Contract of Sale

IN entering upon so extensive and so complicated a field of inquiry as that concerning contracts, we must necessarily confine our attention to a general outline of the subject; and endeavor to collect and arrange, in simple and perspicuous order, those great fundamental principles which govern the doctrine of contracts, and pervade them under all their modifications and variety.

I. Of the different kinds of contracts.

An executory contract, is an agreement upon sufficient consideration, to do or not to a particular thing.¹ The agreement is either under seal, or not under seal. If under seal, it is denominated a specialty, and if not under seal, an agreement by parol; and the latter includes equally verbal and written contracts not under seal.² The agreement conveys an interest either in possession, or in action. If, for instance, one person sells and delivers goods to another for a price paid, the agreement is executed, and becomes complete and absolute; but if the vendor agrees to sell and deliver at a future time, and for a future time, and for a stipulated price, and the other party agrees to accept and pay, the contract is executory, and rests in action merely. There are also express and implied contracts. The former exist when the parties contract in express words, or by writing; and the latter are those contracts which the law raises or presumes by reason of some value or service rendered, and because common justice requires it.

A contract valid by the law of the place where it is made, is valid every where jure gentium, and on that broad foundation all contracts were introduced.³ If it were otherwise, the citizens of one nation could not contract, or carry on commerce in the territories of another. The necessities of commerce, require that acts valid where made, should be recognized in other countries, provided they be not contrary to the independence of nations, and do not proceed from the public power.⁴

II. Of the consideration.

It is essential to the validity of a contract, that it be made by parties competent to contract, and be founded on a sufficient consideration. There must be something given in exchange, something that is mutual, or something which is the inducement to the contract; and it must be a thing which is lawful, and competent in value to sustain the assumption. A contract without a consideration is a nudum pactum, and not binding; and this maxim of the common law was taken from the civil law, in which the doctrine of consideration is treated with an air of scholastic subtlety.⁵ Whether the [contract] be verbal, or in writing, it is still a nude pact, and will not support an action if a consideration be wanting. This was finally settled in England in the House of Lords in Rann v. Hughes,⁶ and the rule has been adopted, and probably prevails extensively in this country.⁷ The rule, that a consideration is necessary to the validity of a contract, applies to all contracts and agreements not under seal, with the exception of bills of exchange, and negotiable notes, after they have been negotiated and passed into the hands of an innocent endorser. The immediate parties to a bill or note, equally with parties to other contracts, are affected by the want of consideration, and it is only as to third persons, who come to the possession of the paper in the usual course of trade, and for a fair and valuable consideration, without notice of the original defect, that the want of a consideration cannot be alleged.⁸ The rule, with this attending qualification, is well settled in English and American law, and pervades the numerous cases with which the books abound.

A valuable consideration is one that is either a benefit to the party promising, or some trouble or prejudice to the party to whom the promise is made.⁹ A mutual promise amounts to a sufficient consideration, provided the mutual promises be concurrent in point of time, and in that case the one promise is a good consideration for the other. If the consideration be wholly past and executed before the promise be made, it is not sufficient unless the consideration arose at the instance or request of the party promising; and that request must have been expressly made, or necessarily implied, from the moral obligation under which the party was placed; and the consideration must have been beneficial to the one party, or onerous to the other.¹⁰ Though a promise to do a thing be merely gratuitous, and not binding, yet, if the person promising enters upon the execution of the business, and does it negligently, or amiss, so as to produce injury to the other party, an action will lie for this misfeasance.¹¹ The consideration must not only be valuable, but it must be a lawful consideration, and not repugnant to law, or sound policy, or good morals. Ex turpi contractu actio non oritur; and no person even so far back as the feudal ages, was permitted by law to stipulate iniquity.¹²

The reports in every period of the English jurisprudence, abound with cases of contracts held illegal on account of the illegality of the consideration, and they contain striking illustrations of the general rule, that contracts are illegal when founded on a consideration contra bonos mores, or one against the principles of sound policy, or founded in fraud, or in contravention of the positive provisions of some statute law. The courts of justice will allow the objection, that the consideration of the contract was immoral or illegal, to be made even by the guilty party to the contract; for the allowance is not for the sake of the party who raises the objection, but is grounded on general principles of policy.¹³ A particeps criminis has been held to be entitled in equity, on his own application, to relief against his own contract, when the contract was illegal, or against the policy of the law, and relief became necessary to prevent injury to others. It was no objection, that the plaintiff himself was a party to the illegal transactions.¹⁴ 1 shall not enter into more particular details on this head, but proceed at once to an examination of the leading doctrines of contracts for the sale of personal property.

III. Of the subject matter of the contract.

A sale is a transfer of chattels front one person to another for a valuable consideration, and three things are requisite to its validity, viz. the thing sold, which is the object of the contract, the price, and the consent of the contracting parties.¹⁵

The thing sold must have an actual or potential existence to render the contract valid.¹⁶ If A. sells his horse to B., and it turns out that the horse was dead at the time, though the fact was unknown to the parties, the contract is necessarily void. So, if A., at New York, sells to B. his house and lot in Albany, and the house should happen to have been destroyed by fire at the time, and the parties equally ignorant of the fact, the foundation of the contract fails, provided the house and not the ground on which it stood, was the essential inducement to the purchase. The civil law comes to the same conclusion on this point. But if the house was only destroyed in part, then if it was destroyed to the value of only half or less, the opinion stated in the civil law is, that the sale would remain good, and the seller would be obliged to allow a rateable diminution of the price. Pothier thinks, however,¹⁷ that in equity the buyer ought not to be bound to any part or modification of the contract, when the inducement to the contract had thus failed; and this would seem to be the reasoning of Papinian, from another passage in the Pandects,¹⁸ and it is certainly the more just and reasonable doctrine. The code Napoleon¹⁹ has settled the French law in favor of the opinion of Pothier, by declaring, that if part of the thing sold be destroyed at the time, it is at the option of the buyer to abandon the sale, or to take the part preserved, on a reasonable abatement of price; and, I presume, the principle contained in the English and American cases tend to the same conclusion, provided the inducement to the purchase be thereby materially affected.

