Commercial Law Part 3

THE OLD RULE.--Upon her marriage a woman's existence became merged in that of her husband, and the husband and wife were regarded for many purposes as one person. What tangible personal property she had became his immediately upon marriage, and he had the right to reduce her bills, notes, bonds and other debts to his possession. Her real property she retained the t.i.tle to, subject to the right of the husband to have the use of it during his life, if children were born of the marriage. He was bound to supply her with necessaries, and so long as he did this her contracts for things of even ordinary use were void; but if he failed to supply the necessaries her contract for them would be valid. All her other contracts were absolutely void--not voidable. Her position, then, was worse than an infant's. She could have personal property of her own only if it was given to someone else to hold the t.i.tle and pay over the income to her, and even this "separate estate," as it was called, could not be bound by her contracts.

CHANGES MADE BY STATUTE.--The law of married women's contracts has been greatly changed by legislative enactments, to give married women the rights which the more enlightened view of the present time accords to them. The first changes aimed quite generally to give her greater rights over her "separate estate," giving her power to make binding contracts with reference to it, or to make binding contracts if she were carrying on a trade or business of her own. But the earlier statutes frequently did not give her power to contract with her husband, or to make binding contracts if she had no separate estate, or was not carrying on a separate business. Later enactments have largely corrected these defects, but the old rule still stands except as it has been changed by statute, and, therefore, the statutes of each State and the decisions interpreting them must be consulted to determine accurately the law in each State. It may, however, be said that generally a married woman may now contract except with her husband, and except as surety for him. In many States she can even make contracts of these excepted cla.s.ses.

ALIENS.--An alien is one born out of the jurisdiction of the United States, of a father not a citizen of this country, and who has not been naturalized. In times of peace, aliens may hold property and make contracts and seek the protection of our courts as freely as citizens.

When war breaks out between this country and another the making of contracts between citizens of the two countries is prohibited. If such contracts are made during a state of war, they are illegal and void, and the courts of this country will not lend their aid to enforce them, either during the war or after its termination. Contracts made before the war breaks out are good, but cannot be enforced, nor can remedies for their breach be obtained, while the war is in progress. When the war ceases, however, the courts will lend their aid to the enforcement of such contracts.

CORPORATIONS.--A corporation may contract as freely as an individual so long as its contracts are within the business powers and scope of the business which its charter authorizes it to conduct. And even if a corporation has made a contract outside of the scope of its business, and the contract has been acted upon so that either party has had the benefit of the contract, an action will lie in favor of the other for the benefits so conferred. But a contract outside of the business which its charter permits the corporation to engage in, and which is wholly executory, the courts will not enforce. Such contracts are said to be ultra vires. Contracts with a corporation may be in the same form as contracts between individuals, and the corporation need use its seal only where an ordinary person is required to use one. The officer or officers making the contract on behalf of a corporation must, however, be authorized so to do either by the directors or by the general powers attached to such officers. In law corporations are deemed to be artificial persons subject in a general way to provisions governing natural persons.

CHAPTER III

Contracts--Performance and Termination

PRIMARY RULE.-After a contract has been formed, it does not make much difference whether it is under seal or whether it is a simple contract; the rules governing the contract, subsequent to its formation, are very much the same though there are a few distinctions. The primary rule running through the law, governing obligations to perform contracts, is that if a man has once formed a good contract he must do as he agreed, and if he fails substantially (not merely slightly) to do so the other party may refuse to perform on his part. If you remember that fundamental principle you cannot generally go far wrong.

CONDITIONAL CONTRACTS--INSURANCE.-What one agrees to often depends on the conditions which he includes as part of his promise. Take the insurance policy previously alluded to. An insurance company promises to pay $5,000, but it does not promise to pay in any event; the condition "if the house burns down" is obviously a qualification of the promise.

