As a third effect of improved transportation may be mentioned the acceleration which it has given to the growth of cities. Cheap and efficient transportation has led manufacturers to locate their plants where they can command a large supply of labour and where they have the greatest advantages for the distribution of their products. The great manufacturing establishments are now located in Chicago, New York, Philadelphia, Pittsburg, and the other large cities. Conditions of transportation have become a stronger factor than even the location of the sources of raw materials in determining where an industry shall be established. The effect of the railroad upon the location of agriculture has been no less potent. The railroad has brought new agricultural regions into cultivation and destroyed the profits of cereal agriculture in many parts of the Eastern States.

Another important consequence of improved transportation and communication has been that of bringing the nations of the world into closer economic and social relations. With the growing solidarity of the economic interests of the countries of the world, with the multiplication of the intellectual and other social ties that unite the nations, their political relations inevitably change, and for the better. Nothing is doing more to advance the attainments of the cherished ideal of international amity than is the development of transportation.

XI. FREIGHT TRANSPORTATION BY RAIL

THE ORIGIN OF RAILROAD TRAFFIC ASSOCIATIONS

The performance of the transportation services necessitates the co-operation of carriers. When the government owns and operates the railroads of a country they are managed by a single authority, and the different parts of the railway system are fully co-ordinated; but when the railroads are operated by a large number of independent corporations, co-operation can be secured only by means of traffic associations composed of representatives of the railway companies, and intrusted with the power of making arrangements affecting joint traffic, and settling questions involving the interests of two or more companies.

Two distinct causes brought about the establishment of railway traffic associations. The first cause was the necessity of co-operation to facilitate the joint business of connecting lines. Through tickets, joint fares and rates, through bills of lading, the interchange of cars between connecting roads, and the settlement of joint accounts led to the establishment of co-operative freight lines, car-service associations, claim associations, and various other general and local organisations for the promotion of the joint transportation business.

The other cause of co-operation among the railways was the necessity of regulating competition. This cause first became potent after the process of consolidation had brought about the formation of numerous large railway systems, and had inaugurated the violent competition which led to discriminations in transportation charges, rate wars, and the other evils which have combined to produce "the railway question." The competitive struggles of rival railway systems began to be violent shortly after 1867, and soon led to the formation of railway traffic associations, with enlarged powers. The classification of freight, the determination of rates on competitive traffic, and the apportionment of that traffic, or of the earnings from it, among the competitors became functions of the associations.

THE WORK OF ALBERT FINK

The man who did more than any other person to develop traffic associations and to promote the co-operation of competing railroads was the late Albert Fink. It was his master mind that organised and put into successful operation in 1876 the Southern Railway and Steamship Association. The following year Albert Fink succeeded in organising the great trunk lines connecting the North Atlantic seaboard and the States north of the Ohio River. Though smaller traffic associations similar to these two organisations had been previously established where but few obstacles had to be overcome, it was Fink who first organised traffic associations including all the competing railroads serving large sections of the country.

In discussing the work of traffic associations, which are to-day concerns of really enormous magnitude, railway pooling and the classification of freight especially demand consideration.

RAILROAD POOLING

Railroad pools are agreements entered into by competing carriers, by which the railroads provide for the division with each other of their competitive traffic, or of the earnings from that traffic in accordance with stipulated ratios. Thus there are traffic pools and money pools. During the decade preceding 1887, the year when the present interstate commerce law was enacted, most traffic associations had the pooling feature, and most of the competitive railway traffic was pooled, thus eliminating all competition in rates.

Pooling agreements have never been legal in this country. Being illegal by the common law, they could not be enforced in the courts. Section 4 of the interstate commerce law made it unlawful for the carriers subject to the act to pool their freights or the earnings from their freight traffic, and made it necessary for the traffic associations to reorganise without the pooling agreements. Until March 22, 1897, it was supposed that the associations, without pooling agreements, were legal; but, on that date, in the case of the United States vs. the Trans-Missouri Freight Association, the United States Supreme Court held that the law of July 2, 1890, popularly known as the Sherman anti-trust law, applied to railways, and made it illegal for railway companies to contract with each other to maintain rates. Thus at the present time traffic associations are permitted neither to contain a pooling feature nor to provide arrangements for the enforcement or maintenance of rates, although the charges may be reasonable and be sanctioned by all the carriers interested. The associations may now legally exercise those functions which are connected with the joint business of their members, and they may act as bureaus of information regarding the competitive traffic. They have no power to make or to maintain rates.

TRAFFIC ASSOCIATIONS INCLUDING POOLING SHOULD BE LEGALISED

The best performance of the service of transportation by rail requires the fullest possible co-ordination of the different parts of our transportation system and the largest attainable measure of co-operation among the agents who perform the service. Section 4 of the act of 1887 and the law of July, 1890, as far as the latter relates to railways, are based on an unsound theory. Provision having been made for that kind and measure of governmental regulation of railway rates that will insure reasonable charges, the railways should be permitted to co-operate in rate-making and be given power to pool their competitive business.

CLASSIFICATION OF RAILROAD FREIGHT

There are thousands of varieties of freight offered to the railroads for transportation. If each class of commodities were charged the same freight rate per ton per mile, the charges upon many articles of prime necessity, such as coal, lumber, and grain, would be so high as to prevent their being moved, while the rates on goods of high value per bulk would be much lower than they could readily pay. Classification must precede the fixing of rate schedules. The railroads are interested in adjusting their charges to services performed in such a manner as to insure the greatest possible amount of traffic at rates that are properly remunerative. The public is interested in having the necessary revenues of the railroads so levied as to make the burdens as light as possible. To accomplish this a careful grouping of commodities is necessary.

The goods are usually classified in five or six large divisions. The official classification referred to below has six classes. The first class consists of articles of high value, the sixth class of bulky commodities of low value, such as iron ore, lumber, grain in bulk, etc. In practice, however, the number of classes is at least doubled. Goods of especially high value are made to pay once and a half, double, treble or quadruple the regular first-class rate. A commodity is also frequently placed in more than one class, the rating of classification being lower for car-load lots than for less than car-load shipments. The classification is further extended by omitting certain articles from the list of those classified. Live stock and coal are illustrations of articles to which so-called "commodity," as distinct from "classification," rates are given. The individual shippers are constantly endeavouring to have their goods given commodity rates, and the effort of the railroad companies is to reduce the number of articles excepted from classification. Commodity tariffs have been a fruitful source of unjust discrimination.

From this description of freight classifications it will be perceived that the main basis upon which the grouping of commodities rests is the relative value of the goods. The gradations cannot, however, be made strictly according to value. The goods are frequently put into a lower class than their value would warrant in order to stimulate their production and shipment or to develop the industries depending upon those articles.

At first each railroad worked out a classification of its own, and there were practically as many classifications as there were railway systems. The disadvantages of this soon became apparent with the development of long-distance traffic. The multiplicity of classifications made it difficult for shippers or purchasers to ascertain in advance what the charges on consignments would be; there was a constant tendency to increase the number of commodity tariffs, and unjust personal and local discriminations were in consequence made more numerous. It became evident that there would be great advantages in having one uniform classification for the whole United States. This ideal has not been reached yet, but the number of classifications has been practically reduced to three—the official, applying to the traffic north of the Potomac and Ohio and west of the Mississippi; the southern, in force among the railroads in the Southern States, and the western, which obtains in the territory west of the Mississippi River. This amalgamation of the classifications has been brought about chiefly by the traffic associations and as the result of the enactment of the interstate commerce law. In order to avoid the discriminations prohibited by that law it was necessary to abandon the system of a separate classification for each railway. It is to be hoped that the attainment of the ideal of uniform classification will not be long delayed.