Where the parties had entered into an agreement for the sale and purchase of an interest in a public house, which was stated to have had eight years and a half to come, and it turned out on examination that the vendor had an interest of only six years in the house, Lord Kenyon ruled,²⁰ that the buyer had a right to consider the contract at an end, and recover back any money which he had paid in part performance of the agreement for the sale. The buyer had a right to say it was not the interest he had agreed to purchase. So, in another case, and upon the same principle, Lord Eldon held,²¹ that if A. purchases a horse of B. which was warranted sound, if it turned out that he was unsound, the buyer might keep the horse, and bring an action on his warrantee for the difference in value; or he might return the horse, and recover back the money paid; though, if he elected to pursue that course, he must be prompt in rescinding the contract.²² There are other cases, however, in which it has been held,²³ that it was no defense at law to a suit on a note or bill, that²⁴ the consideration partially failed, by reason that the goods sold were of an interior quality, unless clear fraud in the sale be made out; and the courts refer the aggrieved party to a distinct and independent remedy. But if a title to a part of the chattels sold had totally failed, so as to defeat the object of the purchase, as if A. should sell to B. it pair of horses for carriage use, and the title to one of them should fail, it is evident, from analogous cases, that the whole purchase might be held void even in a court of law. In the case of a sale of several lots of real property at auction, the purchaser purchased three lots, and paid the purchase money, heat the title to two of the lots failed; and Lord hen) on ruled, that it was one entire contract, and if the seller failed in making title to any one of the lots, the purchaser might rescind the contract, and refuse to take the other lots. The same principle was advanced in the case of Judson v. Wass,²⁵ which was the purchase of several lots of land, and the purchaser was held to be entitled to have a perfect title according to contract, without any encumbrance, or he might disaffirm the sale, and recover back his deposit.

On the subject of the claim to a completion of the purchase, or to the payment or return of the consideration money, in a case where the title, or the essential qualities of part. of the subject, fail, and there is no charge of fraud, the law does not seem to be clearly and precisely settled, and it is difficult to reconcile the cases, or make the law, harmonize on this vexatious question. The rules on this branch of the law of sales are in constant discussion, and of great practical utility, and they ought to be distinctly understood. The principles which govern the subject as to defects in the quality or quantity of the thing sold, are the same in their application to saps of lands and chattels.

In the case of a purchase of land where the title in part fails, the Court of Chancery will decree a return of the purchase money, even after the purchase has been carried completely into execution by the delivery of the deed, and payment of the money, provided there had been a fraudulent misrepresentation as to the title.²⁶ But if there be no ingredient of fraud, and the purchaser is not evicted, the insufficiency of the title is no ground for relief against a security given for the purchase money, or for rescinding the purchase. and claiming restitution of the money. The party is remitted to his remedies at law on his covenants to insure the title.²⁷ In Frisbie v. Hoffnogle,²⁸ the purchaser, in a suit at law, upon his note. Given to the vendor for the purchase money, was allowed to show in his defense, in avoidance of the note, a total failure of title, notwithstanding he had taken a deed with full covenants, and had not been evicted. But the authority of that case, and the doctrine of it, were overruled by the Supreme Court in the state of Maine, in a subsequent case, founded on like circumstances;²⁹ and they were afterwards in some degree restored, by the doubts thrown over the last decision by the Supreme Court of Massachusetts in Knapp v. Lee.³⁰ The same defense was made to a promissory note in the case of Greenleaf v. Cook,³¹ and it was overruled, on the ground that the title to the land, for the consideration of which the note was given, had only partially failed; and it was said, that to make it a good defense in any case, the failure of title must be total. This case at Washington is contrary to the defense set up and allowed, and to the principle established, in the case of Gray v. Handkinson;³² and it leaves the question, whether a total failure of title be not a good defense, as between the original parties, to an action for the consideration money on a sale of lands, in its former state of painful uncertainty.

The justice of the case is with the defense, but I apprehend the technical rule to be otherwise, and that it remits the party back to his covenants in his deed, and if there be no ingredient of fraud in the case, and the party has not had the precaution to secure himself by covenants, he has no remedy for his money even on a failure of title. This is the strict rule of the English law, both at law and in equity, and it applies equally to chattels when the vendor sells without any averment of title, and without possession.³³ The same rule has been considered to be the law in this state;³⁴ but in South Carolina their courts of equity will allow a party suffering by the failure of title, in a case without warranty, to recover back the purchase money, in the sale of real as well as of personal estates.³⁵ This is, no doubt, the law here as to sales of chattels of which the vendor had possession, for a warranty is implied; but the weight of authority is against its more enlarged application.

In one case,³⁶ Lord Kenyon observed, when sitting in chancery, that the Court had gone great lengths in compelling parties to go on with purchases, contrary to their original agreement and intention; but he said, a case might be made out sufficient to put an end to the whole contract, when the seller could not make a good title to part of the subject sold. In the case of the Cambridge wharf, the seller made title to all the estate but the wharf, and that part of the land was the principal object of the buyer in making the purchase; and the buyer, who had contracted for the house and wharf, was compelled to complete the purchase without the wharf; but that, as Lord Kenyon truly observed, was a determination contrary to all justice and reason. There have been a number of hard cases in chancery,³⁷ and in which performance has been enforced, though there was a material variance between the actual and supposed circumstances of the subject, and when those circumstances were wanting which were the strong inducement to the contract. These cases had gone to such extravagant lengths, that Lord Erskine declared ³⁸ he would not follow them, nor decree specific performance when the main inducement to the purchase had failed. In many cases, however, where the title proves defective in a part, or to an extent not very essential, specific performance will be decreed, with a rateable reduction of the purchase money, by way of compensation for the deficiency.³⁹ This is analogous in principle to the case of goods sold as of a certain quality, and they turn out to be of an inferior quality, and in which an abatement of price was allowed in the suit brought by the seller to recover it.⁴⁰ The good sense and equity of the law on this subject is, that if the defect of title, whether of lands or chattels, be so great as to render the thing sold unfit for the use intended, and not within the inducement to the purchase, the purchaser ought not to be held to the contract, but. be left at liberty to rescind it altogether. This is the principle alluded to by Pothier, and repeatedly by Lord Erskine and Lord Kenyon.

In South Carolina, it has been held, that if the deficiency in the quantity of land be so great as to defeat the object of the purchase, the vendee may rescind the bargain; and if the defects were not so great as to rescind the contract entirely, there might be a just abatement of price; and this doctrine was applied equally to defects in the quantity and quality of land, and for unsoundness and defects in personal property.⁴¹ The same principle was declared in Pennsylvania, in the case of Stoddart v. Smith,⁴² on a contract for the purchase of land. If there be a failure of title to part, and that part appears to be so essential to the residue, that it cannot reasonably be supposed the purchase would have been made without it, as in the case of the loss of a mine, or of water necessary to a mill, or of a valuable fishery attached to a parcel of poor land, and by the loss of which the residue of the land was of little value, the contract may be dissolved in toto. But the court, in the last case, limited very much the right of rescinding a contract for a partial failure of title; for if the sale was of lots in different parts of a city, it was not dissolved by the failure of title to some of the lots not adjoining or particularly connected with the others, nor essential to their use or enjoyment. It is to be regretted, that the embarrassment and contradiction which accompany the English and American cases on this subject, cannot be relieved by the establishment of some clear and definite rule, like that declared in France, which shall be of controlling influence and universal reception.

