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United States except two (which were Massachusetts and Rhode Island) was held valid, all of the States but two being considered as a sufficiently defined or limited place; but this was unusual. The courts generally would sanction such a bargain, if it were limited to only a part of the United States ; as to all New England, for example.
In such a contract, it would be better for the parties to agree upon the amount which the seller should pay by way of damages, if he violated his bargain, because it might be very difficult to prove specific damages ; and such a bargain, if it were reasonable, would be enforced by law.
Such damages, agreed on beforehand, are called liquidated damages. In all cases where damages are demanded, and are not agreed on, they are called unliquidated damages, and it is the duty of the jury to determine, from the evidence before them, what damages the injured party has suffered, and what amount would indemnify him.
STOPPAGE IN TRANSITU.
HERE is an instance where a Latin phrase has become English, by general adoption and use. In transitu means “in the transit,” and the English phrase may just as well be used : but the Latin one is used much oftener. What the whole phrase Stoppage in transitu means, is this. A seller, who has sent goods to a buyer at a distance, and after sending them learns that the buyer is insolvent, may stop the goods at any time before they reach the buyer. His right to do this is called the right of Stoppage in transitu.
If the goods are sent to pay a precedent and existing debt, they are not subject to this right.
The right exists only upon actual insolvency; but this need not be formal insolvency, or bankruptcy at law; an actual inability to pay one's debts in the usual way being enough. If the seller, in good faith, stops the goods; in a belief of the
buyer's insolvency, the buyer may at once defeat this stoppage, and reclaim the goods, by payment of the price. So he may, by a tender of adequate security, if the sale be on credit.
The stoppage must be effected by the seller, and evidenced by some act; but it is not necessary that he should take actual possession of the goods. If he gives a distinct notice to the party in possession, whether carrier, warehouseman, middleman, or whoever else, before the goods reach the buyer, this is enough. But a notice of stoppage in transitu, to be effectual, must be given either to the person who has the immediate custody of the goods; or if to the principal whose servant has the custody, then at such a time, and under such circumstances, as that he may, by the exercise of reasonable diligence, communicate it to his servant in time to prevent the delivery to the consignee.
Goods can be stopped only while in transitu; and they are in transitu only until they come into the possession of the buyer. But this possession need not be actual, a constructive possession by the buyer being sufficient to prevent this stoppage; as if the goods are placed on the wharf of the buyer, or on a neighboring wharf with notice to him, or in a warehouse with delivery of the key to him, or of an order on the warehouseman.
But the entry of the goods at the custom-house, without payment of duties, does not terminate the transit. If the buyer has demanded and marked them at the place where they had arrived on the termination of the voyage or journey, personally or by his agent; or if the carrier still holds the goods, but only as the agent of the buyer; in all these cases the transit is ended. But if the carrier holds them by a lien for his charges against the buyer, the seller may pay these charges and discharge the lien, and then stop the goods in transitu.
If the buyer has, in good faith and for value, sold the goods, "to arrive," before he has received them, and indorsed and delivered the bill of lading, this second purchaser holds the goods free from the first seller's right to stop them. But if the goods and bill are transferred only as security for a debt due from the first purchaser to the transferee, the original seller may stop the goods, and hold them subject to this security, and need pay only the specific advances made on their credit, or on that very bill of lading, and not a general indebtedness of the first purchaser to the second.
A seller who stops the goods in transitu does not rescind the sale, but holds the goods as the property of the buyer; and they may be redeemed by the buyer or his representatives, by paying the price for which they are a security; and if not redeemed, they become the seller's, only in the same way as a pledge might become his; that is, he may sell them at a proper time, and in a proper manner, and with due notice, so that the buyer may protect his interests. And if the seller then fails to obtain from them the full price due, he has a claim for the Iyalance upon the buyer. If he gets more than the amount due In him, he must pay over the balance to the buyer or his assignees.
An honest buyer, apprehending bankruptcy, might wish to return the goods to their original owner; and this he could undoubtedly do, if they have not become distinctly his property, and the seller his creditor for the price. But if they have, the buyer has no more right to benefit this creditor by such an appropriation of these goods, than any other creditor by giving him any other goods.
