XXII. CONTRACTS FOR PAYMENT IN COMMODITIES

736. In General.-A form of contract which has frequently come before the courts is one whereby one party agrees or is given the option to pay a certain sum in a commodity or articles on which a price is set.10 As a general rule agreements to pay a certain amount in specific articles at a fixed price are presumed to be made in favor of the debtor, and he may pay the amount of the debt in money, in lieu of the articles, which, by the terms of the contract, the creditor had agreed to receive. And if he tenders the articles on the day fixed by the agreement, he may plead it, and continue his right to pay the property instead of the money.11 The contract may, however, be so worded, though the amount to be paid is expressed, as to render the contract one for the absolute delivery of the commodity at the price fixed, the amount of the indebtedness being used simply to determine the amount of the commodity to be delivered, and as so construed will not give the debtor the right to pay the money in lieu of his obligation to deliver the property or impose on him an obligation to pay the amount specified in money in default of delivery.12 Thus it has been held that a covenant to pay a certain sum, "in good merchantable pig iron," at a certain price per ton, cannot be discharged at the option of the debtor by tendering the money in place of the iron.18 And it has been held that a contract to pay the price of land in wheat of a certain quality, at a specified price per bushel, in annual instalments of a specified amount, is equivalent to a contract for the sale of the amounts of wheat to be delivered at the times and price specified. The vendor, therefore, is entitled to the wheat at the times specified for its delivery, and the vendee has no right to pay in money, instead of wheat, the amount of the purchase price.14

737. Loss of Right to Pay in Commodities.-Where the contract is for payment in commodities at a specified time, it is not necessary for the payee to demand or request delivery, in order to place the payor in default; a tender of the specific articles must be made by the payee on the day stipulated.15 And if he makes default in the delivery of the articles, his right to make payment therein is lost and his obliga

10. Aldrich v. Albee, 1 Greenl. 12. Cole v. Ross, 9 B. Mon. (Ky.) (Me.) 120, 10 Am. Dec. 45; Pierce v. Marple, 148 Pa. St. 69, 23 Atl. 1008, 33 A. S. R. 808.

11. Hoys v. Tuttle, 8 Ark. 124, 46 Am. Dec. 309; Pinney v. Gleason, 5 Wend. (N. Y.) 393, 21 Am. Dec. 223; Roberts v. Beatty, 2 Pen. & W. (Pa.) 63, 21 Am. Dec. 410; Smith v. Coolidge, 68 Vt. 516, 35 Atl. 432, 54 A. S. R. 902.

Note: 21 Am. Dec. 422.

393, 50 Am. Dec. 517; Noonan v. Ilsley, 17 Wis. 314, 84 Am. Dec. 742; Starr v. Light, 22 Wis. 433, 99 Am. Dec. 55.

13. Cole v. Ross, 9 B. Mon. (Ky.) 393, 50 Am. Dec. 517.

14. Starr v. Light, 22 Wis. 433, 99 Am. Dec. 55.

15. Roberts v. Beatty, 2 Penn. & W. (Pa.) 63, 21 Am. Dec. 410.

tion becomes solvable only as a money obligation.16 The contract to pay a certain amount in commodities being entire the payor has no right to require the payee to accept a part of the articles and the balance in money.17 A plea of tender of specific articles must state that they were kept ready until the uttermost convenient time of the day of payment.18

738. Damages Recoverable.-The authorities are not in accord as to the amount recoverable under contracts to pay a certain amount in articles at a designated price. The better view seems to be that upon the debtor's default the designation of the amount of the indebtedness may be recovered by the creditor, though the market price of the articles which the debtor could have delivered in satisfaction was less than the price placed thereon in the contract; the contract in such a case is considered one to pay the amount expressed with an option to the debtor to discharge it by delivery of the articles at the price fixed which is lost and of no avail to him whatever if he fails to deliver the articles, or the amount stipulated to be paid is considered as recoverable as liquidated damages.19 And likewise it has been held that though the articles were worth more at the time of delivery than the price fixed in the contract, the amount of the creditor's recovery is still limited to the amount of the indebtedness stated.20 On the other hand the view is taken in some cases that when an obligation such as a note for a certain amount is payable

wards v. McKee, 1 Mo. 123, 13 Am. Dec. 474.