IV. Of the implied warranty of the articles sold.

In every sale of a chattel, as one’s own property, if the possession be at the time in another, and there be no covenant or warranty of title, the rule of caveat emptor applies, and the party buys at his peril.⁴³ But if the seller has possession of the article, and he sells it as his own property, he is understood to warrant the title.⁴⁴ A fair price implies a warranty of title, and the purchaser may have a satisfaction from the seller, if he sells the goods as his own, and the title proves deficient. This was also the rule of the civil law in all cases, whether the title wholly or partially failed.⁴⁵ But with regard to the quality or goodness of the articles sold, the seller is not bound to answer, except under special circumstances, unless he expressly warranted the goods to be sound and good, or unless he bath made a fraudulent representation concerning them; and to attend, when he makes his contract, to those qualities of the article he buys, which are supposed to be within the reach of his observation and judgment, and which the common law very reasonably requires the purchaser distinction between the responsibility of the seller as to the title, and as to the quality of goods sold, is well established in the English and American law.⁴⁶ In Seixas v. Wood,⁴⁷ the rule was examined and declared to be, that if there was no express warranty by the seller, or fraud on his part, the buyer, who examines the article himself, must abide by all losses arising from latent defects equally unknown to both parties; and the same rule was again declared in Swett v. Colgate.⁴⁸

There is no doubt of the existence of the general rule of law as laid down in Seixas v. Wood; and the only doubt is, whether it was well applied in that case, where there was a description in writing of the article by the vendor, which proved not to be correct, and from which a warranty might have been inferred. But the rule fitly applies to the case where the article teas equally open to the inspection and examination of both parties, and the purchaser chose to rely on his own information and judgment, without requiring any warranty of the quality; and it does not reasonably apply to those cases where the purchaser has ordered goods of a certain character, or goods of a certain described quality are offered for sale, and when delivered, they do not answer the description directed or given in the contract. They are not the articles which the vendee agreed to purchase; and if there be no opportunity for inspection, there is an implied warranty that the article is saleable.⁴⁹

When goods are discovered not to answer the order given for them, or to be unsound, the purchaser ought immediately to return them to the vendor, and give him notice to take them back, and thereby rescind the contract; or he will be presumed to acquiesce in the quality of the goods.⁵⁰ In the case or a breach of warranty, he may sue upon it without returning the goods; but he must return them and rescind the contract in a reasonable time before he can maintain an action to recover back the price.⁵¹ An offer to return the chattel in a reasonable time, on I reach of warranty, is equivalent in its effect upon the remedy to an offer accepted by the seller, and the contract is rescinded.⁵² But a contract cannot be rescinded without mutual consent, if circumstances be so altered by a part execution, that the parties cannot be put in statu quo, for if it be rescinded at all, it must be rescinded in toto.⁵³

In South Carolina the rule of the civil law is followed, and a sale for a sound price is understood to imply a warranty of soundness against all faults and defects.⁵⁴ The same rule was for many years understood to be the law in Connecticut; but if it did ever exist, it was entirely overruled in Dean v. Mason, in favor of the other general principle which has so extensively pervaded the jurisprudence of this country.⁵⁵ Even in South Carolina, the rule that a sound price warrants a sound commodity was said to be in a state of vibration; and it is not applied to assist persons to avoid a contract, though made for an inadequate price, provided it was made under a fair opportunity of information as to all the circumstances, and when there was no fraud, concealment, or latent defect.⁵⁶

If the article be sold by the sample, and it be a fair specimen of the article, and there be no deception or warranty on the part of the vendor, the vendee cannot rescind the sale. Such a sale amounts to a warranty that the sample, and equally sound and good throughout, and it article is in bulk of the same kind and quality with the amounts to nothing more.⁵⁷ if the article should turn out not to be merchantable, from some latent principle of infirmity in the sample, as well as in the bulk of the commodity, the seller is not answerable. The only warranty is, that the whole quantity answers the sample.

V. Of the duty of mutual disclosure of facts material to the contract.

If there be an intentional concealment or suppression of material facts in the making of a contract, in cases in which both parties have not equal access to the means of information, it will be deemed unfair dealing, and will vitiate and avoid the contract. There may be some difference in the facility with which the rule applies between facts and circumstances that are intrinsic, and form material ingredients of the contract, and those that are extrinsic, and form no component part of it, though they create inducements to enter into the contract, or affect the price of the article. As a general rule, each party is bound in every case to communicate to the other his knowledge of material facts, provided he knows the other to be ignorant of there, and they be not open and naked, or equally within the reach of his observation. Thus, in the sale of a ship which had a latent defect known to the seller, and which the buyer could not by any attention posssibly discover, the seller was held to be bound to disclose it, and the concealment was justly considered to be a breach of honesty and good faith.⁵⁸ So, if one party suffers the other to buy an article under a delusion created by his own conduct, it will be deemed fraudulent and fatal to the contract; as if the seller produces an impression upon the mind of the buyer, by his acts, that he is purchasing a picture belonging to a person of great skill in painting, and which the seller knows not to be the fact, and yet suffers the impression to remain, though he knows it materially enhances the value of the picture in the mind of the buyer.⁵⁹ One party must not practice any artifice to conceal defects, or make any representations for the purpose of throwing the buyer off his guard.

The same principle had been long ago declared by Lord Hardwicke, when he stated,⁶⁰ that if a vendor, knowing of an encumbrance upon an estate, sells without disclosing the fact, and with knowledge that the purchaser is a stranger to it, and under representations inducing him to buy, he acts fraudulently, and violates integrity and fair dealing. The inference of fraud is easily and almost inevitably drawn, when there is a suppression or concealment of material circumstances, and one of the contracting parties is knowingly suffered to deal under a delusion. It was upon this ground that Lord Mansfield must have considered,⁶¹ that selling an unsound article for a sound price, knowing it to be unsound, was actionable. It is equivalent to the concealment of a latent defect. The same rule applies to the case where a party pays money in ignorance of circumstances with which the receiver is acquainted, and does not disclose, and which if disclosed, would have prevented the payment. In that case, the parties do not deal on equal terms, and the money is held to be unfairly obtained, and may be recovered back.⁶² It applies, also, to the case where a person takes a guaranty from a surety, and conceals from him facts which go to increase his risk, and suffers him to enter into the contract under false impressions. Such concealment is held to be fraud, and vitiates the contract.⁶³