THE CONDUCT OF THE FREIGHT BUSINESS OF RAILROADS—TRANSPORTATION PAPERS

The manner in which the freight business is conducted affords a good illustration of the high degree of development to which modern business methods have attained. Freight is accepted by each railroad for shipment not only to all points on its own system, but also practically to every railway station in the country, and even to many foreign cities.

A waybill containing the initials of the number of the car used, the name of the consignor, the name and address of the consignee, the description and weight of the articles sent, the freight class and rate of the goods, and the total amount of freight charges, accompanies each shipment and is delivered to the agent at the place to which the goods are shipped.

For the goods thus accepted for transportation, manifests, or "bills of lading," are issued to the consignor, which, like other representatives of property, may be transferred by the owner or may be deposited in a bank subject to draft. Bills of lading are of two general kinds—"straight consignment bills" and "order bills." When a straight consignment bill of lading is issued the goods must be delivered to the consignee or to the person to whom he may order them delivered. An order bill of lading is one that may be transferred upon indorsement. The following concise description of an order bill of lading is taken from the "Book of General Instructions to Freight Agents," issued by the Pennsylvania Railroad Company:

When freight is consigned to "Order" it is, as a rule, for the purpose of securing the payment at destination of a draft for the value of the property. The draft is usually attached to the bill of lading and sent through a bank for collection from the party at destination, who is to be notified of the arrival of the freight. The payment of the draft secures to the payer the possession of the bill of lading, which must be indorsed by the party to whose order the property is consigned.

XII. RAILROAD RATES

Transportation charges have such a general and vital relation to industrial and social welfare that the problem of the just and equitable distribution of their assessment is one of paramount economic and political consequence. A consideration of the main factors which influence the railway companies in fixing charges should precede a discussion of the regulation of transportation by the government.

GENERAL FACTORS WHICH DETERMINE RAILROAD RATES AND FARES

The factors which have most weight in fixing schedules of rates and fares are what it will cost to perform the several services, what the services are worth to those for whom they are to be rendered, and the extent to which there is competition among rival carriers to secure the traffic concerned. Though on the face of things it would seem that the railways should fix the charges for their various services in accordance with the costs of performing those services, it is neither practicable for them to do so nor is it desirable from the standpoint of public welfare that such a criterion should be adopted. It is impracticable for the railroads to base their charges upon cost of service, because it is impossible to determine accurately the elements which enter into the cost of performing the particular transportation service. The modern railroad is a very complex mechanism, employed in the performance of a multitude of different services. No railroad official is able to say just how much of the company's total expenses are to be charged against any one particular freight or passenger service.

The cost of service would be an undesirable basis of rates, because the railroads would derive such a small part of their total necessary revenues from the carriage of goods having a high value in proportion to bulk and weight, that they would be obliged to charge much higher rates than they now do upon the cruder products of the farm, forest, and mine. These products are the basic materials of industry, and the lowest possible rate for their transportation is essential to social and economic progress.

VALUE OF SERVICE AND VALUE OF COMMODITIES

Value of service is a more desirable basis for rates and fares than cost of service. By charging according to value of service is meant that the shippers of commodities and the passengers who travel shall contribute to the railroad's aggregate expenses in proportion to the value which they derive from the transportation service. The rates and fares may cover a part or all of the value of the service obtained. In either case they are fixed with reference to that value and not with regard to the cost involved in performing the work of transportation. The levy of rates and fares in accordance with this theory, which is usually called "charging what the traffic will bear," is considered by most people to distribute transportation charges properly, because it is claimed that the true measure of a shipper's or a passenger's ability to pay for a desired service is the value which he will thereby derive. That this theory, nevertheless, does not afford an altogether satisfactory basis of charges, particularly in the freight traffic, may be readily shown.

While it is true that the amount of value added by transportation to goods of low value is less for each unit of weight or bulk than the amount of value which is acquired by an equal weight or bulk of high-priced commodities, yet the percentage increase in value is greater in the case of the goods of low cost. Expensive articles can be carried long distances without adding very much to their cost to the consumers. Measured in their percentages, then, the value of the service of transportation is relatively much lower in the case of the higher-priced commodities. The freight charges on wheat range from twenty to forty per cent. of its farm value, while the rate on shoes is possibly two per cent. of their factory price. That these charges are levied in accordance with the real ability of the articles to pay would be hard to establish.

A PARTIAL THEORY OF RAILROAD FREIGHT RATES

Without attempting in this connection to formulate a complete theory of freight rates, it may be said that there are three factors to which weight should be given in fixing charges: First, the cost of service. The total costs of transportation, including a fair return on invested capital, must be covered by total receipts. Furthermore, the minimum rate charged any particular class of commodities ought to be sufficient to pay the operating expenses incurred in transporting the goods. Second, the value of the service. This fixes the maximum rate that may be charged. Were the railroads to charge more than the service is worth to the shipper the service would not be desired. Third, the value of the commodities. Between the minimum rate fixed by the operating expenses and the maximum charge determined by the value of the service actual rates may vary through a wide possible range. In determining what rates within this range will be theoretically most just and least discriminatory, consideration should be given both to the value of the service and—more than is the case at present—to the value of the articles transported. By doing this rates will be paid by the various articles of freight more nearly in proportion to their ability to pay.

THE EFFECT OF COMPETITION ON RAILROAD RATES AND FARES

Whatever theory of rates may be accepted as ideally best, it cannot be strictly adhered to under the existing conditions of active competition obtaining in the United States. Actual charges have to be fixed and revised to meet the varying circumstances under which railway traffic is conducted. This competition takes several distinct forms. One is that between railways and waterways. A large part of the domestic traffic of the United States has the choice of transportation by rail or by water on the great lakes and the tributary canals, by the navigable rivers, or by one of the many ocean routes followed by our coastwise commerce. There is also the competition of rival railways connecting common termini or serving the same cities. These forms of competition are the ones most frequently noted; but they perhaps exercise a less potent influence over rates than what is known as competition through the markets or through the channels of trade. The competition between rival centres of commerce and industry—between the Atlantic cities and the gulf ports, for instance, or between the manufactures of New York and Philadelphia and those of Chicago or Cincinnati for the markets of the Southern States, to cite another example—is a force that must be considered in making rates and fares. Even towns served by only one railway and by no waterway enjoy the benefits of this industrial competition. Unless the railroad can give the industries in these local towns rates that will enable them to market their products, the industries will decline and the railway will lose its traffic.

An interesting result of the competition of roads connecting common termini or joining a common industrial region with seaboard points is that the road whose line is the longest and whose expenses of transportation are greatest is obliged to charge the lowest rate. The short lines can charge more because they compete for traffic under more favourable circumstances. The lower charge of the longer line is called a differential rate, and it is customary for the shorter or "standard" lines to agree to allow the "differential" line a stipulated differential rate. This is the concession which the standard lines are obliged to make to temper competition and to prevent rate wars. The Grand Trunk, running from Chicago to Boston by way of Montreal, is a good example of a differential line, and the New York Central is a good instance of a standard line.

GOVERNMENTAL REGULATION OF RAILROAD TRANSPORTATION

It is a maxim of common law that transportation charges must be reasonable, and the exaction of an unreasonable rate by a public carrier is a common-law misdemeanour punishable by the courts. But when, as the result of severe competition of railroads with waterways and with each other, unjust discriminations between persons, between places, and as regards classes of traffic—the abuses which constitute the railway question—became prevalent, the common-law provisions applying to railway charges were given statutory form and were supplemented and extended by such legislation as the circumstances peculiar to the situation seemed to demand. The comprehensive railway- and canal-traffic act passed by Great Britain in 1854 has been the model adopted for much of the railway legislation in the United States.

The Constitution of the United States gives Congress power to regulate commerce "among the several States," but the jurisdiction over intrastate traffic lies with the State governments. The States began to pass general laws for the regulation of railroads fully twenty years before Congress acted, and two thirds of the States have established commissions to administer those laws.

