PART II PARTICULAR CONTRACTS CONCERNING GOODS CHAPTER IV SALES OF GOODS I. THE CONTRACT 45. Definition and analysis. A contract of sale is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. Where the result of the contract is to transfer the title to the goods to the buyer there is strictly a sale; but where the title is to be transferred at some later time there is only an agreement to sell. The agreement to sell becomes a sale when the title is in fact transferred. Examples: 1. “I will sell you my horse for $100." "I accept." This is a sale. The title passes at once. If the horse dies, the loss falls on the buyer, even though the horse had not yet been delivered. 2. "I will sell you my colt for $100 when he is a year old." "I accept." This is an agreement to sell. The title remains with the seller until the colt is a year old. It then passes to the buyer and the agreement to sell becomes a sale. 3. The colt dies before he is a year old, without fault of either party. The contract is discharged. 1. It is a contract. This implies all the elements heretofore discussed, namely, agreement, competent parties, sufficient consideration, in some cases a particular form, legality, and real assent. These need not be again discussed at this point, but the nature of the consideration (money) and the form (Statute of Frauds) will call for notice under another head. It is also important to note that where necessaries are sold to an infant, or minor, or to a person under mental incapacity, as a lunatic, he must pay a reasonable price therefor. What are necessaries depends upon the social and financial condition of the infant or lunatic, and upon his actual needs at the time of the sale (see secs. 15 and 16 ante). 2. Whereby the seller transfers or agrees to transfer. If the seller transfers the property in the goods, the sale is said to be executed; the seller's title is divested; the buyer's title is vested. If the seller merely agrees to transfer the property in the goods, the sale is said to be executory; the seller's title is not disturbed; the buyer has only a right of action under the contract, and he has not any title in the goods. It is one of the important questions in the law of sales as to when the title passes, that is, whether the sale is executed or executory. This will be discussed hereafter. It should be observed that the contract may be executory while the sale is executed, that is, the agreement to pass title is executed while the rest of the agreements are executory. Examples: 4. "I will sell you my horse for $100 and deliver him to you to-morrow at your farm, you to pay the money at that time." "I accept." This is an executed sale, that is, the title passes at once to the buyer; but it is still an executory contract, that is, each party has still something to do in the way of performance. 5. If, as above, the seller and the buyer agree, but the seller also agrees to shoe the horse before delivery, the title does not pass until the horse is shod. This is an executory sale and an executory contract. 3. Property in the goods. By the term goods is meant, generally, every kind of personal property, such as corporeal movable property, like a horse or a bushel of wheat; incorporeal property, like a patent right or a trademark; choses in action, like a stock certificate or a debt. By property is meant the ownership of the goods or the general title to the goods. In order to pass this property to the buyer, it is necessary that the seller should have it, for the general rule in sales is that "a buyer acquires no better title to goods than the seller had." Three important exceptions to this rule may be noted. (a) In the sale of negotiable instruments the seller may give a better title than he has himself. (b) By the Factors Acts it is provided that a factor or commission merchant who is intrusted with goods by the owner may sell or otherwise dispose of them and give good title as if he were the true owner of the goods or had authority from the true owner. (c) If the buyer leaves the seller in possession of the goods, or of the documents of title to the goods, and the seller resells and delivers them to another innocent purchaser, many courts hold that the latter may retain them as against the first buyer, since the first buyer has made it possible for the seller to commit the fraud. So, if the true owner invests another person with the indicia of ownership, and the latter sells to an innocent purchaser for value, the true owner will be estopped to set up his title against the innocent purchaser. But if one sells and delivers goods to another, retaining title in himself as security for the purchase money, and the buyer resells them to an innocent purchaser for value, the latter gets at common law no title against the first seller who retained the title. This has led to such hardship upon innocent purchasers that statutes now generally provide that such conditional sales shall be void as against innocent purchasers from the vendee unless they are in writing and recorded in some public office. The retention of title is merely a form of security, like a chattel mortgage, and chattel mortgages are not valid against innocent purchasers of the mortgaged chattels unless duly recorded. When the seller has been induced by fraud of the buyer to sell his goods and part with the possession, he may rescind the contract and recover the goods. But if, before he does so, the buyer resells them to an innocent purchaser for value, the latter gets a title good against the first seller. Who is "a purchaser in good faith and for value"? First, one who purchases without notice of his vendor's defective title, or of facts which should put him upon inquiry concerning the title; and second, one who also pays a valuable consideration. A promise to pay is not sufficient, since, if the true owner recovers the goods, this purchaser will never be obliged to pay. his vendor. Whether taking the goods in payment of an antecedent debt owing him from his vendor makes the buyer a purchaser for value, the courts differ. Some hold it does not, because if the buyer has to give up the goods the debt is restored and he is in no worse position than he was before; others hold that it does because the buyer has been "lulled into security," and may thereby lose the debt which he otherwise would have collected. There is the same difference of opinion where the buyer takes the goods from his vendor as collateral security (pledge) for a preexisting debt. It is generally held that an attaching creditor or an assignee in bankruptcy is not a purchaser for value. Examples: 6. B sells his horse to C, and C allows B to retain possession. B then sells and delivers the horse to D, who does not know of the previous sale. D may retain the horse as against C, for the latter by leaving B in possession made it possible to commit the fraud, and C must suffer the loss rather than D. (This is not universally held. Some courts regard continued possession by the vendor merely as evidence of fraud, but open to honest explanations.) 7. B owns a wagon. He rents it to C, who paints on it, "C, Piano Mover," and uses it in his business. C sells the wagon to D, who believes C to be the owner. B cannot reclaim it from D. He has invested C with the indicia of ownership. But if B had merely rented the wagon without authorizing C to put his name on it, the purchaser would have obtained no title as against B. 8. B sells and delivers a piano to C, but by the contract retains title until it is fully paid for. C sells it to D for value, D supposing C to be the owner. B brings an action to recover it from D. B will recover unless some statute changes the rule of the common law. (In a very few states the holding is for D without the aid of statute.) But D gets whatever rights C had, and by paying what the latter still owes may acquire title, unless C has already by default forfeited his rights. 9. B sells and delivers buggies to C, a retail dealer in buggies, but retains title in the buggies, and provides that the proceeds of sales by C shall belong to B so far as necessary to pay B. C sells his whole business and stock to D, including these buggies, and B brings an action against D to recover them. It is held that B cannot recover because he has Know all Men by these Presents, That. I. Richard Atkins, of the city of Lockport, Niagara County New York, ...of the first part, for and in consideration of the sum -Dollars ($10.00...............), lawful money of the United States, of ten to me in hand paid, at or before the ensealing and delivery of these presents, by. Joseph Dudley, of the same place, his. of the second part, the receipt whereof is hereby acknowledged, have bargained and sold, and by these presents do grant and convey unto the said party of the second part,.. executors, administrators and assigns, the twelfth edition of Kent's "Commentaries on American Law," edited by O. W. Holmes, Jr. To have and to hold the same unto the said party of the second part, his.executors, administrators and assigns forever. And I do covenant to and with the said party of the second part that.......I am.....the owner and have the right to sell and transfer the said property, and will defend the same against any person or persons whomsoever claiming the same. In Witness Whereof, hand and seal the ..... second I day of....... have hereunto set: my person described in and who executed the foregoing instrument, and he: |