But there are other conditions in the insurance policy. The insurance company says that it will not be liable if gasoline is kept in the house beyond a small quant.i.ty necessary for cleaning. That, too, is a condition of its promise to pay $5,000; so that "if the house burns down," "if gasoline is not kept in the house," "if the house is not unoccupied more than three months," and "if mechanics are not allowed in possession of the property for more than a certain length of time," are all conditions, and the company's main promise need only be kept if the conditions are complied with. That is why an insurance policy is not always quite as good as it seems--because there is a large promise in large print; but there are a good many qualifications in smaller print which are really part of the promise and must be taken into account.

CONDITIONS IN BUILDING CONTRACTS.--Another kind of conditional promise often occurs in building contracts. The employer agrees to pay the builder or contractor on the production of an architect's certificate.

Now it doesn't do the builder any good to build that house unless he gets the architect's certificate, for he has been promised pay only on condition that he produce it. That is the promise between the parties.

That is the only promise.

WHEN PERFORMANCE OF CONDITIONS IS EXCUSED.--It is obvious that these conditions in promises may be sometimes used to defeat the ends of justice, and undoubtedly at times they are so used. A person who draws a contract cleverly will put in a great many conditions qualifying his own liability, and will try to make the promise on the other side as unconditional as possible. The law cannot wholly do away with these conditions, because in general, so long as parties do not make illegal bargains, they have a right to make such bargains as suit themselves.

The court cannot make their agreement for them, but it is held that if a condition will lead to a real forfeiture by an innocent promisee, the law will relieve the promisee. Thus, in the architect's certificate case, if the house was properly built and it was merely ill temper on the part of the architect that caused him to withhold giving the certificate, the court would allow the builder to recover, and even if the architect had some good reason for refusing the certificate, the court would not allow the builder to be permanently prevented from recovering anything on the contract, providing the builder had substantially though not entirely performed his contract and had acted in good faith. If, however, his default was wilful, if he had tried to beat the specifications, and the architect had found him out and therefore refused the certificate, the only thing the builder could do would be to go at it again, tear out his faulty construction and build as he had agreed.

IN CONTRACTS OF EMPLOYMENT, WORK MUST BE PERFORMED BEFORE PAYMENT IS DUE.--There are other matters which qualify the obligation of a promisor to perform besides express conditions such as those we have alluded to.

Take this case: John promises to work for the A. B. Company; the A. B.

Company promises to employ him and to pay him a salary of $1,000 a year.

John comes to work the first day and works a while, and then he says he would like his thousand dollars. The A. B. Company says, "Well, you have got to do your work first." John says, "Why should I work first and trust you for pay, rather than you pay first and trust me for the work?

I will keep on working, but I want the pay now." Of course, the employer is right in refusing to pay until the work has been done, even though the promise of the employer is not expressly qualified by the statement that after the work has been done he will pay $1,000. It has been dictated by custom, rather than by anything else, that where work is to be performed on one side and money to be paid on the other, in the absence of any statement in the contract to the contrary, the work must be done before the pay is given. The result is this: that John must work anyway, his promise to work being absolute; but the employer's promise to pay the money is, in effect, conditional. It is subject to an implied condition, as it is called, that John shall have done the work he agreed to do. The promise of the employer is, in effect, "I will pay if you previously have done the work." But John's promise is absolute: "I will work." He has to trust for the pay.

PERFORMANCE FIRST DUE UNDER A CONTRACT MUST BE GIVEN BEFORE PERFORMANCE SUBSEQUENTLY DUE FROM THE OTHER PARTY CAN BE DEMANDED.--And that case is an ill.u.s.tration of a broader principle which may be stated in this way: where the performance promised one party to a contract is to precede in time the performance by the other side, the party who is to perform first is bound absolutely to perform; whereas the party who is to perform subsequently may refuse to perform unless and until the other party performs. In the cases thus far alluded to, the promises of the two parties could not be performed at the same time. You cannot work for a year and pay $1,000 simultaneously. One performance takes a whole year and the other performance takes only a moment.