Notes: 21 Am. Dec. 231, 425; 55 Am. Dec. 776.

17. Roberts v. Beatty, 2 Pen. &. W. (Pa.) 63, 21 Am. Dec. 410. 18. Aldrich V. Albee, 1 Greenl. (Me.) 120, 10 Am. Dec. 45.

19. Cummings v. Dudley, 60 Cal. 383, 44 Am. Rep. 58; Brooks v. Hubbard, 3 Conn. 58, 8 Am. Dec. 154; McKinnie v. Lane, 230 Ill. 544, 82 N. E. 878, 120 A. S. R. 338; Smith v. Coolidge, 68 Vt. 516, 35 Atl. 432, 54 A. S. R. 902.

16. McGillin v. Bennett, 132 U. S. 445, 10 S. Ct. 123, 33 U. S. (L. ed.) 422; Russell v. McCormick, 45 Ala. 587, 6 Am. Rep. 707; Hoys v. Tuttle, 8 Ark. 124, 46 Am. Dec. 309; Cummings v. Dudley, 60 Cal. 383, 44 Am. Rep. 58; Vanhooser v. Logan, 3 Scam. (Ill.) 389, 38 Am. Dec. 90; McKinnie v. Lane, 230 Ill. 544, 82 N. E. 878, 120 A. S. R. 338; Wyman v. Winslow, 11 Me. 398, 26 Am. Dec. 542; Bailey v. Simonds, 6 N. H. 159, 25 Am. Dec. 454; Smith v. Smith, 2 Johns. (N. Y.) 235, 3 Am. Dec. 410; Newman v. McGregor, 5 Ohio 349, 24 Am. Dec. 293; Roberts v. Beatty, 2 20. Pinney v. Gleason, 5 Wend. (N. Pen. & W. (Pa.) 63, 21 Am. Dec. 410; Y.) 393, 21 Am. Dec. 223, holding that Choice v. Moseley, 1 Bailey L. (S. C.) the measure of damages for the breach 136, 19 Am. Dec. 661; Dunham v. of a contract "to pay seventy-nine Strother, 1 Tex. 89, 46 Am. Dec. 97; dollars and fifty cents in salt at fourBaker v. Todd, 6 Tex. 273, 55 Am. teen shillings per barrel," is the sum Dec. 775; Deel v. Berry, 21 Tex. 463, agreed to be paid and not the value of 73 Am. Dec. 236; Wainwright v. the salt, on the day specified for payStraw, 15 Vt. 215, 40 Am. Dec. 675; ment, though the salt was worth more Smith v. Coolidge, 68 Vt. 516, 35 Atl. at that time than the price so fixed. 432, 54 A. S. R. 902. See also Ed

in specific articles at a stipulated price, the actual value of the articles at the time for delivery and not the stipulated sum is the measure of damages. And undoubtedly if the contract is construed as one for the absolute delivery of the commodity referred to at the price fixed, the amount stated as the indebtedness being used merely to fix the quantity of the commodity without conferring an option on the debtor as to the medium of payment, the amount of damages recoverable is determined by the rules relating to ordinary contracts for the sale and delivery of personalty; and consequently if the commodity was at the time for delivery worth more than the price fixed in the contract the creditor would be entitled to recover on such basis. So a due bill in the form "Due to J. A. N., three hundred dollars in Watertown Railroad stock," has been construed as an agreement merely to pay so much of the stock of the kind described as will amount, at its par value, to such sum of three hundred dollars and consequently the measure of damages for failure by the maker to deliver the stock on demand is limited to the value of the stock at the time. of such demand, with interest. The parties have the right to adjust the amount due in money on a contract payable in commodities, where at the time of payment several instalments of the commodity have been delivered, but a large amount still remains payable; and on such an adjustment neither party can be relieved without error, mistake, or fraud in making it; and in absence of such evidence, it is error for the court to instruct the jury as to the mode of reckoning to ascertain the amount without regard to the settlement made by the parties.