THE INTERSTATE COMMERCE LAW

After fifteen years of agitation and investigation the existing interstate commerce law was enacted in 1887. The law prohibits unreasonable rates and unjust discriminations between persons, places, and classes of traffic, prohibits pooling agreements, provides penalties for the violation of the law, and establishes a commission of five men to administer and enforce the statute. Fortunately for the commission and for the country the first chairman of that body was the eminent jurist, Thomas M. Cooley, whose master mind did much to give vitality to the law.

During the first five years after the law was passed it secured a fairly efficient regulation of interstate railway commerce, but recent decisions of the United States Supreme Court have so weakened the law that at present the commission has very little power. The commission can investigate complaints and make reports, it can collect statistical information, it can and does informally adjust many differences between shippers and carriers; but, to quote from the last report of the commission, "it has ceased to be a body for the regulation of interstate carriers." Legislation to amend and strengthen the interstate commerce law is urgently needed.



XIII. STOCK AND PRODUCE EXCHANGES

THE STOCK EXCHANGE

The stock exchanges of the world must not be considered simply as noisy congregations of brokers speculating in securities under the guise of legitimate business. They really play an important and necessary part in the financial mechanism of the country, and are instruments of enormous value in subdividing and distributing capital, and in directing its employment in great commercial and industrial enterprises.

The largest stock exchange of the world is that of London. It is not only the centre of the English market for stocks and securities but, like the Bank of England, it is linked internationally with nearly all the financial centres of the world. Almost every reputable security is marketable in London, either through the ordinary channels provided by arbitrage dealers, who buy in the cheaper and sell in the dearer markets, or through the agency of trusts and investment concerns. The magnitude and extent of the financial resources of the London Stock Exchange are enormous. Its advantages to the business public outweigh altogether the drawbacks imposed by the too-speculative spirit of mankind. It is a great business barometer, extremely sensitive to all conditions likely to disturb the world's finances. The London Stock Exchange has scarcely more than one hundred years of history. In the early part of the century the elder Rothschild was one of the giants "on 'change," and it was in this business that he amassed the great fortune which makes the name of his house a synonym for money power. The membership of the London exchange is not limited to a fixed number, as in Paris and New York. In the Paris Bourse all agents are strictly forbidden to trade on their own account.



The New York Stock Exchange was formed in 1792. There are 1100 members. Members are elected and must be nominated by two men who will say that they would accept the uncertified cheque of the nominee for $20,000. The initiation fee is $20,000. Memberships have sold as high as $32,500, and the market value of a seat on the Exchange varies only slightly from year to year.



There are stock exchanges in all large cities, and scattered throughout the country in convenient centres are grain and produce exchanges, cotton exchanges, petroleum exchanges, etc. These exchanges are really the central markets for the commodities they represent. Commodity exchanges deal in actual products, even though the dealers handle nothing but warehouse receipts or promises to deliver. Stock exchanges deal in credits and securities, which may or may not have a tangible value back of them.

There is no reason why bonds and shares should not be publicly dealt in—and in large quantities—as well as dry goods, corn or cotton; but, unfortunately, few stock exchanges confine their transactions wholly to legitimate business. You will look in vain in the quotations for the stock of dozens of corporations whose securities are among the choicest investments. It is upon fluctuations that stock speculations prosper, and it is often true that the largest profits are made on the poorest stocks.

Transactions are quickly collected and reported to the world. In hundreds of offices in New York, Chicago, and other American cities may be seen a little instrument called a ticker, which automatically prints abbreviated names of stocks, with their prices, on a narrow ribbon of paper. These tickers are rented to these offices by the telegraph companies, and as fast as the sales are made the quotations are ticked off in thousands of offices in all parts of the United States.

TECHNICAL TERMS OF STOCK EXCHANGES

The term bull is applied to those who are purchasers of stock for long account, with the purpose of advancing prices, as the tendency of a bull is to elevate everything within his reach. The term bear is applied to those who sell short stock, with the purpose of depreciating values. The bear operates for a decline in prices. The broker's charge for his services is called a commission, which in the New York Stock Exchange is one eighth of one per cent. each way on a par value of the security purchased or sold. A point means one per cent. on the par value of a stock or bond. Stock privileges or puts and calls are extensively dealt in abroad and to some extent here. A put is an agreement in the form of a written or printed contract filled out to suit the case, whereby the signer of it agrees to accept upon one day's notice, except on the day of expiration, a certain number of shares of a given stock at a stipulated price. A call is the reverse of a put, giving its owner the right to demand the stock under the same conditions. A put may serve as an insurance to an investor against a radical decline in the value of stocks he owns; a call may be purchased by a man whose property is not immediately available, but who may desire to be placed in a position to procure the shares at the call price, if they are not below that in the open market when he secures the necessary funds. The speculator usually trades on margins. If he has $500 to invest he buys $5000 worth of stock, his $500 being ten per cent. of the total amount. He expects to sell again before the remaining amount falls due. The margin is usually placed by the speculator in the hands of a broker as a guaranty against loss. Although these brokers are really agents for others, yet on 'change they stand in the mutual relationship of principals. A margin is merely a partial payment, but a broker buying stock for a client on margin is compelled to wholly pay for it. If he has not the necessary capital his usual custom is to borrow from banks or money-lenders, pledging the stock as collateral security. In foreign exchanges the element of credit enters more largely into the conduct of business. Where the credit of the client in London is established his broker does not, ordinarily, call on him for any cash until the next "settlement day." A wash sale is a fictitious transaction made by two members acting in collusion for the purpose of swelling the volume of apparent business in a security and thus giving a false impression of its value. Stocks sell dividend-on between the time the dividend is declared and the day the books of the company close for transfer; after that they sell ex-dividend, in which case the dividend does not go to the buyer. When a company decides not to declare a dividend it is said to pass its dividend. To sell stock buyer 3 is to give the buyer the privilege of taking it on the day of purchase or on any of the three following days, without interest; and to sell stock seller 3 is to give the seller the privilege of delivering it on the day of purchase or on any one of the three following days without interest. Buyer 3 is a little lower and seller 3 a little higher than regular way when the market is in a normal condition. Bucket shops are establishments conducted nominally for the transaction of a stock-exchange business but really for the registration of bets or wagers, usually for small amounts, on the rise or fall of the prices of stocks, there being no transfer or delivery of the commodities nominally dealt in. There are thousands of these counterfeit concerns throughout the country conducted without any regard for legitimate commercial enterprises.

FUTURE DELIVERY

Grain is stored in warehouses until needed for milling or shipment. When we speak of December wheat we mean wheat that is to be delivered to the buyer in December. The carrying charges include storage, interest, and insurance, so that wheat sold for May delivery would necessarily bring a higher price than wheat sold for December delivery. Carrying charges are in favour of the short seller. When sold for immediate delivery it is known as cash grain.

XIV. STORAGE AND WAREHOUSING

BONDED WAREHOUSES

There is a government regulation that an importer who does not wish to pay immediately the customs duties on his goods may have them stored in a warehouse, provided he furnish a bond with a surety that he will pay the duty within three years or export the goods to some other country. It is also a requisite that the goods be deposited in a bonded warehouse in the care and custody of its proprietor, who also must furnish the government with a bond of indemnity. The bond of the proprietor is a general bond and usually covers what might be considered a fair amount of total values due the government at any time. Officers of the United States are stationed at the bonded warehouse during business hours. These are there in evidence of the government's proprietary interest in the merchandise stored. When an importer makes entry at the custom house for bonding his goods, he at that time provides the security required.

By a recent decision of the Treasury Department at Washington goods in bond are in the joint custody of the United States government and the proprietor of the warehouse, and after the government has received its customs duties for the goods they are in the proprietor's sole possession. The government cannot interfere to enforce delivery of the goods to the importer. The claim of the warehouse proprietor for storage charges becomes a first lien after the government's claim is satisfied. When the importer has paid both customs and storage charges he is privileged to remove his goods.