PERFORMANCES CONCURRENTLY DUE.--But frequently there arise cases where both promises can take place at the same time. The commonest ill.u.s.tration of that is a contract to buy and sell. You can pay the price and hand over the goods simultaneously, and when a contract is of this character, that is, where both performances can be rendered at the same time, the rule is that in the absence of agreement to the contrary, they must be performed simultaneously. John agrees to buy James' horse and pay $200 for it, and James agrees to sell the horse for $200; that is a bilateral contract of purchase and sale. Now suppose neither party does anything, has each party broken his promise? It might seem so, for John has not bought the horse or paid for it as he agreed, nor has James sold the horse. But where each party is bound to perform simultaneously with the other, if either wants to acquire any rights under the contract he must do what is called putting the other party in default, that is, he must offer to perform himself. John, therefore, must go to James, offer $200 and demand the horse if he wants to a.s.sert that James has broken his contract. And James, on the other hand, if he wishes to enforce the contract, must go with the horse to John and say, "Here is the horse which I will hand over to you on receiving simultaneously the $200 which you promised me for it." The obligation of the two promises when they can be performed simultaneously is called concurrently conditional, that is, each party has a concurrent right to performance by the other, and has a right to refuse performance until he receives, concurrently with his own performance, performance by the other party.

INSTALLMENT CONTRACTS.--Sometimes contracts are more complicated than those which we have stated, such as contracts of service and contracts to buy and sell. This, for instance, is a type of a very common sort of contract in business: a leather manufacturer uses large quant.i.ties of tanning extract in his tannery. He makes a contract for a regular supply, so many barrels each week for a year, for which he agrees to pay a specified price a barrel on delivery. For a time the extract promised him is sent just as agreed. We will suppose, then, that perhaps the extract manufacturer is slow in sending what he promised; there is a delay; perhaps the extract that is furnished is not as good as it was or as the contract called for. What can the leather manufacturer do about it? Of course, he can keep on with the contract, taking what the extract manufacturer sends him, getting as much performance as he can, and then sue for such damages as he may suffer because of the failure to give what was promised completely. But he does not always want to do that.

Suppose it is necessary for his business that he should get tanning extract and get it regularly. He does not want to wait and take chances on the extract manufacturer's delays in delivery and inferiorities in quality. He wants to make a contract with somebody else and get out of his bargain with the first extract manufacturer altogether. May he do so? No question in contracts comes up in business more often than that.

And the answer to the question is this: it depends on the materiality of the breach, taking into consideration the terms of the contract and the extent of the default. Is the breach so serious as to make it fair and just in a business sense to call the contract wholly off; or will justice be better obtained by making the injured party keep on with the contract and seek redress in damages for any minor default?

MATERIALITY OF BREACH IN CONTRACTS OF EMPLOYMENT.--The same thing comes up very often in contracts of employment. Suppose an employer hires an employee for a year, and in the course of the year the employee at some time or other fails to fulfill his contractual duty as an employee.

He is negligent and in some respect fails to comply with his contract to render good and efficient service. Can the employer discharge him?

We must ask how serious is the breach. A merely negligent breach of duty is not so serious as one which is wilful. Or the breach might be on the other side of the contract. Suppose the employer has promised to pay a certain sum each month as salary during the year, and does not pay promptly. Has the employee a right to say, "You pay my salary on the first day of the month as you agreed, or I leave"? No, he does not have a right to speak so positively as that. A single day's delay in the payment of one month's installment of salary would not justify throwing up a year's contract. On the other hand, if the delay ran along for any considerable time, it would justify the employee in refusing to continue. You will see that this principle of materiality of the breach on one side, as justifying a refusal to perform on the other, is rather an indefinite one. It involves questions of degree. That is so in the nature of the case. The indefiniteness of the rule, therefore, cannot very well be helped.