XXIII. CONDITIONAL SALES

General Principles

739. Definition and Scope.-A conditional sale, as the term implies, is a sale in which the transfer of the title to the buyer or his retention of it is made dependent upon the performance of some condition. The term is used in this country most frequently with reference to that large class of cases where the seller reserves or retains the title, though the possession is delivered to the buyer, until some condition is per

1. Noonan v. Ilsley, 17 Wis. 314, 84 Am. Dec. 742 (referring to the conflict in the authorities and stating that the rule as laid down in the text is the preferable and more just rule).

2. Cole v. Ross, 9 B. Mon. (Ky.) 393, 50 Am. Dec. 517; Noonan v. Ilsley, 17 Wis. 314, 84 Am. Dec. 742; Starr v. Light, 22 Wis. 433, 99 Am. Dec. 55. See supra, par. 335 et seq., as to damages recoverable for breach

by the seller.

3. Cole v. Ross, 9 B. Mon. (Ky.) 393, 50 Am. Dec. 517; Starr v. Light, 22 Wis. 433, 99 Am. Dec. 55.

4. Noonan v. Ilsley, 17 Wis. 314, 84 Am. Dec. 742.

5. Bryant v. Crosby, 36 Me. 562, 58 Am. Dec. 767.

6. Freed Furniture, etc., Co. v. Sorensen, 28 Utah. 419, 79 Pac. 564, 107 A. S. R. 731, 3 Ann. Cas. 634.

formed, usually the payment of the purchase price, and it is this class of cases which is chiefly considered in this chapter. A contract of this character is distinct from and inconsistent with the idea of an absolute sale under which title vests in the buyer with a mortgage back to secure the purchase price. Due, however, to other provisions in the contract inconsistent with the idea of a conditional sale, and more consistent with the idea of an absolute sale with a' mortgage back, the courts have construed the contracts in question as falling within the latter class rather than the former, though denominated by the parties, eo nomine, as conditional sales. A consignment with a power of sale is distinguished from a conditional sale with reservation. of title in the seller until the price is paid or the performance of some other condition; and where such a consignment is made, a provision in the contract expressly reserving title in the consignor until the sale of the goods by the consignee does not constitute the transaction a conditional sale, as the transaction does not import any liability on the part of the consignee for the price or contemplate the vesting of the title in him at any time. So a statute prohibiting the owner of property, as against a bona fide purchaser, from selling it and retaining the title as a means of securing the payment of the purchase price, does not operate to prevent the owner of chattels from placing them in the hands of an agent, commission merchant, or factor to be sold on his account without making his property subject to execution against such agent, merchant, or factor. 10 A married woman under her general statutory power to contract and purchase personal property may enter into a valid and binding contract to purchase under which title is retained by the seller until the price is paid."1

740. Sales with Condition of Defeasance or Right of Repurchase Generally. The courts will not permit the parties as a cloak for usury to make use of a transaction by which one party transfers property to another with an option to repurchase at an advanced price.12 As in case of transfers of real estate,18 a marked distinction as to the effect has been recognized, from an early day, between a sale with condition for defeasance, operating as a sale with the right of repur

7. Studebaker Bros. Co. v. Man, 13 Wyo. 358, 80 Pac. 151, 110 A. S. R. 1001.

8. Fleet v. Hertz, 201 Ill. 594, 66 N. E. 858, 94 A. S. R. 192; Norris v. Boston Music Co., 129 Minn. 198, 151 N. W. 971, L.R.A.1917B 615. See infra, par. 744.

9. Fleet v. Hertz, 201 Ill. 594, 66 N. E. 858, 94 A. S. R. 192. As to the general distinction between sales and consignments for sale, see supra, par.

33 et seq.

10. Fleet v. Hertz, 201 Ill. 594, 66 N. E. 858, 94 A. S. R. 192.

11. Hays v. Jordan, 85 Ga. 741, 11 S. E. 833, 9 L.R.A. 373. As to the general power of married women to bind themselves by contracts to purchase, see HUSBAND AND WIFE, vol. 13, p. 1281 et seq.