WAREHOUSE REGULATIONS

It is the duty of United States storekeepers to check off the goods as they are received at the warehouse and to report the same to the custom house; and when goods are to be withdrawn to see that delivery is not made until a custom house permit is presented. Upon payment of the import duty on goods in bond at the custom house at any time after importation, the customs officials issue a warehouse permit to the importer ordering the United States storekeeper in charge of the bonded warehouse to deliver the goods to the importer, and upon presentation of the permit the goods are released unless the proprietor holds them subject to storage charges.

Goods may be held in bond for three years with the duty unpaid, but after that time either the duty must be paid or the goods exported. If shipped to another country and afterward re-imported the goods would again be entitled to the three-year privilege. If goods are not exported and the customs charges are due and unpaid, the government may dispose of the goods at public sale to obtain its claim.

Goods arriving by steamer and unclaimed lie at the wharf forty-eight hours. If the owner does not appear to make entry for them within that time, after the entry for the vessel has been made, the goods are sent to a bonded warehouse and remain there on what is known as a general order, and if they stand there unclaimed for a year they may, at the expiration of that time, be sold by the government.

The capital of a warehouse is its storage space. The rates vary from 1/4 to 3/4 of a cent per cubic foot. The charges may be based on the amount of space consumed and the weight of the merchandise. The latter often determines the floor elevation to which the goods may be assigned. The more convenient of access the storage location is, the greater the cost. Warehouse receipts are issued as evidence of storage. All merchandise is conveniently bulked for numbering and marking, and these distinguishing marks appear on the receipts. Negotiable and non-negotiable receipts are issued as the needs of the owner may require. The former permit advances to be made by bankers upon the merchandise as collateral security.

FREE WAREHOUSES

These differ from bonded warehouses only in the fact that the government has no control or interest in them. They are only for the storage of imported goods on which the customs duty has been paid or for goods imported free of duty or for merchandise of domestic production and manufacture. They are managed entirely by the proprietor, and the contracts for storage are, of course, between the proprietor of the warehouse and the owner of the goods. The storage rates in free warehouses are considerably lower than for goods stored in bonded warehouses—the latter being a much more expensive business to conduct. There is no time limit in free warehouses. Goods may remain indefinitely. When they remain from six months to a year the charges are collected usually at certain periods to avoid accumulation. Experience shows that goods in free warehouses do not stay so long as those in bond. The articles commonly found in these houses are domestic and imported wools, cotton, canned goods, peanuts, yarns, cotton piece goods, mattings, dry goods, etc. Perishable goods, of course, do not find their way into bonded or free warehouses. These are placed in cold storage.

BANKING FEATURES OF WAREHOUSING

Many of the warehouses find it advantageous to do a banking business in connection with the storage features. Very frequently, for the convenience of the importer, goods are consigned to the warehouse and sent subject to a sight draft for the amount of the invoice. The warehouse company will pay the draft with the exception of about twenty per cent., which the importer is expected to furnish. If the duty is paid then the value upon which a loan is estimated is based upon the market value of the goods in this country. After the draft has been satisfied the goods are placed in the stores of the warehouse company subject to the customs and storage charges. The amount advanced by the company bears interest at current money rates. In illustration let us suppose bonded goods to be shipped and invoiced at $10,000, customs duty $4000, and the goods consigned to a bonded warehouse. The draft ($10,000) is sent to the warehousing company, which advances $8000, and together with the $2000 received from the importer pays the draft. The $8000 loan made by the company is then charged to the importer at the usual interest rate, and when the borrower withdraws his merchandise from storage he will have to pay the government the $4000 customs duty and pay back his loan of $8000 to the warehouse company, together with interest and storage charges. If any portion of the goods stored is withdrawn for use in the business of the importer, the company will rebate a proportionate amount of the interest. If goods decline in value as collateral in storage the company will demand additional margin for its protection. If goods appreciate in value the loan may be increased. The market value of the goods is ascertained by the appraisement of some expert, who receives a commission for his services.

COLD STORAGE

The cold-storage warehouse is the natural result of the necessities of our great agricultural interests in the preservation of perishable products so sensitive to the deteriorating effects of temperature. The solution of the problem of the preservation of dairy products, meats, fish, poultry, fruits, and vegetables has developed a system that has eliminated the seasons and made possible the equalisation of prices of the finer class of edibles. The cornering of products and the creation of unreasonable prices are avoided. No article becomes a glut on the market as formerly. When there is a surplus of eggs and fruit, prices may be maintained by putting them in cold storage for a few days and offering them on the market when the conditions of trade warrant.

TEMPERATURE REQUIREMENTS FOR COLD STORAGE

Prior to the year 1890 cold storage was dependent upon the employment of ice, but in the evolution of the cold-storage warehouse ice is no longer a requisite. In fact, the temperature obtained by the employment of ice precluded a thermometric register much below the freezing point. The accepted temperature for butter and eggs was formerly 40 deg. to 50 deg.; but through the introduction of mechanical refrigeration, which has revolutionised the business economically as well as physically, eggs now are held in storage at a temperature of 31 deg. and butter from 10 deg. to 18 deg.. Under the former method of ice storage, goods that were offered on the market as "held goods"—that is, as coming from a cold storage—always brought several cents under the prices of fresh merchandise. But the remarkable modern methods of cold storage permit the carrying of dairy products for a number of months and their successful sale afterward in competition with fresh goods. Eggs stored in March are taken out in the following November and have commanded as high and often higher prices than the fresh commodity. Eggs have been kept two years and found perfectly sweet when used. In freezing poultry and fish the temperature now frequently given is zero and under. Poultry does not carry so well as other merchandise. Although it is possible to keep it for two years, yet it loses its flavour. Five or six months' storage is its usual average limit.

Certain temperatures are maintained in the various compartments of a cold-storage warehouse according to the requirements of the products, and these temperatures are made possible by forcing through pipes arranged around each compartment a brine composed of about ninety-five per cent. of pure salt whose temperature has been reduced by the action of the chemicals. When a shipper stores his goods there is an implied contract with the storage company that the temperature required for the product will be furnished and maintained. Failure to do this renders the company liable for any damage to property. So vital is this feature of the business, which is really the only liability assumed by the company, that the custom prevails of taking the temperature of each room as often as five times in every twenty-four hours, and keeping the record in temperature books open to the inspection of the shippers. A room filled with merchandise may not vary in temperature one degree in six months.

COLD-STORAGE CENTRES

Chicago very naturally is the leading cold-storage centre. Its situation in the heart of the productive area and its advantages as a distributing centre have given it its prestige. But in the last two or three years the Eastern cities, New York, Philadelphia, and Boston, have developed enormous cold-storage facilities, and Chicago no longer is absolute in her dictation to the markets of the world. When it is remembered that the dairy interests of our country during the last three years averaged an annual value of $650,000,000, and that the greater portion of this found its way into cold-storage warehouses, the importance of this new and very necessary business is readily appreciated.

COLD-STORAGE CHARGES

The cold-storage charges for eggs in thirty-dozen cases would be about 15 cents per case for the first month and 9 cents for every additional month. Butter in sixty-pound tubs would be charged at the rate of 12 cents per tub for each month. Cheese would cost one tenth of a cent a pound per month. The rates of Eastern cities are usually higher than in the West. About ninety per cent. of the storage business of the East is in goods shipped from the West. The refrigerator car is a valuable adjunct to the business. The temperature of the cars is about 45 deg..

Although no ice is used in the modern cold-storage plant, yet the ice has become a very valuable by-product. Since all the facilities for its manufacture are at hand it has become a matter of commercial expediency to employ them to the company's profit in the production and sale of a commodity indispensable to modern life.