The writers on the moral law hold it to be the duty of the seller to disclose the defects which are within his knowledge.⁶⁴ But the common law is not quite so strict. If the defects in the article sold be open equally to the observation of both parties, the law does not require the vendor to aid and assist the observation of the vendee. Even a warranty will not cover defects that are plainly the objects of the senses;⁶⁵ though if the vendor says or does any thing whatever, with an intention to divert the eye, or obscure the observation of the buyer, even in relation to open defects, he would be guilty, of an act of fraud.⁶⁶ A deduction of fraud may be made, not only from deceptive assertions and false representations, but from facts, incidents, [or cir]cumstances, which may be trivial in themselves, but decisive evidence in the given case of a fraudulent design. When, however, the means of information relative to facts and circumstances affecting the value of the commodity, be equally accessible to both parties, and neither of them does or says any thing tending to impose upon the other, the disclosure of any superior knowledge which one party may have over the other, as to those facts and circumstances, is not requisite to the validity of a contract.⁶⁷ There is no breach of any implied confidence that one party will not profit by his superior knowledge, as to facts and circumstances open to the observation of both parties, or equally within the reach of their ordinary diligence, because neither party reposes in any such confidence, unless it be specially tendered or required. Each one, in ordinary cases, judges for himself, and relies confidently, and perhaps presumptuously, upon the sufficiency of his own knowledge, skill and diligence.

The common law affords to every one reasonable protection against fraud in dealing, but it does not go to the romantic length of giving indemnity against the consequences of indolence and folly, or a careless indifference to the ordinary and accessible means of information. It reconciles the claims of convenience with the duties of good faith, to every extent compatible with the interests of commerce. This it does by requiring the purchaser to apply his attention to those particulars which may be supposed within the reach of his observation and judgment; and the vendor to communicate those particulars and defects which cannot be supposed to be immediately within the reach of such attention. If the purchaser be wanting of attention to these points, where attention would have been sufficient to protect him from surprise or imposition, the maxim caveat emptor ought to apply. Even against this maxim he may provide, by requiring the vendor’ to warrant that which the law would not imply to be warranted; and if the vendor be wanting in good faith, fides servanda is a rule equally enforced at law, and in equity.⁶⁸

A mere false assertion of value, when no warranty is intended, is no ground of relief to a purchaser, because the assertion is a matter of opinion, which does not imply knowledge, and in which men may differ. Every person reposes at his peril in the opinion of others, when he has equal opportunity to form and exercise his own judgment.⁶⁹ If the seller represents what he himself believes as to the qualities or value of an article, and leaves the determination to the judgment of the buyer, there is no fraud or warranty in the case.⁷⁰ The cases have gone so far as to hold, that if the seller should even falsely affirm, that a particular sum had been bid by others for the property, by which means the purchaser was induced to buy, and was deceived as to the value, no relief was to be afforded, for the buyer should have informed himself from proper sources of the value, and it was his own folly to repose on such assertions, made by a person whose interest might so readily prompt him to invest the property with exaggerated value. Emptor emit quam minimo potest; venditor vendit quam maximo potest.⁷¹

The same principle was laid down in a late case in the K. B., where it was held,⁷² that a false representation by the buyer in a matter merely gratis dictum, in respect to which the buyer was under no legal pledge or obligation to the seller for the precise accuracy of his statement, and upon which it was the seller’s own indiscretion to rely, was no ground of action. There was no recognized principle of law which rendered a party legally bound to allege truly, if he stated at all, the motives and inducements to the purchase, or the chances of sale to the seller. The true rule was stated to be, that the seller was liable to an action of deceit, if he fraudulently misrepresent the quality of the thing sold in some particulars which the buyer has not equal means of knowledge with himself; or if he do so in such a manner as to induce the buyer to forbear making the inquiries, which, for his own security and advantage, he would otherwise have made.

The rule in equity is more rigid on this subject than it is at law. Lord Hardwicke held,⁷³ that where the seller had falsely affirmed a farm to have been valued by two persons at a certain price, and that assertion had induced the purchaser to contract, it was such a misrepresentation as would induce a court of equity to withhold a decree for a specific performance. But there is a settled distinction in equity between enforcing specifically and rescinding a contract; and an agreement may not be entitled to be enforced, and yet not be so objectionable as to call for the exercise of equity jurisdiction to rescind it. It does not follow, that a contract of sale is void at law, merely because equity will not decree a specific performance.⁷⁴

An action will lie against a person not interested in the property, for making a false and fraudulent representation to the seller, whereby he sustained damage by trusting the purchaser on the credit of such misrepresentation.⁷⁵ This principle was first established in England after great discussion and opposition, in the case of Pasley v. Freeman;⁷⁶ and though that case met with powerful resistance, it has been repeatedly recognized, and the doctrine of it is now well settled both in the English and American jurisprudence.⁷⁷ The principle is, that fraud, accompanied with damage, is a good cause of action, and the solidity of the principle was felt and acknowledged by the writers on the civil laws.⁷⁸ Misrepresentation, without design, is not sufficient for an action. But, if the recommendation of a purchaser, as of good credit, to the seller, be made in bad faith, and with knowledge that he was not of good credit, and the seller sustains damage thereby, the person who made the representation is bound to indemnify the seller.⁷⁹

Lord Thurlow, in Fox v. Mackreth,⁸⁰ allowed of much latitude of concealment on the part of the purchaser. The latter, according to his opinion, would not be bound, in negotiating for the purchase of an estate, to disclose to the seller his knowledge of the existence of a mine on the land, of which he knew the buyer was ignorant. If the estate was purchased for a price in which the mine formed no ingredient, he held, that a court of equity could not set aside the sale, because there was no fraud in the case, and the rule of nice honor must not be drawn so strictly as to affect the general transactions of mankind. From this and other cases it would appear, that human laws are not so perfect as the dictates of conscience, and the sphere of morality is more enlarged than the limits of civil jurisdiction. There are many duties that belong to the class of imperfect obligations, which are binding on conscience, but which human laws do not, and cannot undertake directly to enforce. But when the aid of a court of equity is sought to carry into execution such a contract, then the principles of ethics have a more extensive sway; and a purchase made with such a reservation of superior knowledge, would be of too sharp a character to be aided and forwarded in its execution by the powers of the Court of Chancery.⁸¹ It is a rule in equity,⁸² that all the material facts must be known to Loth parties to render the agreement fair and just in all its parts; and it is against all the principles of equity, that one party, knowing a material ingredient in an agreement, should be permitted to suppress it, and still call for a specific performance.