ILl.u.s.tRATIONS AND DISTINCTIONS.--A few concrete ill.u.s.trations may help to bring out the points under discussion. Suppose an agreement for the sale of real estate, and, for instance, the buyer is unable to be on hand the day the sale is to be completed, and the owner is present, and, finding the buyer absent, immediately sells the land to another. Now is there any action against the owner, or might he justly refuse to go on with the contract because of the momentary breach of contract? No, he cannot refuse to go on in the case of a contract of that sort to sell real estate, unless the contract very expressly provided that the transaction must be carried through at the specified time and place or not at all. The case would be governed otherwise by the principle of materiality of the breach, to which we have alluded. A brief delay would not be a sufficiently material breach to justify the seller in refusing to go on, but a long delay, of course, would be sufficient. In sales of personal property time is regarded by the law as more important than in sales of land. In contracts to sell stocks varying rapidly in value, time is a very important element. Suppose now that an option for a piece of land was given by the owner. May he dispose of the land to another a few minutes after the time specified in the option for the acceptance of the offer? That is different from the case previously put. The option is in effect an offer to make a sale, and the offer is by its terms to expire, we will say, at 12 o'clock, noon, October 23. It will expire at that time, and an acceptance a minute later will be too late. The difference is in the terms of the promise made by the different parties.

In the case put first, there is an unqualified contract to buy and sell.

In the case now put there is a promise to sell only if the price is tendered or if acceptance is made prior to 12 o'clock, noon, October 23.

The terms of the option, a.s.suming in its favor that it was given for consideration or was under seal and therefore not merely a revocable offer, were expressly conditional. The vital thing in contracts is to be sure of the terms of your promise. The term option indicates a right which exists up to a certain point; beyond that point there is no right.

PROSPECTIVE INABILITY OF ONE PARTY EXCUSES THE OTHER.--There is one other thing besides actual breach by his co-contractor, which justifies one party to a contract in refusing to go on with the contract, and that may be called prospective inability to perform on the part of the other side.

INSOLVENCY OR BANKRUPTCY.--Let us give one or two ill.u.s.trations of that.

You have entered into a contract to sell a merchant 100 barrels of flour on thirty days' credit. The time has come for the delivery of the flour, but the merchant is insolvent. He says to you, "I want you to deliver that flour; the agreed day has come." You say, "But you cannot pay for the flour." "Well," he replies, "it is not time to pay for it. You agreed to give me thirty days' credit: perhaps I shall be able to pay all right then. I have not broken my promise yet, and as long as I am not in default in my promise you have no right to break yours." You have a right to refuse to deliver the flour because, though the buyer has not yet broken his contract, the prospect of his being able to keep it, in view of his insolvency, is so slight that his prospective inability to perform in the future, when the time comes, excuses you from going on now. Insolvency or bankruptcy of one party to a contract will always excuse the other party from giving credit or going on with an executory contract, unless concurrent performance is made by the insolvent party or security given for future performance.

REPUDIATION.--Repudiation of a contract by one party is also a good excuse. Repudiation means a wrongful a.s.sertion by one party to a contract that he is not going to perform in the future what he agreed.

After such repudiation the other party may say, "I am not going to perform now what I agreed to perform, since you have said you will not perform in the future what you agreed. I shall not go ahead and trust you, even though I did by the contract agree to give you credit, in view of the fact that you have now repudiated your agreement by saying that you are not going to do what you agreed." Repudiation may be indicated by acts as well as by words, and often is indicated partly by words and partly by acts.

TRANSFER OF PROPERTY TO WHICH THE CONTRACT RELATES.--Still another ill.u.s.tration of prospective inability arises where a contract relates to specific property, as a certain piece of land, and before the time for performance comes, the owner of the land, who had agreed to sell it we will suppose, transfers it to somebody else or mortgages it. The man who had agreed to buy that piece of land may withdraw from the contract. He may say, "You might get the land back at the time you agreed to perform, but I am not going to take any chances on that. I am off the bargain altogether."