QUESTIONS FOR REVIEW

1. Give some particulars in which the Bank of England differs from our larger national banks.

2. A bank cheque is a demand order for money drawn by one who has funds in the bank. How does a cheque differ from an order on A—— B—— to pay bearer a certain sum of money?

3. You are sending a cheque through the mails to John Brown, Chicago. How will you prevent the cheque from falling into the hands of the wrong Brown?

4. You identify A—— B—— at your bank. The cheque A—— B—— presented turns out to be a forgery. Are you responsible?

5. What is meant by power of attorney? How should an attorney indorse cheques for any person for whom he is acting?

6. What is a certified cheque? Brown gives A an ordinary cheque for $1000, and B a certified cheque for $1000. He fails before either cheque is presented. Why is B's security for his claim considered better than A's?

7. Show how all the banks of the United States are connected through the clearing-house system.

8. How do State and national banks differ as to their organisation?

9. A national bank has a capital of half a million. A customer asks for a loan of $62,000 on indorsed paper. Can the bank legally grant the loan?

10. Give some particulars of the liabilities of the officers and directors of national banks.

11. What is meant by borrowing money on collaterals? How is this done?

12. Tell how it is possible for a young man of good character, but without friends who have financial standing, to secure bonds for his faithful conduct in a responsible position.

13. When rates are high bankers prefer to deal in long-time paper. Why?

14. Account for the fact that London is the financial centre of the world.

15. Explain in detail the business of a note broker, giving some particulars of his responsibility in connection with the paper handled.

16. Enumerate the leading items of resource and liability in a national-bank statement.

17. A bank receives from the comptroller of the treasury $100,000 in new bank-notes of its own issue. What ledger entry? A bank retires $10,000 of its own bank-notes. What entry?

18. Discuss fully the points which should enter into a proper estimate of the value of paper offered for discount.

19. Give the successive and necessary steps in the formation of a joint stock company.

20. Why are companies which properly exist and belong in one State sometimes organised under the laws of another State?

21. Explain very fully the difference as to resource and liability between a bondholder and a stockholder.

22. How may a stock company be dissolved?

23. What is the difference between a voluntary association, such as a society or club, and a stock company?

24. Explain very fully the meaning of Limited when it forms part of the legal title of a company.

25. Is it legal to sell shares of stock and issue mortgage bonds upon the same property? What relationship do they bear one to the other?

EXAMINATION PAPER

NOTE.—The following questions are given as a means by which the student may test for himself whether he has attentively pursued the lessons of the course or not. It is recommended that each student as he finishes the course write out the answers to the questions in full. Only such answers need be attempted as the student can frame from a careful study of the course.

1. (a) Give some particulars in which the Bank of England differs from our larger national banks. (b) Enumerate some of the advantages afforded to the community and to commerce in general by banking institutions. (c) How do private banks and trust companies differ from national banks?

2. (a) What is a stock certificate? How does it differ from a mortgage bond? (b) At what rate must United States 4 per cents be bought to net 3.2465 per cent.? (c) Give the successive and necessary steps in the formation of a stock company. How can the stock of a company or corporation be increased?

3. (a) What provision is usually made for the redemption of municipal bonds which have a long period to run? (b) What is meant when we say that a certain railway is in the hands of a receiver? (c) Give some of the advantages which stock companies have over partnerships.

4. (a) Tell how you would receipt for a payment on a note. Why is not an ordinary separate receipt sufficient? (b) Discuss fully the points which should enter into a proper estimate of the value of paper offered for discount. (c) Explain in detail the business of a note broker, giving some particulars of his responsibility in connection with the paper handled.

5. (a) What are the advantages to the banks of a city of their central clearing-house? (b) Show by a diagram how collections are made between distant points. (c) What is a certified check?

6. (a) Enumerate some of the abuses of rate discrimination in the United States and tell how they are met. (b) What are the advantages to the public of freight organisations which arrange for through service? (c) Explain in detail the methods adopted by leading and competing railway lines to regulate and adjust freight rates. (d) What are differentials? How are (1) through and (2) local passenger rates regulated?

7. (a) Give the particulars in which a warehouse receipt resembles and differs from (1) a promissory note, (2) a bill of lading. (b) What are the advantages to the importer of bonded warehouses? (c) What are the duties of our foreign consuls with reference to the importation of goods?



COMMERCIAL LAW

I. THE DIFFERENT KINDS OF CONTRACTS

Commercial law relates to CONTRACTS. These are made by almost every one. A person cannot ride in a street-car without making a contract with the company for carrying him. If he goes into a store and buys a cigar, a stick of candy, or a tin whistle, he has made a contract with the man behind the counter, who owns the store or is his salesman. Tramps and thieves are about the only persons who live without making contracts. In that respect they are like the birds of the air, getting whatever they desire whenever the chance is seen.

A contract has been defined as an agreement to do or not to do some particular thing. These are the words used by one of the greatest of American judges. The reader may turn to his dictionary and find other definitions that contain more, if he pleases, but this will answer our purpose.

All contracts may be put into three classes, and each of these will be briefly explained. First, SEALED AND UNSEALED CONTRACTS. What do we mean by a contract that is sealed? It is one to which the person who signs it adds, after his name, a seal. But what is a seal? It may consist of sealing-wax, stamped in a peculiar manner, or a wafer made of sealing-wax, or a paper wafer. In the olden times when people could hunt and fight but were not able to write their names, they put a seal at the end of a contract made by them; in other words, the seal supplied the place of a name. Each person's seal differed from the seal of every other. It had its origin really in the ignorance of the people. As they were unable to write their names these distinct signs or marks, called seals, were put on instead of their signatures.

With the changes brought by time the form of this device or seal, required by law, is much simpler than it was centuries ago. Indeed, in every State persons use the letters "L. S.," with brackets around them, instead of a seal. They mean "the place of a seal," and are just as good in every way as any kind of seal that might be used. Here are two of the forms of seals in most common use:



Any contract that has a seal after the name of the signer is a sealed contract, and every other is called an UNSEALED, ORAL, or VERBAL contract. If a contract was written and a seal was added after the signer's name, and there was another exactly like it in form, but without a seal, this would be called an unsealed or verbal contract, and in law would differ in some important respects from the other. This is true in every State except California, where the difference between sealed and unsealed contracts is no longer known.

The second class of contracts are called EXPRESS AND IMPLIED CONTRACTS. By an EXPRESS CONTRACT is meant one that is made either in writing or in words. But the reader may ask, Are not all contracts of this kind? By no means. Many contracts exist between people which have not been put into words. Suppose A should ask B for employment and it should be given to him, but no word should pass between them about the price to be paid. The law would imply that B must pay him whatever his work was reasonably worth. If A should come at the end of the week for his pay and B should say to him: "I never made any bargain with you concerning the price, and I am unwilling to pay you anything," A could, if he understood the law, say to B: "You told me to work, and the law implies that you must pay me whatever my work is worth." How much would the law give him for his work? Just what the employer was paying other men for the same kind of work.

Another class of contracts are called EXECUTED and EXECUTORY. An EXECUTED CONTRACT is one that is finished, done, completed. If I should go into a store and ask the price of a book and say to the salesman, "I will take it," and give him the money, and take the book with me, this would be an executed contract. An EXECUTORY CONTRACT is one that is to be completed. Suppose the salesman did not have the book and I should say to him, "Please get it for me and I will come in next week and pay you for it," this would be an executory contract; and it would remain so until I came in and got the book, as I had promised to do, and paid the price.

These are the three most general classes of contracts made by persons in daily life. Almost all persons make contracts of each kind during their lives. Sealed contracts are not as common as unsealed ones, yet they are frequently made. Every deed for the sale of land or lease for the use of it is a sealed contract.

