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business, or commercial corporation, except a municipal, railroad, insurance, or banking corporation, owing debts to the amount of one thousand dollars or over, may be adjudged an involuntary bankrupt upon default or an impartial trial, and shall be subject to the provisions and entitled to the benefits of this act. The bankruptcy of a corporation shall not release its officers, directors, or stockholders, as such, from any liability under the laws of a State or Territory or of the United States."
The act also provides that a partnership, during the continuation of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged a bankrupt.
156. Claims provable against a bankrupt.—The claims which are provable against a bankrupt include open accounts, promissory notes, bills of exchange, bonds, and all other debts arising from contract, whether due or not, and judgments, whether based upon contract or tort actions. They do not include, however, tort actions not reduced to judgment.
157. Property which is exempt.-Persons who are adjudged bankrupt are entitled to the benefit of the state exemption laws in force at the time of the filing of the petition in the state in which they have had their domicile for the six months or the greater portion thereof immediately preceding the filing of the petition.
158. Effect of adjudging a debtor a bankrupt.—The effect of adjudging a debtor a bankrupt is to discharge him from his debts generally, provided he has not been guilty of fraud or concealment. The discharge does not release him, however, from debts created by fraud or embezzlement while acting as an officer in a fiduciary character; from debts not scheduled in time for proof;
from judgments for fraud or willful injuries; from taxes; or from debts arising after the petition is filed.
159. Remedies for breach of contract.—When one of the parties to a contract commits a breach thereof the other party acquires certain rights. He is exonerated from further performance. He may sue for damages for the breach. He may treat the contract as abandoned and sue upon an implied promise to pay a reasonable compensation for the partial performance. And in some cases he may sue in equity to compel specific performance of the contract.
160. Damages recoverable for breach.-In every case of unjustifiable breach of contract the injured party is entitled to recover damages. Even where he suffers no actual loss he is entitled to nominal damages. Where he has sustained actual loss he is entitled, as stated by Baron Parke: 2 “So far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.” For any special loss not contemplated by the parties, and which does not flow naturally from the breach, he is not entitled to damages. They must not be speculative or conjectural. In other words, they must be proximate, not remote; and they must be provable with reasonable certainty. This was stated in the leading English case upon the subject:
That where a party has broken his contract the damages which the other party should recover should be (1) such as may fairly and reasonably be considered to arise naturally —that is, according to the usual course of things from the breach, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of its breach; that (2) if the damages arose out of special circumstances, communicated and so known to both parties when the contract was made, the damages which the parties would reasonably contemplate would be the amount of injury which would ordinarily follow from the breach of a contract under those special circumstances so known and communicated; but (3) if the special circumstances were wholly unknown to the party breaking the contract, he at the most could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any such special circumstances.
1 In re Burka, 104 Fed. 326. 2 Robinson v. Harman, 1 Exch. 855.
As a rule, what are known as exemplary, punitive, or vindictive damages are not recoverable for breach of contract. An exception to this rule is the case of a breach of a promise to marry. When the defendant in such a case maliciously defames the plaintiff's character exemplary damages are recoverable.
1 McPherson v. Ryan, 59 Mich. 33, 26 N. W. R. 381.
PART II: SPECIAL FORMS OF
SALES: THE CONTRACT
161. Definition.—A sale of a chattel is a transfer of the general or absolute property in it for a money consideration.
162. Distinguishing features.-A sale differs from a contract to sell. The distinction is one of great importance. In an executed sale title to the property vests in the buyer at once. But in a contract to sell, title to the thing sold remains in the seller until the sale becomes complete by the performance of some further act or the happening of some event. In the meantime, the buyer enjoys simply a personal right to have the sale made absolute upon the performance of the act or the happening of the event. A contract to sell is called an executory sale.
A sale also differs from a bailment, from a barter or exchange, and from a gift. In the case of a sale there is a transfer of ownership in the property for a money consideration. In the case of a bailment there is a transfer of possession of the property but not of ownership in it. In the case of a barter or exchange there is a transfer of ownership in the property for something other than money; and in the case of a gift there is a transfer of ownership in the property without any consideration.
It also should be observed that a distinction exists between an executory sale and an executory contract. An executory sale is one in which title has not passed. An executory contract is one in which something remains to be done by either or both of the parties to it. Such a contract may include an executed sale.
163. Parties to the contract of sale.-As a rule, an owner of property, or his authorized representative, can pass title to it. There are, however, some exceptions to this rule.
When a person finds another's property, or steals it, he does not get title to it. And, as a rule, he cannot pass title to anyone else. Thus, where he transfers the property to an innocent purchaser for full value, the buyer does not get title to it. This rule does not apply, however, to money. Nor does it apply to negotiable paper payable to bearer or indorsed in blank, where the party who has signed it has been guilty of negligence which has facilitated its wrongful appropriation.
When the buyer obtains title by means of fraud and transfers it to a bona fide purchaser the latter gets good title. But when a person gets merely the possession of another's goods by means of fraud and transfers them to an innocent purchaser the latter does not get title.
164. Subject-matter of the sale.—The subject-matter of the sale must have an actual or a potential existence. A person cannot sell, acting as principal, what he does not own. Thus, he cannot make a valid sale of a chattel he intends to buy. He may make, however, a valid sale of the wool which is yet to grow on sheep he owns. In the latter case the wool has a potential existence. He also may sell a crop to be grown on his farm, or the future earnings of a present employment. He cannot, however, make a valid sale of a crop to be grown on