IMPORTANCE OF EXACT PROVISIONS IN CONTRACTS.--So much for the rather difficult subject of the mutual duties of parties to a contract in the performance of it. The best way to avoid doubt or uncertainty in such matters is to provide very exactly in the contract what the rights of the parties shall be in certain contingencies. The law always respects the intention of the parties when it is manifested, and it is only when they have said nothing about their intention that the rules which we have considered become important.

FRAUD.--The next question in regard to contracts arises out of certain grounds of defense that may come up and the most important of these is fraud. Fraud is deception; it is inducing the other party to believe something which is not true, and, by inducing him to believe that, influencing his action. The ordinary way in which fraud is manifested is by misrepresentations. A purchase or sale of stock or of goods may be induced by fraud. A loan may be obtained from a bank by fraud, that is, by misrepresentation of material facts which influence the other side to act.

MISSTATEMENTS OF OPINION ARE NOT FRAUDULENT.--Now what kind of misrepresentation amounts to fraud? There must be misrepresentation of a fact. Merely misrepresentation of opinion is insufficient and what is opinion and what is fact has been the basis of a good many lawsuits.

John offers his horse to James for sale at $300. He says that it is the best horse in town. Well, it is not the best horse in town by a good deal, but that sort of statement cannot be the basis of an allegation of fraud. That a thing is "good," or "the best in the market," or similar general statements, all of which ought to be known to the hearer to be simply expressions of opinion, are not statements of positive fact. Take these two statements in regard to the horse. "He can trot very fast."

That is a mere statement of opinion. To some minds eight miles an hour is very fast; to more enterprising persons fifteen miles an hour is necessary in order to make travel seem fast. Those are matters of opinion. But a statement that the horse can trot twelve miles an hour, or has trotted one mile in three minutes on the track, are statements of fact, and if untrue are fraudulent. A statement of value is a statement of opinion and cannot be the basis of fraud. A statement that the horse is worth $300, or is worth twice as much as the owner is asking for him, cannot be relied upon; but a statement that $300 was paid for this horse, or was offered for him, is an a.s.sertion of fact, and if untrue would be the basis of an allegation of fraud.

PROMISES ARE NOT FRAUDULENT BECAUSE BROKEN.--A promise is not a statement of fact. A man may promise to do something and fail to carry out the promise, and in consequence the person he was dealing with may regret the bargain he entered into, but his only remedy is to sue for damages for breach of the promise if it was part of a contract. He cannot a.s.sert that merely because the promise was not kept the transaction was fraudulent. But if a man makes a promise knowing when he makes it that he cannot keep it, he is committing a fraud. The commonest ill.u.s.tration of this is where a man buys goods on credit, having at the time an intention not to pay for them, or well knowing that he cannot pay for them.

STATEMENTS MUST HAVE BEEN CALCULATED TO INDUCE ACTION.--Generally speaking, the statement relied on as fraudulent must have been made with the purpose of inducing action. For instance, suppose John likes to tell large stories. He tells James things about his neighbor's horse. John does not do this for any purpose except to brag about living near a man who has such a splendid horse, but James suddenly takes the notion he would like to have that horse and he goes and buys it. Now it was not legal fraud on John's part to tell those lies about the horse, even though they did induce James to go and buy it, unless John, as a reasonable man, ought to have known that James was likely to buy the horse, as might have been the case if James had been talking about buying him. Then it would be fraud, and it would not make any difference in regard to its being fraudulent that John had nothing to gain by telling these lies, that he was simply doing it for the fun of the thing.

REMEDIES FOR FRAUD.--What remedy has the defrauded person? The law gives him two remedies of which he may take his choice; he cannot have both, but he can have either. One is to sue the fraudulent person for such damages as have been suffered, and the other is to rescind the transaction, to get back what has been given, or to refuse to go on with the contract at all if it is still wholly executory.