II. THE PARTIES TO A CONTRACT

To every contract there must be two or more persons or PARTIES. When Robinson Crusoe was on his island all alone, eating breadfruit and entertaining himself by throwing stones at the monkeys, he perhaps had a good time, but he could not make any contracts. But as soon as Friday came along they could make contracts, trade, and cheat each other as much as they pleased. A contract, therefore, is one of the incidents of society. A person sailing in a balloon alone could not make a contract, but if two were in the basket they might amuse themselves by swapping jack-knives or neckties, and these exchanges would be completed or executed contracts and would possess, as we shall soon see, every element of a contract.

Again, persons must be able, or COMPETENT, to make contracts. What kind of ability or competency must a person have? Not every person can make a contract, even though he may wish to do so. A MINOR, or person less than twenty-one years of age, though he may be very wise and weigh perhaps two hundred and fifty pounds, can make very few contracts which the law regards as binding. In fact, the only contracts that a minor can make for which he is bound are for necessaries—clothing, food, and shelter. Nor can he make contracts even for these things in unlimited quantities. A minor could not go into a store and buy six overcoats and bind himself to pay for them. The storekeeper must have common sense in selling to him and keep within a reasonable limit. In one of the well-known cases a minor bought a dozen pairs of trousers, half a dozen hats, as many canes, besides a large supply of other things, and, refusing afterward to pay the bill, the merchant sued him, and the jury decided that he must pay. The case, however, was appealed to a higher court, which took a different view of his liability. The judge who wrote the opinion for the court said that the merchant must have known that the minor could not make any personal use of so many trousers, canes, and hats, and ought not to have sold him so many. In short, the court thought that the merchant himself was a young minor in intelligence and ought to have known better than to sell such a bill to a person under age.

Of course it is not always easy to answer this question, WHAT ARE NECESSARIES? Much depends on the condition of the person who buys. A merchant would be safe in selling more to a minor living in an affluent condition of life than to another living in a much humbler way. Quite recently the question has been considered whether a dentist's bill is a necessity, and the court decided that it was a proper thing for a minor to preserve his teeth and to this end use the arts of the dentist. Again, is a bicycle a necessity? If one is using it daily in going to and from his work, surely it is a necessity. But if one is using it merely for pleasure a different rule would apply, and a minor could not be compelled to pay for it. Cigars, liquors, theatre tickets are luxuries; so the courts have said on many occasions.

The courts, in fact, regard a minor as hardly able to contract even for necessaries, and he is required to pay for them for the reason that as he needs them for his comfort and health he ought to pay for them. In other words, his duty or obligation to pay rests rather on the ground of an implied contract (which has been already explained) than of an express one. The force of this reasoning we shall immediately see.

Suppose a minor should say to a merchant who was unwilling to sell to minors,—having had, perhaps, sad experience in the way of not collecting bills of them,—"I am not a minor and so you can safely trust me. I wish to go into business and wish you would sell me some goods." Suppose that, relying on his statement, the merchant should sell him hats or other merchandise for which he would afterward decline to pay, on the ground that he was a minor. Suppose he proved that he really was one—could the merchant compel him to pay the bill? He could not compel him to fulfil his contract, because, as we have already said, the law does not permit a minor to make a contract except for necessaries. The court, then, would say to the merchant: "It is true that you sold the goods to this minor; he has indeed lied to you; still the court cannot regard a contract as existing between you and him." On the other hand, a court will not permit a person to defraud another, and the merchant could make the minor pay for the deceit or wrong that he had practised on him; and the measure of this wrong would be the value of the goods he had bought. Thus the court would render justice to the merchant without admitting that the minor could make a legal contract for the goods that he had actually bought and taken away.

III. THE PARTIES TO A CONTRACT (Continued)

In the former article we told our readers that there were some persons who could not make contracts, and among these were INFANTS or MINORS. In most of the States a person, male or female, is a minor until he or she is twenty-one years old. In some of the States, among them Illinois, a female ceases to be a minor at eighteen years of age.

By the Roman law a minor did not reach his majority until the end of his twenty-fourth year, and this rule has been adopted in France, Spain, Holland, and some parts of Germany. The French law, though, has been changed, with one noteworthy exception. A woman cannot make a contract relating to her marriage without the consent of her parents until she is twenty-five. Among the Greeks and early Romans women never passed beyond the period of minority, but were always subject to the guardianship of their parents until they were married.

MARRIED WOMEN are another class of persons who cannot make every kind of a contract like a man. Once a married woman had but very little power to make contracts. However great might have been her wealth before marriage, as soon as she entered into this blissful state the law kindly relieved her of all except her real estate, giving it to her husband. On the other hand, he was obliged to pay her bills, which was one of his great pleasures, especially if she was a constant traveller to the silk and diamond stores. She could still keep her real estate in her own name, but that was about all. Her husband took everything else; he could claim her pocket-book, if he pleased, and was obliged to support her in sickness or health, in sweetness or in any other "ness."

The law has been greatly changed in all civilised countries in this regard, and to-day in most States she can make almost any kind of a contract. In some States, however, it is even now said that she cannot agree to pay the debt of another, but this is, perhaps, the only limit on her power to contract. She can engage in business, buy and sell, transfer notes, make contracts relating to the sale and leasing of her real estate, insure it, build houses, and do a thousand other things quite as freely as if there were no husband around. The most of these changes widening her authority to make contracts have come within the last fifty years. Of course, unmarried women can make contracts like men, and many of them know it.

Another class who cannot make contracts are DRUNKEN PERSONS. Once the law regarded a drunken man as fully responsible for his acts, and if he made a contract he was obliged to execute or fulfil it. He could not shield himself by saying he did not know what he was doing at the time. The court sternly frowned on him and said: "No matter what was your condition at the time of making it, you must carry it out." This was the penalty for his misdeed. It may be the courts thought that by requiring him to fulfil his contracts he would be more careful and restrain his appetite. Whatever the courts may have thought, they have changed their opinions regarding his liability for his contracts made under such conditions. Now they hold that he need not carry them out if he desires to escape from them. There is, however, one exception to this rule. If he has given a note in the ordinary form, and this has been taken by a third person in good faith who did not know of the maker's condition at the time of making it, he must pay. But, we repeat, the third person must act in good faith in taking it, for if he knew that the maker was drunk at that time he cannot require him to pay any more than the person to whom it was first given.

One other class may be briefly mentioned—the INSANE. They are regarded in the law quite the same as minors. For their own protection the law does not hold them liable on any contracts except those for necessaries. These are binding for the same reasons as the contracts of minors, in order that they may be able to get such things as they need for their health and comfort. For if the law were otherwise, then, of course, merchants would be afraid to sell to them. But as merchants can now safely sell to them whatever they truly need in the way of clothing, food, etc., to make themselves comfortable, so, on the other hand, the insane, like minors, must pay for these things, and it is right that they should.

IV. THE CONSIDERATION IN CONTRACTS

Having explained who can make contracts, we are now ready to take another step. Besides having parties, there must be a CONSIDERATION for every contract. This is rather a long word, but no shorter can be found to put in its place. What do we mean by this term? We mean that there must be some actual gain or loss to one or both parties to a contract, otherwise it is not valid. If, for example, A should say to B, "I will give you $100 to-morrow," B, perhaps, might go away very happy, thinking that with this money he could buy a bicycle or some other fine thing; indeed, it was just the sum for which he was longing; so on the morrow he goes to A for his money. He promptly appears, but A says to him: "I have changed my mind, and will not give you the $100." B asks: "Did you not promise to give me this money?" "Certainly." "Well, why will you not fulfil your promise?" A replies: "I was a fool when I made that promise; you are not going to give me anything for it, so I am unwilling to give the money to you." Suppose B in his sorrow should go to a lawyer, thinking, perhaps, that he could compel A by some legal proceeding to pay over the money. What would the lawyer tell him? Why, he would say: "Did you promise to give A anything for the $100?" "No, sir." "Then the law will not help you out. You cannot get the money from him by any legal method. Perhaps you can get $100 worth of fun in licking him for not giving you the money, but you cannot get the cash. But, mind, perhaps you had better not try to get your fun in that way, for this is contrary to law, and he might get much more than $100 out of you in the way of damages for licking him."