Pothier⁸³ contends, that good faith and justice require that neither party to the contract of sale should conceal facts within his own knowledge, which the other has no means at the time of knowing, if the facts would materially affect the value of the commodity. But he concludes, in conformity with the doctrine of Lord Thurlow, that though misrepresentation or fraud will invalidate the contract of sale, the mere concealment of material knowledge which the one party has touching the thing sold, and which the other does not possess, may affect the conscience, but will not destroy the contract, for that would unduly restrict the freedom of commerce, and parties must, at their own risk, inform themselves of the value of the commodities they deal in.⁸⁴ He refers to the rules of morality laid down by Cicero, and he justly considers some of them as being of too severe and elevated a character for practical application, or the cognizance of human tribunals.⁸⁵

VI. Of passing the title by delivery.

When the terms of sale are agreed on, and the bargain is struck, and every thing that the seller has to do with the goods is complete, the property and the risk of accident to the goods, vest in the buyer, even before delivery or payment.⁸⁶ The buyer is entitled to the goods on payment or tender of the price, and not otherwise, when nothing is said at the sale as to the time of delivery, or the time of payment. The payment, or tender of the price, is, in such cases, a condition precedent implied in the contract of sale, and the buyer cannot take the goods, or sue for them, without payment; for though the vendee acquires a right of property by the contract of sale, he does not acquire a right of possession of the goods, until he pays or tenders the price.⁸⁷ But if the goods are sold upon credit, and nothing is agreed upon as to the time of delivering the goods, the vendee is immediately entitled to the possession, and the right of possession and the right of property vest at once in him; though the right of possession is not absolute, but is liable to be defeated, if he becomes insolvent before he obtains possession.⁸⁸

If the seller has even dispatched the goods to the buyer, and insolvency occurs, he has a right, in virtue of his original ownership, to stop them in transtitu; for though the property is vested in the buyer, so as to subject him to the risk of any accident, he has not an indefeasible right to the possession, and his insolvency, without payment of the price, defeats that right, equally after the transitus has begun, as before the seller has parted with the actual possession of the goods. Whether default in payment when the credit expires, will destroy that right of possession, if the vendee has not before that time obtained actual possession, and put the vendor in the same situation as if there had been no bargain for credit, was left undecided in Bloxam v. Sanders,⁸⁹ though I apprehend that as between the original parties the same consequence would follow.

To make the contract of sale valid in the first instance, there must be a delivery or tender of it, or payment, or tender of payment, or earnest given, or a memorandum in writing signed by the party to be charged; and if nothing of this kind takes place, it is no contract, and the owner may dispose of his goods as he pleases.⁹⁰ The English statute of frauds of 29 Car. II. c. 3. sect. 17, which we have reenacted,⁹¹ and the provisions of which prevail generally in the United States, declares that no contract for the sale of goods, for the price of £10 or upwards, shall be good, except the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the bargain, or in part payment; or unless some note or memorandum in writing of the bargain be made and signed by the parties to be charged, or their agents thereunto lawfully authorized.

If, therefore, earnest money be given, though of the smallest value, or there be a delivery or payment in whole, or in part, or a note or memorandum of the contract, duly signed, the contract is binding, and the property passes to the vendee with the risk and under the qualifications already stated.⁹² Whether a delivery of part of an entire stock, lot, or parcel of goods, be a virtual delivery of the whole, so as to vest in the vendee the entire property in the whole, without payment. was a point much debated in Hanson v. Meyer,⁹³ and left undecided by the court. It was held in that case, not to amount to such a delivery, provided any other act was necessary to precede payment or delivery of the residue; but if every thing to be done on the part of the vendor be completed, a delivery of part of a cargo or lot of goods has, under certain circumstances, been considered a delivery of the whole, so as to vest the property.⁹⁴

The vendee cannot take the goods, notwithstanding earnest he given, without payment. Earnest is only one mode of binding the bargain, and giving to the buyer a right to the goods upon payment; and if he does not come in a reasonable time after request, and pay for and take the goods, the contract is dissolved, and the vendor is at liberty to sell the goods to another person.⁹⁵ If any thing remains to be done, as between t he seller and the buyer, before the goods are to be delivered, a present right of property does not attach in the buyer. This is a well established principle in the doctrine of sales.⁹⁶ But when every thing is done by the seller, even as to parcel of the quantity sold, to put the goods in a deliverable state, the property, and consequently the risk of that parcel, pass to the buyer; and as to so much of the entire quantity as requires further acts to be done on the part of the seller, the property and the risk remain with the seller.⁹⁷ The goods sold must be ascertained, designated, and separated from the stock or quantity with which they are mixed, before the property can pass.⁹⁸ It is a fundamental principle pervading every where the doctrine of sales of chattels, that if the goods be sold by number, weight or measure, the sale is incomplete, and the risk continues with the seller, until the specific property be separated and identified.⁹⁹

Where no time is agreed on for payment, the payment and delivery are concurrent acts, and the vendor may refuse to deliver without payment. If he does deliver freely and absolutely, and without any fraudulent contrivance on the part of the vendee to obtain possession, and without exacting or expecting simultaneous payment, there is confidence and credit bestowed, and the precedent condition of payment is waived, and the right of property passes.¹⁰⁰ This rule is understood not to apply to cases where payment is expected simultaneous with delivery, and is omitted, evaded, or refused, by the vendee, on getting the goods under his control; for the delivery in such case is merely conditional, and the nonpayment would be an act of fraud, entering into the original agreement, which would render the whole contract void, and the seller would have a right instantly to reclaim the goods.¹⁰¹ The obtaining goods upon false pretenses, under color of purchasing them, does not change the property.¹⁰² If it was even a condition of the contract, that the seller was to receive, upon delivery, a note, or security for payment at another time, he may dispense with that condition, and it will be deemed waived by a voluntary and absolute delivery without a concurrent demand of the security.¹⁰³

But if the delivery in that case be accompanied with a declaration on the part of the seller, that he should not consider the goods as sold until the security be given, the sale is conditional, and the property does not pass by the delivery as between the original parties, though as to subsequent bona fide purchasers or creditors of the vendee, the conclusion might be different.¹⁰⁴ Where there is a condition precedent attached to a contract of sale, the property does not vest in the vendee on delivery, until he performs the condition, or the seller waives it, and the right continues in the vendor, even against the creditors of the vendee.¹⁰⁵ If the delivery of the goods precedes for a short time the delivery of the note to be given for the price, according to particular usage in that species of dealing, and which usage is known to the buyer, the case falls within the same principle, and the delivery is understood to be conditional. The condition is not deemed to be waived, and the seller will have a right in equity to consider the goods as held in trust for him, until the vendee performs the condition, and gives the note with security; and his right to the goods will be good as against the buyer and his voluntary assignee, though not as against a bona. fade purchaser from the vendee.¹⁰⁶