DURESS AND UNDUE INFLUENCE.--There are certain defences similar to fraud; duress, or undue influence, is one of them. However, this is comparatively rare. It is compelling a person to do what he does not want to do, making him agree to a bargain that he would not agree to accept under compulsion, as by fear of personal violence or imprisonment; and a bargain made under these circ.u.mstances can be rescinded or set aside. Merely threatening to enforce your legal rights by suit against another is not duress, though it may in fact induce him to agree to what he would not otherwise have agreed; but to threaten criminal prosecution as a means of extorting money or inducing an agreement is illegal and in many jurisdictions is itself a crime.

MISTAKE OF FACT.--In certain cases, also, a mutual mistake of a vital fact is ground for setting aside a contract, but these cases are not very common. Mistakes generally do not prevent the enforcement of contracts. Usually where there is a mistake, it is of a character for which one party or the other is to blame. If the mistake arises out of deception it is fraud. If the mistake arises simply because the mistaken party has failed to inform himself of the facts, as he might have done, then it is no defence at all. But if both parties were acting under the mutual a.s.sumption that some vital fact was true in making a bargain, either one of them may avoid or rescind the bargain when it appears they were both mistaken.

IMPOSSIBILITY.--Impossibility is sometimes a defence to the performance of a contract. Perhaps the simplest ill.u.s.tration of this arises in a contract for personal services of any kind. Illness or death of the person who promises the services excuses performance. Death does not usually terminate a contract or serve as a defence to it. If a man contracts to sell 100 bushels of grain and dies the next day his estate is liable on the contract just as if he continued alive; but if he agreed to hire a man as an employee for a year, his death or the employee's death within the year would terminate the obligation of both.

Unexpected difficulty is not impossibility. For instance, take a building contract: the builder agrees to put up a building within a certain time; he is prevented by strikes. Nevertheless, he is liable for not doing as he agreed. He should have put a condition in his promise, qualifying his agreement to build, that if strikes prevented, he would not be liable. So, if the foundation gave way and the building tumbled down before it was finished, the builder must put it up again. Also, if lightning struck it, he must put it up again.

ILLEGAL CONTRACTS.--One other matter to be considered in connection with contracts and defences to them is illegality. Some kinds of illegal contracts are so obviously illegal that it is not necessary to say anything about them. Anybody would know that they were illegal and that they could not be enforced for that reason. A contract to steal or murder or take part in any crime is a good example. But other kinds of illegal contracts are not so obviously wicked as to make it clear that they are unenforceable. It may be worth while to mention a few of these kinds of illegality.

CONTRACTS IN RESTRAINT OF TRADE.--One cla.s.s of contracts which has become very important in late years in business is the contract in restraint of trade, so called. The original contracts in restraint of trade were contracts by which one man agreed that he would not thereafter exercise his trade or profession, the object generally being that the promisee should be freed from the compet.i.tion of the man who had promised to refrain from exercising his trade; and the law became settled a good many years ago that if the promise was general not to exercise the trade or profession anywhere, or at any time, it was illegal, but that if it was only for a reasonably limited s.p.a.ce of time it would not be illegal. That old law still exists, but there has grown up further a much more important cla.s.s of cases where contracts are made to further an attempted monopoly, and one may say pretty broadly that all such attempts are illegal. It does not matter how much business reason there is for it; any attempt to combine in order to get a monopoly, or in order to put up prices, is bad. Moreover, if the attempted restraint of trade or monopoly concerns interstate commerce, the agreement is a Federal crime under the Sherman law.

GAMBLING CONTRACTS.--Another kind of illegal contract is a gambling contract. This seems obvious in agreements for the more extreme kinds of gambling, but in certain business transactions where the matter becomes important, the dividing line is not so clear; especially in dealings on stock exchanges and exchanges for sales of staple products, such as grain, cotton and coffee. The stock exchanges and other exchanges are made the means of a great deal of speculation, which is virtually gambling. Now, in what cases does the law regard these transactions as gambling and, therefore unenforceable, and in what cases are they legal?