In every case, therefore, there must be something for something. Now this something may be a thousand things. It may be money or merchandise or work. In short, there is no end of the things that may serve as a consideration of a contract. An example may be given to explain what is meant by this. A man had been speculating in stocks, and one of the rules of the stock board is that a margin or sum of money that is to be paid for stock must be paid in every case. It may be that an additional margin or sum must be paid under some circumstances. The speculator in this particular case was unwilling to pay this margin, and he said to the broker: "If you will do as I wish, and not put up this margin, I will save you from any loss that may result from such conduct." It was contrary to the rules of that stock exchange for the broker not to put up the margin, and the consequence was that he was put off the floor; in other words, the board would not permit him to act as a member. Of course, as he could not buy and sell any more stock, he lost money; and he went to his customer, the speculator, and told him that he was losing money in consequence of carrying out his order about the margin. The speculator said he was sorry, but he could not help it. The broker then insisted that the speculator must make good his daily loss in consequence of doing as he had promised. This the speculator would not do. The broker then sued him for the amount of his loss. The speculator defended on the ground that there was no consideration for the agreement he had made with the broker about the margin. The court said that the loss which the broker had suffered in consequence of carrying out his contract with the speculator was a good consideration for the contract and must be made good.

When a contract is sealed the law implies that there is consideration, and there need not be an actual one consisting of money, labour, or any other thing. This seems like an exception to the rule requiring a consideration in all cases, but the reason is this: When a sealed contract is made, the law supposes or assumes that each party made it, clearly knowing its nature—made it carefully, slowly, and, consequently, that either a consideration had been or would be given. If, therefore, one of the parties should refuse to fulfil it the other could sue him in a court of law. The person who sought to have it carried out would not be obliged to show that he had given any consideration on his part for the undertaking, because the seal appended to his name would imply that a consideration had been given. A deed for a piece of land is a good illustration of a sealed instrument. The law assumes whenever such a deed is given that the seller received a consideration for his land. The money paid was a consideration received by the seller, and the land was the consideration received by the buyer. Each gives a consideration of some kind for the consideration received from the other; and this is true in all cases.

V. THE ESSENTIALS OF A CONTRACT

In our last paper we told our readers that there must be a consideration in every contract. Sometimes this is illegal, and when it is the effect is the same as would be the giving of no consideration.

Suppose a robber having stolen money from a bank should afterward offer to return a certain portion if he is assured that he will not be arrested and compelled to change the style of his clothing and his place of residence for a season. He cannot endure the thought of missing a game of football; and as for striped clothes, though very comfortable, perhaps, he is sure they would not be becoming. Suppose this agreement to return a part should be put in writing, and after fulfilling it he should be sued by the bank for the remainder, and also prosecuted by the State for committing the theft. Very naturally he would present the writing in court to show that he had been discharged from the crime and also from the payment of any more money. But this writing would not clear him either from prosecution for the criminal offence or from liability to return the rest of the money. The bank would say that although he had returned a part, this was not a proper consideration for its agreement not to sue him; it had no right to make such an agreement, and consequently it could sue the robber for the remainder of the money just as though no agreement had ever been made.

Another illustration may be given. Suppose a person having made a bet and lost is unable to pay the money and gives his note for the amount. When the note becomes due the holder or owner sues him for the money. He defends, as he is unwilling to pay, by saying there was no legal consideration for the note. The money he promised to pay was only a wager, which the law regards as illegal. And this would be a good defence.

If the consideration is partly legal and partly illegal and can be divided then there can be a recovery of the legal part. Suppose a man owed another $1000 for borrowed money and also a wager for the same amount, and had given his note for $2000. When it became due if the owner sued him he could recover only the $1000 of borrowed money; this much and no more, for the reason that the consideration could be divided, the legal part from the illegal part. If no separation was possible then the note would be void and the owner could get nothing.

A person cannot recover for a voluntary service that he has rendered to another. A man would be very mean indeed who refused to pay another for any service rendered to him that was truly valuable; yet if he would not do so the man rendering the service could get nothing through the law. Suppose that a person when walking along a road should see some cattle astray in a corn-field having a good time with a farmer's corn. He knows they are in the field for business and in a short time, unless driven out, will get the best of nature and down her efforts in corn-raising. In the kindness of his heart he jumps over the fence and succeeds in driving them away. Suppose there happens to be among the number an unruly animal which is unwilling to leave such a tempting field of plunder and turns on him and gores him, and he is taken to a hospital. The farmer finds out who drove out the animals, and of his injury, but declines to give him any reward whatever. Can the man recover anything? The law says not, because the service is purely voluntary.

The question has often been asked whether a person who has made a contract to work for another and has broken it can recover for the worth of his service during the period he was employed. Some courts have said that a person thus breaking his contract cannot afterward recover anything, because he does not come into court with clean hands. Other courts have said that though he can recover nothing on the contract he has broken, he can nevertheless recover on a contract which the law implies in such a case for the worth of his service during the period of his employment. On the other hand, the employer can set off against his claim any injury that he may have sustained. Suppose he could show that the service was of no worth to him; that he was injured rather than benefited by what he did; then the employe could get nothing. The courts have been inclined of late years to uphold an employe in recovering whatever his service was worth—not, however, as done by virtue of an express or actual contract with the employer. He cannot sue on that; in other words, he cannot take advantage of his own wrong to recover anything from his employer, but he may recover on the contract which the law implies, as we have explained, as much as his service was worth to his employer, and no more.

Another element in a contract is the meeting of minds of both parties. Both must understand the matter in the same sense. For example, a person offered to sell another "good barley" for a stated price, and the other offered to buy "fine barley" at the price mentioned. There was no contract between these persons, because it was shown that "good barley" and "fine barley" were different things in the trade. This, therefore, is one of the essential elements of a contract—the meeting of the minds of the contracting parties. Whether they have assented or not is a question of fact, to be found out like any other question of fact.

Sometimes offers are made on time, and when they are several interesting questions may arise. Suppose A and B are negotiating for the sale and purchase of a piece of land. A says to B: "I will give you a week to think the matter over." Soon after parting A meets C, to whom he mentions his offer to B. C says: "I will give you a great deal more for the land and pay you now." "Very well," says A; "the land is yours." And he at once writes a letter to B saying that he has withdrawn his offer, as another person has offered him more for the land and that he has sold it to him. Now B might be very much surprised by this letter. Very likely he would think A was a hard man and perhaps a dishonest one. Perhaps he would go to a lawyer and ask him if he could compel A to sell the land to him if he accepted his offer within the time mentioned and paid to him the money. The lawyer would tell him—if he understood his business—that A had a perfect right to withdraw his offer, even though it was made on time. This would probably be brand-new knowledge to B, but he would know what to do on the next occasion.

Is this true in all cases? It certainly is of all offers made in that manner. How, then, can a person who makes an offer to another on time be compelled to regard it? The way is simple enough. The person to whom the offer is made should give something—a consideration—to A, who makes the offer, for the delay. Then he would be bound by it. But the courts would say to B, if nothing were given: "Why should A's offer bind him so long as he is to get no compensation or consideration for it?" And we shall see again and again in these papers this element of consideration is ever present, and must be to make transactions legal. So with respect to an offer on time—if the person to whom it is made is really desirous of having it continue, in order to find out whether he can raise the money to pay, or for some reason, he can make the offer binding by giving to the offerer a consideration for the specified time, whatever that may be.