12. Rogers v. Blouenstein, 124 Ga. 501, 52 S. E. 617, 3 L.R.A.(N.S.) 213 and note. See USURY.

13. See MORTGAGES, vol. 19, p. 266 et seq.

chase which is lost on a noncompliance with the conditions attached to the right, and a chattel mortgage, under which the right of redemption will exist until cut off by foreclosure.14 The law, however, does not preclude the parties from entering into the former class of contracts and where it clearly appears that such was the intention of the parties full effect will be given thereto; 15 and where the transaction is a sale with right of repurchase or defeasance, the conditions must be strictly performed by the transferor; otherwise his right is lost.16 It has been held that a contract for the transfer of property, by the terms of which the buyer advances a part of the purchase money, and the seller reserves the right to abrogate the contract by returning the money so advanced, with interest, at a particular time, and if not so abrogated, the contract to be executed by the buyer paying the residue of the purchase money, and the seller surrendering the possession of the property, is a conditional sale and not a mortgage. The character of the transaction as a mortgage or a sale with right of repurchase is fixed at its inception.18

741. Intention of Parties.-As the line of discrimination between mortgages and these defeasible sales cannot well be marked out by any general rule, every case as to the true nature of the transaction and the intention of the parties must, in some measure, be determined on its own circumstances. 19 The chief criterion for determining to which class of cases the transaction in question belongs is the intention of the parties; 20 and in doubtful cases the contract will be construed to be a mortgage rather than a defeasible sale, or a sale with right of repurchase, because in the case of a mortgage the mortgagor, although

14. Weathersley v. Weathersley, 40 Miss. 462, 90 Am. Dec. 344; Critcher v. Walker, 1 Murph. (N. C.) 488, 4 Am. Dec. 576; Hickman v. Cantrell, 9 Yerg. (Tenn.) 172, 30 Am. Dec. 396; Lucketts v. Townsend, 3 Tex. 119, 49 Am. Dec. 723; Chapman v. Turner, 1 Call (Va.) 280, 1 Am. Dec. 514.

Notes: 1 Am. Dec. 518; 4 A. S. R. 699.

15. Conway V. Alexander, 7 Cranch 218, 3 U. S. (L. ed.) 321; Beck v. Blue, 42 Ala. 32, 94 Am. Dec. 630; Edrington v. Harper, 3 J. J. Marsh. (Ky.) 353, 20 Am. Dec. 145; Slowey v. McMurray, 27 Mo. 113, 72 Am. Dec. 251; Poindexter v. McCannon, 16 N. C. 373, 18 Am. Dec. 591; Munnerlin v. Birmingham, 22 N. C. 358, 34 Am. Dec. 402; Moss v. Green, 10 Leigh (Va.) 251, 34 Am. Dec. 731. Notes: 46 A. S. R. 297; 94 A. S. R. 236.

16. Beck v. Blue, 42 Ala. 32, 94 Am. Dec. 630; Weathersley v. Weathersley, 40 Miss. 462, 90 Am. Dec. 344; Slowey v. McMurray, 27 Mo. 113, 72 Am. Dec. 251; Hickman v. Cantrell, 9 Yerg. (Tenn.) 172, 30 Am. Dec. 396. Note: 94 A. S. R. 237.

As to options to purchase generally, see supra, par. 105.

17. Moss v. Green, 10 Leigh (Va.) 251, 34 Am. Dec. 731.

18. Weathersley v. Weathersley, 40 Miss. 462, 90 Am. Dec. 344.

Note: 4 A. S. R. 699. 19. Chapman v. Turner, 1 Call (Va.) 280, 1 Am. Dec. 514.

20. Weathersley v. Weathersley, 40 Miss. 462, 90 Am. Dec. 344; Chapman v. Turner, 1 Call (Va.) 280, 1 Am. Dec. 514 and note.

Notes: 90 Am. Dec. 351; 4 A. S. R. 699; 94 A. S. R. 234.