The answer is, if an actual delivery of the stock, or commodity bought, is contemplated, then the transaction is not gambling in the legal sense; but if a settlement merely of the differences in buying and selling prices is contemplated, as the only performance of the bargain, then the transaction is gambling. The difference is between a stock-exchange business and a bucket-shop business. If you give an order to a stock-exchange house to buy stock, even though you put up but a small margin and could put up but a small margin, and the stock-exchange house knows you could put up but a small margin, nevertheless, the stock-exchange house actually buys that stock, and it is delivered to it. The stock-exchange house would then have a right to demand of you that you pay for that stock in full and take delivery of it, and could sue you for the price if you failed to comply with the demand. However, as a matter of fact, it does not ordinarily do that. If it wants to get the price which you promised to pay, and you fail on demand to take up the stock, it sells the stock which it has been holding as security. The bucket-shop, on the other hand, though it takes your order to buy, does not actually buy the stock; it simply settles with you when you want to settle, or when it wants to settle, because the margin is not sufficiently kept good, by calculating the difference between the price at which the stock was supposedly bought and the price at which it is supposedly sold, those prices being fixed by the ruling market quotations at the time. It would be perfectly possible to make a gambling transaction out of the stock-exchange transaction by a very slight change. If a stock-exchange house should agree, for instance, that the customer should not be compelled to take delivery of the stock, then that added agreement would make the transaction between broker and customer a gambling transaction, even though the broker actually bought the stock on the exchange, and, as between himself and the other broker on the exchange with whom he dealt, there was a perfectly valid sale of the stock. In some jurisdictions, by statute, speculative contracts which are not gambling contracts at common law are made illegal.

BREACH OF FIDUCIARY DUTIES.--Another very important cla.s.s of illegal transactions arises from breach of fiduciary duties. A fiduciary is rather hard to define. He is somebody that owes a duty higher than a mere contractual obligation, a duty involving something of trust and confidence. A trustee is a fiduciary, so is an agent. A director or officer of a corporation is a fiduciary, and any dealing in which a fiduciary violates his duty to the person for whom he is fiduciary is illegal, and any agreement for such a violation is an illegal contract.

It is illegal for a trustee to bargain for any advantage from his trust other than his regular compensation. It would be illegal for a trustee to bargain with a bank to give the bank a trust account in return for some personal advantage, as a loan to be made to the trustee personally.

It would be a breach of fiduciary duty for a corporation officer and director to bargain for any personal advantage by virtue of his official action.

KNOWLEDGE OF ANOTHER'S ILLEGAL PURPOSE.--The knowledge of another's illegal purpose will not make the person who knows of it himself guilty of illegality; but if one not only knows but in any way promotes the illegal purpose of another, he will be considered a party to the illegality. A may sell goods to B, knowing that B is going to use them illegally, and A's sale will not be illegal; but if A does anything to help B in using them illegally, or if the goods are of such a character that they can be used only illegally, then A would be guilty of illegality himself.

MEANING OF a.s.sIGNMENTS.--Much of the difficulty regarding a.s.signment of contracts is due to different meanings which may be attached to the word a.s.signment. When property is a.s.signed the a.s.signee becomes the owner in every sense, if the person from whom he took the a.s.signment had a valid t.i.tle. This is not true of the a.s.signment of contracts. By the common law, contract rights or "choses in action," as they are termed in law, were not a.s.signable, the reason being that one who contracted with A, cannot without his consent become bound to B.

POWER OF ATTORNEY TO COLLECT A CLAIM.--Though when a man had a contract right he could not by common law make B in a complete sense the owner of the claim, he could give B a power to collect the claim as his, A's, agent, and authorize him to keep the proceeds when the claim was collected. It long ago became established that when an owner of a claim purported to make an a.s.signment of a claim he thereby gave the a.s.signee the power to enforce the claim in his stead, and this power given the a.s.signee is irrevocable.