By the civil law the right of property was not vested is the purchaser even by delivery, without payment of the price, unless the goods were sold on a credit.¹⁰⁷ The risk of the goods was, nevertheless, thrown on the buyer before delivery, and as soon as the contract of sale was completed, even though the title was still in the vendor. Periculum rei venditae, non dum traditae, est emptoris.¹⁰⁶ Pothier endeavors to vindicate this principle of the civil law, in answer to the objections of Pufendorf, Barbeyrac, and others, who insisted, that the civil law in this respect was not founded on principles of natural justice.¹⁰⁹ We think the common law very reasonably fixes the risk where the title resides; and when the bargain is made, and rendered binding by giving earnest, or by part payment, or part delivery, or by a compliance with the requisitions of the statute of frauds, the property, and with it the risk, attaches to the purchaser. But though the seller has parted with the title, he may retain possession until payment, and he has even the equitable right of stoppage in transitu, in the case of the insolvency of the purchaser; and that right assumes that the vendor has divested himself of the legal title, and that the property has passed to the vendee, while the actual possession is in some third person in its transit to the vendee.

Delivery of goods to a carrier, or master of a vessel, when they are to be sent by a carrier or muster, is equivalent to a delivery to the purchaser; and the property with the correspondent risk, immediately vests in the purchaser, subject to the vendor’s right of stoppage in transitu.¹¹⁰ A delivery by the consignor of goods, on board of a ship chartered by the consignee, is a delivery to the consignee;¹¹¹ and the rule is the same if they were put on board a general ship for the consignee.¹¹² The effect of a consignment of goods by a bill of lading, is to vest the property in the consignee. A delivery to any general carrier is a constructive delivery to the vendee; and the rule is the same whether the goods be sent from one inland place to another, or beyond sea.

Symbolical delivery will, in many cases, be sufficient, and equivalent in its legal effects to actual delivery. The delivery of the key of the warehouse in which goods sold are deposited, is a delivery sufficient to transfer the property.¹¹³ So, the delivery of the receipt of the storekeeper for the goods, being the documentary evidence of the title, has been held to be a constructive delivery of the goods.¹¹⁴ There may be a symbolical delivery when the thing does not admit of actual delivery. The delivery must be such as the nature of the case admits. ¹¹⁵ We have a striking instance of this in the Pandects,¹¹⁶ where the delivery of wine is held to be made by the delivery of the keys of the wine cellar; and the consent of the party upon the spot is a sufficient possession of a column of granite, which, by its weight and magnitude, was not susceptible of any other delivery, and possession was taken by the eyes, and the declared intention.

In the sale of a ship, or goods at sea, the delivery trust be symbolical, by the delivery of the documentary proofs of the title; and a delivery of the grand bill of sale is a delivery of the ship itself.¹¹⁷ A bill of sale of timber, and materials of great bulk, lying on the banks of a canal, or marking the timber, has been held to be a delivery sufficient to make the possession follow the right. It was as complete a delivery and possession as the subject matter reasonably admitted.¹¹⁸ Taking a bill of parcels, and an order from the vendor on the storekeeper for the goods, and going and marking them with the initials of one’s name, has been held a delivery. The mere communication of the vendor’s order on a wharfinger or warehouseman for delivery,¹¹⁹ and assented to by him, passes the property to the vendee.¹²⁰ Even the change of mark on bales of goods in a warehouse by direction of the parties, has been held to operate as an actual delivery of the goods.¹²¹ If the vendor takes the vendee within sight of ponderous articles, such as logs lying within a boom, and shows them to him, it amounts to a delivery, though the vendee should suffer them to lie within the boom as is usual with such property, until he have occasion to use them.¹²² Delivery of a sample has been sufficient to transfer the property, when the goods could not be actually delivered until the seller had paid the duties; that fact being known and understood at the time, and when the buyer accepted of the sample as part of the quantity purchased.¹²³ The delivery must always be according to the subject matter of the delivery, and the property must be placed under the control and power of the vendee.¹²⁴

The facts and circumstances which may amount to an acceptance of part of the goods sold, so as to take the case out of the statute of frauds, has been a fruitful source of discussion, and subtle and refined distinctions have been raised and adopted.

Cutting off the spills of wine casks, and marking the initials of the purchaser’s name on them, has been held an incipient delivery sufficient to take the case out of the statute.¹²⁵ So, if the purchaser deal with the commodity as if it were in his actual possession, by selling part, this supersedes the necessity of proof of actual delivery.¹²⁶ Where a purchaser, at the merchant’s shop, marked the goods which he approved of, and laid them aside on the counter, and went for a porter to remove theme, without receiving a bill of parcels, or stipulating a time of payment, or tendering the merchant’s note which he was to offer in payment, it has been held, that the property in the goods was not changed by that transaction.¹²⁷ But. since that decision, a more relaxed rule has been adopted; and it has been held, that if the purchaser writes his name upon the article purchased, it is a sufficient delivery within the statute of frauds, though the article remained with the vendor.¹²⁸ It has been even decided, that on the purchase of a horse without memorandum, payment, or actual delivery, the verbal request of the buyer that the vendor keep the horse in his possession for a special purpose, and the consent on the part of the vendor, amounted to a constructive delivery, sufficient to take the sale out of the statute.¹²⁹

That case has since been questioned, as carrying the doctrine of constructive delivery to the utmost verge of safety; and the purchase of part of a heap of grain, if it be not measured off and separated at the time, is not valid by means of such a request, even though the seller afterwards measured it off, and set it apart for the vendee.¹³⁰ In short, probity in dealing, the interests of commerce, and the variety, extent, and rapidity of circulation of property which it has introduced, require that delivery should frequently be presumed from circumstances, and a destination of the goods by the vendor to the use of the vendee; the marking them, or making them tip to be delivered, or the removing them for the purpose of being delivered, may all entitle the vendee to act as owner.¹³¹ But the presumption fails when positive evidence contradicts that presumption, as in the case of a refusal on the part of the vendor to part with the goods until payment;¹³² and on the part of the vendee to take the goods when inspected;¹³³ or when the vendee leaves part of the articles bought unmarked;¹³⁴ or the delivery be of a sample which is not part of the bulk of the commodity sold.¹³⁵

If the subject matter of the contract does not exist in rerum natura, at the time of the contract, but remained to be thereafter fabricated out of raw materials, it is, consequently, incapable of delivery, and not within the statute of frauds, and the contract is valid without a compliance with its requisitions.¹³⁶

If the buyer unreasonably refuses to accept of the article sold, the seller is not obliged to let it perish on his hands, and run the risk of the solvency of the buyer. The usage, on the neglect or refusal of the buyer to come in a reasonable time, after notice, and pay for and take the goods, is for the vendor to sell the same at auction, and to hold the buyer responsible for the deficiency in the amount of sale.¹³⁷

The place of delivery is frequently a point of consequence in the construction of the contract of sale.