A GUARANTor is one who is bound to another for the fulfilment of a promise, or of an engagement, made by a third party. This kind of contract is very common. Generally it is not negotiable; that is, not transferable so as to be enforced by the transferee as if it had been given to him by the guarantor. No special form or words are necessary to the contract of guaranty; and if the word "guarantee” be used, and the whole instrument contains all the characteristics of a note of hand, payable to order or bearer, then it is negotiable. Thus, in a case in New York, the instrument was as follows: "For and in con: sideration of thirty-one dollars and fifty cents received of B. F. Spencer, I hereby guarantee the payment and collection of the within note to him or bearer. Auburn, Sept. 25, 1837. (Signed) Thomas Burns." And it was held negotiable. What negotiable means will be more fully explained in the chapter on Notes of Hand and Bills of Exchange.
The guaranty may be enforced, although the original debt cannot; as, for example, the guaranty of the promise of a wife or an infant; and sometimes the guaranty of a debt is requested, and given, for the very reason that the debt is not enforceable at law. But, generally, the liability of the principal measures and limits the liability of the guarantor. And if the creditor agree that the principal debt shall be reduced or lessened in a certain proportion, the obligation of the guarantor is reduced by law in an equal proportion.
A contract of guaranty is construed somewhat strictly. Thus, a guaranty of the notes of one, does not extend to notes which he gives jointly with another.
A guarantor who pays the debt of the principal may demand from his creditor the securities he holds, although not an assignment of the debt itself, or of the note or bond which cieclares the debt, for that is paid and discharged. And some. times the creditor will not be permitted to resort to the guarantor until he has collected as much as he can from these securities.
Unless the guaranty is by a sealed instrument, there must be a consideration to support it. If the original debt or obligation rest upon a good consideration, this will support the promise of guaranty, if this promise was made at the same time with or prior to the original debt. But if that debt or obligation be first incurred and completed before the guaranty is given, there must be a new consideration for the promise to guarantee that debt or the guaranty is void. But the consideration need not pass from him who receives the guaranty to him who gives it. Any benefit to him for whom the guaranty is given, or any injury to him who receives it, is a sufficient consideration if the guaranty be given because of it.
A guaranty is not binding unless it is accepted, and unless the guarantor has knowledge of this. But the law presumes this acceptance in general, when the giving of the guaranty and any action on the faith of it, by the party to whom it is given, are simultaneous. In New York, wherever the guaranty is absolute, notice of its acceptance is unnecessary, unless expressly or impliedly required by the offer of guaranty. But, generally, an offer to guarantee a future operation, especially if by letter, does not bind the offerer unless he has such notice of the acceptance of his offer as would give him a reasonable opportunity of making himself safe.
If the liability of the principal be materially varied by the act of the party guaranteed, without the consent of the guarantor, the guarantor is discharged. Many interesting cases have arisen which involve this question. Thus, where a bond was given conditioned for the faithful performance of the duties of the office of deputy collector of direct taxes for eight certain townships, and the instrument of appointment, referred to in the bond, was afterwards altered so as to extend to another township without the consent of the surety, the Supreme Court of the United States held that the surety was discharged from his responsibility for moneys collected by his principal after the alteration. Again, in an English case, the facts were, that, in a bond by sureties for the careful attention to business and the faithful discharge of the duties of an agent of a bank, it was provided “that he should have no other business of any kinil, nor be connected in any shape with any trade, manufacture, or mercantile copartnery, nor be agent for any individual or copartnery in any manner or way whatsoever, nor be security for individual or copartnery in any manner or way whatsoever." The bank subsequently, without the knowledge of the sureties, increased the salary of the agent, he undertaking to bear one fourth part of all losses which might be incurred by his discounts. It was held that this was such an alteration of the contract, and of the liability of the agent, that the sureties were discharged, notwithstanding that the loss arose, not from dis. counts, but from improper conduct of the agent.
The guarantor is also discharged if the liability or obligation