and a half, seven years and fourteen years, as the applicant may elect.

The subject matter of a patent must be new and useful. It must be new not only to the patentee, but to all the people in this country, and at the time he filed his invention. The federal law, however, secures a patentee who had no knowledge that his invention had been discovered abroad and which had not been patented there, nor described in a printed publication. Before the enactment of this law a patent was not granted without showing that the applicant was the original inventor with relation to every part of the world.

Much has been said concerning the novelty of an invention. This may be in the use of an old means in a new way; or a change of shape or form to produce new functions and results, but the changes must amount to invention, which is more than mere novelty.

A foreign patent in order to invalidate an American patent must antedate the invention patented. A foreign patent exists as a patent only as of the date when the invention was published. In England an invention is not patented within the meaning of the act of Congress until the enrollment of the complete specification.

What is meant by a prior publication? It is a printed book, newspaper or doc.u.ment of a public nature disclosing the invention intended and actually employed for the purpose of informing the public. Publication in a book of general circulation is sufficient; business catalogues or circulars are not such publications as are meant in the law.

To defeat a patent on the ground of want of novelty the proof of prior use or knowledge must be convincing, sufficient to establish the fact beyond a reasonable doubt. The recollection of one witness concerning the peculiar construction of a piece of machinery, especially if the structure is one of complex character, is not enough evidence to defeat a patent. Much less evidence, however, might be sufficient to prove that a very simple invention had been antic.i.p.ated.

To justify the granting of a patent it must be useful. If the invention be frivolous or pernicious, the inventor cannot secure for it legal protection. The use of the invention must not be contrary to public health or morals. It is not needful that the invention should be the best of its kind, or that it should accomplish all that the inventor claims for it. Furthermore, its utility depends on the state of the art at the time of making the claim or issuing the patent; its subsequent inutility does not invalidate the patent. Extensive use is evidence of utility. The presumption of law favors a patent, and the burden of proof is on the one attacking it to show that it is not useful. The infringement of an invention is in effect an admission of utility, because use implies utility.

A patent also calls for the exercise of inventive power. Though invention must be seen in every patent, it is difficult to define.

Says a former commissioner of patents, Justice Duell: "It is a matter resting in judgment and therefore no fixed rule for its determination is possible." Some principles, however, a.s.sist in defining the term.