If no place be designated by the contract, the general rule is, that the articles sold are to be delivered at the place where they are at the time of the sale. The store of the merchant, the shop of the manufacturer or mechanic, and the farm or granary of the farmer, at which the commodities sold are deposited or kept, must be the place where the demand and delivery are to be made, when the contract is silent as to the place. Thus appears to be the general doctrine on the subject.¹³⁸ Pothier distinguishes between contracts for a thing certain, as for all the wine of the vintage of the vendor, and a contract for any thing indeterminate, as a pair of gloves, a certain quantity of corn, wine, etc. In the former case, the delivery is to be at the repository where the wine was at the time of the contract, and this is reasonably supposed to be the understanding of the parties, as the purchaser would then be able to see that he had the whole quantity agreeably to the, contract.

In the latter case the property is to be delivered at the debtor’s place of residence, unless the parties lived near each other, and the thing be portable, in which case the place of payment would be the creditor’s residence.¹³⁹ The common law on the subject of the delivery of specific articles which are portable, makes a distinction between the contract of sale, and the contract to pay a debt at another time in such articles. We have seen, that in the contract of sale the delivery is to be at the place where the vendor has the article, but in the other case, the weight of authority would seem to be in favor of the rule, that the property was to be delivered at the creditor’s place of residence, though the cases on the subject are not easily reconcilable with each other.

Lord Coke lays down the rule,¹⁴⁰ that if the contract he to deliver specific articles, as wheat or timber, the obligor is not bound to carry the same abroad, and seek the obligee, (as in the case of payment of money,) but he must call upon the obligee before the day, to know where he would receive the articles, and they must be delivered at the place designated by the obligee. This doctrine was admitted in the case of Aldrich v. Albee,¹⁴¹ in which it was declared, that if no place be mentioned in the contract, to deliver specific articles, (and which, in that case, were hay, bark and shingles,) the creditor had the right to name the place. It is evident, however, that this rule must be received with considerable qualification, and it will depend, in some degree, upon the nature and use of the article to be delivered. The creditor cannot be permitted to appoint an unreasonable place, and one so remote from the debtor, that the expense of the transportation of the articles might exceed the price of them. If the place intended by the parties can be inferred, the creditor has no right to appoint a different place. But if no place of performance be designated, and none can be clearly inferred from collateral circumstances, it seems to have been again admitted, that the creditor may designate a reasonable place for the delivery of the articles.¹⁴² Mr. Chipman¹⁴³ lays it down also as a rule of the common law, well understood and settled in Vermont, that if a note be given for cattle, grain, or other portable articles, and no place of payment. be designated in the note, the creditor’s place of residence at the time the note is given, is the place of payment.

If the articles be not portable, but ponderous and bulky, then Lord Coke’s rule prevails, and the debtor must seek the creditor, or get him to name a place; and if no place, or an unreasonable one be named, the debtor may deliver the articles at a place which circumstances shall show to be suitable and convenient for the purpose intended, and presumptively in the contemplation of the parties when the contract was made.¹⁴⁴ There is a material difference in the reason of the thing, between a tender of cumbersome goods, and those which are portable, and the same removal from one place to another is not equally required in the two cases.¹⁴⁵ There is another class of cases, in which the position is assumed, that if the parties have not designated any particular place of delivery, it is to be at the debtor’s residence, or where the property was at the time of the contract, as in the case of a note payable in farm produce, without mentioning time or place, the place of demand and delivery is held to be at the debtor’s farm.¹⁴⁶ It is likewise adjudged, that where a person, in the character of bailee, promises to deliver specific goods on demand, though the demand may be made wherever he may be at the time, his offer to deliver at the place where the property is, or at his dwelling house, or place of business, will be sufficient.¹⁴⁷

If the debtor makes a tender of specific articles at the proper time and place, according to contract, and the creditor does not come to receive them, or refuses to accept them, the better opinion is, that the debt is thereby discharged.¹⁴⁸ If the debtor he sued, he may plead the tender and refusal, and he will be excused by the necessity of the case from pleading uncore prist, and bringing the cumbersome articles into court;¹⁴⁹ and it is not like the case of a tender of money which the party is bound to keep good, and on a plea of tender to bring the money into court.

The creditor is entitled to the money at all events, whatever may be the fate of the plea,¹⁵⁰ and there is equal reason that he should be entitled to the specific articles tendered. But in Weld v. Hadley,¹⁵¹ it was decided, after a very able discussion, that on a tender and refusal of specific articles, the property did not pass to the creditor. This was contrary to the doctrine declared in other cases,¹⁵² and the weight of argument, if not of authority, and the analogies of the law, would appear to lead to the conclusion, that on a valid tender of specific articles, the debtor is not only discharged from his contract, but the right of property in the articles tendered passes to the creditor.¹⁵³ The debtor may abandon the goods so tendered; but if he elects to retain possession of the goods, it is in the character of bailee to the creditor, and at his risk and expense.¹⁵⁴

I have thus endeavored to mark the prominent and most practical distinctions, on the very diffusive subject of the delivery requisite to pass the title to goods, or to take the case out of the operation of the statute of frauds. But even in this general view of the subject, it has been difficult to select t hose leading principles, which were sufficient to carry us safely through the labyrinth of cases, that overwhelm and oppress this branch of the law.

VII. Of the memorandum required by the statute of frauds.

The signing of the agreement by one party only is sufficient, provided it be the party sought to be charged. He is estopped by his signature from denying that the contract was validly executed, though the paper be not signed by the other party who sues for a performance.¹⁵⁵ It is sufficient, likewise, if the note or memorandum be made by a broker employed to effect the purchase, and the instrument is liberally construed without a scrupulous regard to forms. The signature may be with a lead pencil, according to the practice in cases of hurried business. The mark of one unable to write, is a sufficient signature; and if the name be inserted in such a manner as to have the effect of authenticating the instrument, it is immaterial in what part of it the name be found.¹⁵⁶ The contract must, however, be stated with reasonable certainty, so that it can be understood from the writing itself, without having recourse to parol proof.¹⁵⁷ Unless the essential terms of the sale can be ascertained from the writing itself, or by a reference contained in it to something else, the writing is not a compliance with the statute; and if the agreement he thus defective, it cannot be supplied by parol proof, for that would at once introduce all the mischiefs which the statute of frauds and perjuries was intended to prevent.¹⁵⁸