VI. CONTRACTS BY CORRESPONDENCE

A great many contracts are made by correspondence. A person writes a letter to another offering to sell him merchandise at a stated price. The other replies saying that he will accept the offer. Is a contract made at the time of writing his letter and putting it into the post-office, or not until it is received by the person who made the offer? The law in this country is that a contract is made between two persons in that way as soon as the answer is written and put into the post-office beyond the reach of the acceptor.

The post-office usually is the agent of the person who uses it, but when a person sends an offer to another by mail the post-office is regarded a little differently. It is the agent of the person who sends the offer and also his agent in bringing back the reply. Consequently, when this is put into the hands of the agent the law regards the offerer as bound by his offer. In like manner, if a creditor should send a letter to his debtor asking him to send a cheque for his debt and he should comply, the post-office would be the agent of the creditor in carrying that cheque, because he requested his debtor to use this means in sending his cheque to him. But when a request is not made and a debtor sends a cheque on his own account, the post-office is his agent for carrying it to his creditor.

A person making an offer by letter can of course withdraw it through the telephone or telegraph if he likes at any time before the letter has been received by the other party. Suppose the price of things is rising and A, finding that his goods are also advancing, should, after making an offer of some of them by letter, send a telegram stating what he had written and withdrawing his offer. This would be a proper thing for him to do. If, on the other hand, A's offer had been received by B before his withdrawal and accepted, then A would be bound by it.

Can B, after mailing his letter of acceptance and before it has been received by A, withdraw his acceptance? No, he cannot—for the reason above given, that the post-office is the agent of A, in carrying both his offer and B's reply. If this were not so, if the post-office were the agent of B in sending his reply, then of course it could be revoked or withdrawn at any time before it reached A.

Suppose A should send an offer and afterward a withdrawal and the withdrawal should be received first. Notwithstanding this, however, if the person to whom the offer was sent should accept the offer, could he not bind A? One can readily see that all the proof would be in the possession of B, the acceptor. If he were a man without regard for his honour and insisted that he received the offer first, A might be unable to offer any proof to the contrary and fail to win his case should B sue him. But the principle of law is plain enough; the only difficulty is in its application. Doubtless cases of this kind constantly happen in which the acceptor has taken advantage of the other to assent to an offer actually received after its withdrawal.

Suppose B should in fact receive A's offer first in consequence of the neglect of the telegraph company to deliver A's message of withdrawal promptly, which if delivered as it should have been would have reached B before the letter containing the offer, what then? A doubtless would be bound by his offer, but perhaps he could look to the telegraph company for any loss growing out of the affair. If he could show that he had been injured by fulfilling the contract the telegraph company might be obliged to pay this.

Let us carry the inquiry a little further. Suppose the messenger on receiving the telegram took it to B's office and it was closed and he made diligent inquiry concerning B's whereabouts and was unable to find him. Suppose he had gone off to a horse race or to a football game, would it be the duty of the messenger boy to hunt him up at one of these places? By no means. If B was not at his place of business when he ought to have been, the company would not be bound to deliver the message to him elsewhere, except at his house, unless he had left a special direction with the company concerning its delivery. Generally a telegraph company states very clearly its mode of delivering messages and the time when it will do so, the place, etc., to which it will take them, and it is not obliged to hunt all over creation to find the person to whom a message is addressed. That would be a very unreasonable rule to apply. Therefore, if the company did its duty A could not recover anything from it. Would A, then, it may be asked, be obliged to fulfil his contract with B? He has sent his withdrawal, which if delivered in time would have been received by B before the letter containing the offer. B, however, is away from his place of business, and perhaps is where he ought not to be—perhaps he is playing poker or doing something worse—ought A under such circumstances to be held by his offer? This is a closer question and one that we will leave our readers to think over. Surely A would have a strong reason for claiming that he ought not to be held under such conditions.

A person who makes an offer cannot turn it into an acceptance. An old uncle offered by letter to buy his nephew's horse for $100, adding: "If I hear no more about the matter I consider the horse as mine." The uncle, not hearing from the nephew, proceeded to take the horse. At this stage of the proceedings, however, the nephew was not inclined to suffer his good old uncle to make the contract entirely himself, and refused to give up the horse. The court said that one person could not do all the contracting himself, and this is what he virtually undertook to do. If a person could, by correspondence or otherwise, make a contract in this manner, one can readily see the dangers that might follow. Some positive act must be put forth by the other party showing or indicating his assent before it will be regarded as given. A person, in truth, is not obliged to pay any attention to an offer of this kind.

Rewards are often made. They are found almost every day among the newspaper advertisements. These are binding under various conditions. An interesting question has been raised in the case of a runaway horse whose owner has made an offer to any finder who returns him. Suppose a person at the time of catching the animal did not know of the reward but does know of it when returning the beast to his owner; can he claim the reward? This question has somewhat puzzled the judges, but the more recent opinion is that the catcher can claim the reward like a person who knew at the time of stopping the pleasure of the runaway. Of course, there is no question concerning these rewards when they are known at the time of acting on them.

In one of the cases tried not long since, an old farmer offered a reward of $15 to any one who would find the person who had stolen his harness and also $100 to the man who would prosecute the thief. The harness, in truth, was worth not even this small sum and the thief still less. Yet he was caught and prosecuted, and then the prosecutor and finder claimed the rewards. The farmer's excitement had cooled off by this time and he was not so loud and liberal as he was at the time of finding out his loss. He refused to pay, saying that he did not really mean to offer these sums as rewards, and the court decided in his favour, declaring that his offer of reward could not be regarded strictly as one, but rather "as an explosion of wrath." In another case a man's house was burning up and his wife was inside, and he offered any one $5000 who would go in and bring her out—"dead or alive." A brave fellow went in and rescued her. Then he claimed the reward. Was the man who made the offer obliged to pay, and could he not have escaped by insisting that this was simply "an explosion of affection" and not strictly an offer or promise of reward? He tried to hold on to his money, but the court held that this was an offer he must pay. Possibly after the recovery of his wife his valuation of her had changed somewhat from what it was while his house was burning up.

One or two more cases may be given. Some persons who prepared "carbolic-smoke balls" offered to pay L100 to any person who contracted influenza after having used one of the balls in the manner clearly set forth and for a stated period. This offer was in the form of a newspaper advertisement. A person bought one of them and followed carefully all the directions about its use. The influenza, though, did not disappear as advertised, so he sued to recover the offer; and, having proved clearly that he had complied faithfully with the directions and had not been cured, the court said that the owners must pay up and compelled them to give him the L100 offered.

Another case may be briefly mentioned. A offered to sell B his farm for $1000. B offered $950, which offer was declined. Then B offered to pay $1000. By that time A had changed his mind and declined to accept B's offer. Then B sued to get the farm, offering to pay the money; but the court held that B had declined A's offer and consequently that, as A had not made any other offer, there was no contract.

Finally, it may be added that the phrase "by return mail" does not always mean by the next mail, although the person to whom the offer is made cannot delay his answer long. On the other hand, the person to whom such a letter may be addressed can bind the other by an acceptance very quickly after the receipt of the offer, although not literally by the first mail going out.

VII. WHAT CONTRACTS MUST BE IN WRITING

Some contracts must be in writing to be valid; for instance, contracts relating to the sale and leasing of lands. This writing must be signed by the person who is charged with having made it. Suppose that A has sold his farm to B for an agreed sum and refuses to give him a deed on his payment of the amount or offer to pay, and B wishes to compel A to carry out or execute his agreement. B must show a writing signed by A to that effect, otherwise the court will not pay any attention to the matter. On the other hand, if A claims that such an agreement has been made with B, who is unwilling to pay the money and receive the deed, he must show in court a writing signed by B that he has agreed to purchase the farm at a stated price and to receive a deed of the same. If such a writing is not forthcoming when required, he cannot recover anything from him. This is the meaning of the phrase, therefore, that a writing must be signed by the party charged with having made the agreement.