VIII. Of sales of goods, as affected by fraud.

Though there be a judgment against the vendor, and the purchaser has notice of it, that fact will not of itself affect the validity of the sale of personal property. But if the purchaser, knowing of the judgment, purchases, with the view and purpose to defeat the creditor’s execution, it is iniquitous and fraudulent, notwithstanding he may have given a full price, for it is assisting the debtor to injure the creditor. The question of fraud depends upon the motive. The purchase must be bona fide, as well as upon a valuable consideration. This rule has been repeatedly declared and established.¹⁵⁹ Whether it would be an act of fraud sufficient to vacate the contract, if the purchaser, knowing of his own insolvency, and utter incapacity to make payment, but without using any device or contrivance to deceive the vendor, purchases goods of another, who is ignorant of his insolvency, and sells them under the relief of the solvency as well as good faith of the buyer, is a question which was raised, but left undecided, in Conyers v. Ennis.¹⁶⁰ It has been since decided in another case,¹⁶¹ that the mere insolvency of the vendee, and the liability of the goods to immediate attachment by his creditors, though well known to himself, and not disclosed to the vendor, would not of itself avoid the sale. In that case, there was no false assertion, or fraudulent misrepresentation or deceit practiced, or concert, or secret agreement, with any other person, and there was no direct evidence that the vendee knew at the time that he was insolvent. The decision was put upon the ground that the credit was in fact, obtained without any fraudulent intent, and the validity of the sale would depend upon the decision of the question, whether there was fraud in fact.

If the vendee discovers that he is insolvent, and not in his power to pay for the goods, the courts have allowed him to rescind the contract, and return the goods to the seller, with his assent, provided he did it before the contract was consummated by an absolute delivery and acceptance. He cannot rescind the contract after the goods have been actually received into his possession, and the rights of other creditors have attached.¹⁶²

On the subject of fraudulent sales, another, and a very vexatious question has arisen, as to the legal consequence and effect of an agreement between the parties at the time of the sale, that possession was not to accompany and follow the bill of sale of the goods. There is no doubt of its being evidence of fraud; but the great point has been, whether the fraud which was to be inferred in such a case, was an inference of law to be drawn by the court, and resulting inevitably from the fact, or whether the fact was only evidence of fraud to be drawn by the jury, and susceptible of explanation. The history and diversity of the decisions on this subject, form a curious and instructive portion of our jurisprudence.

By the English statutes of 3 Hen. VII. and 13 Eliz. c. 5. which have been reenacted in this state,¹⁶³ and the essential provisions of which have been adopted generally throughout the United States, all conveyances of goods and chattels in trust for the use of the person conveying them, or made to delay, hinder, or defraud creditors, are declared to be void; and it is every where admitted,¹⁶⁴ that the statutes of fraud of 13 and 27 Eliz. were declaratory of the principles of the common law, and the decisions of the English courts are, therefore, applicable to questions of constructive fraud arising in this country.

Twyne’s case,¹⁶⁵ which arose in the Star Chamber in the 44th Eliz. is the basis of the decisions, on the question of fraud arising from possession being retained by the vendor.

Among other indicia of fraud upon which the court relied, and adjudged the deed fraudulent in that case, a prominent one was, that the vendor, after a bill of sale of chattels for a valuable consideration, to a creditor, continued in possession, and exercised acts of ownership over the goods. Afterwards, in Stone v. Grubham,¹⁶⁶ upon a bill of sale of chattels, being a lease for years, the vendor continued in possession, but as the conveyance was only conditional upon payment of money, it was held, that the possession did not avoid the sale, as by the terms of the deed the vendee was not to have possession until he had performed the condition. The rule was explicitly declared in Sheppard’s Touchstone, in the time of James I, that if a debtor secretly made a general deed of his goods to one creditor, and continued the use and occupation of the goods as his own, the deed was fraudulent and void against a subsequent judgment and execution creditor, notwithstanding the deed was made upon good consideration.¹⁶⁷ Again, in Bucknal v. Roiston,¹⁶⁸ a bill of sale of goods was given by way of security or pledge for money lent, and a trust in the vendor to keep the goods, and sell them for the benefit of the vendee, appeared on the face of the deed; and for that reason it was held by the Lord Chancellor not to be fraudulent. One of the counsel in that case observed, that it had been ruled forty tithes in his experience at Guildhall, that if a man sells goods, and still continues in possession as visible owner of them, the sale wits fraudulent and void as to creditors.

The case of a mortgage of goods was afterwards held, in Ryall v. Bowles, not to form an exception to the general rule recognized in the former cases. It was declared by very strong authority in that case, that a mortgagee of goods permitting the mortgagor to keep possession, had no specific lien against general assignees under a commission of bankruptcy, and he was understood to confide in the personal credit of the vendor, and not in any security. Though that case was decided upon the bankrupt act of 21 J. I., and not upon the statutes of Elizabeth, the reasoning of the court relative to the distinction between absolute and conditional sales or mortgages, was founded on general principles applicable to every case. It was the doctrine of the case, that in a mortgage of goods the mortgagee takes possession. and that there was no reason, unless in very special eases, why an absolute or conditional vendee of goods, should leave them with the vendor, unless to procure a collusive credit.¹⁶⁹ There was no distinction, it was admitted, under the 13th Eliz., between conditional and absolute sales of goods, provided they were fraudulent; and continuance in possession by the mortgagor was fraudulent at common law, and void by the statutes of Elizabeth.

The doctrine of that case was powerfully sustained by Lord Mansfield in Worseley v. Demattos & Slader.¹⁷⁰ That case arose under the bankrupt act of 21 James I, and it was held by the K. B., that a mortgage of goods, with possession retained by the mortgagor, was fraudulent in law equally as it would be upon an absolute sale. To give a creditor priority by such a mortgage, when the mortgagor is allowed to appear and act as owner, is enabling him to impose upon mankind by false appearances; for where possession is not delivered, goods may be mortgaged a hundred times over, and open a plentiful source of deceit. But in Cadogan v. Kennet,¹⁷¹ where household goods, by settlement before marriage, in consideration of the marriage, and of the wife’s marriage portion, were conveyed to trustees in trust for the settler for life, remainder to his wife for life, and remainder to the sons of the marriage, it was held, that those goods were protected from execution in favor of a creditor existing at the time of the settlement, though the grantor continued in possession of the goods. The transaction was fair and honest in point of fact, and it was part of the trust that the goods should continue in the house.

Other subsequent cases have established the rule, that the wife’s goods may, before marriage, be conveyed to trustees with her husband’s assent, for her use during coverture, and such property will not be liable to his debts.¹⁷² Again, in Edwards v. Harben,¹⁷³ the K. B. laid down the principle emphatically, that if the vendee took an absolute bill of sale to take effect immediately by the face of it, and agreed to leave the goods in the possession of the vendor for a limited time, such an absolute conveyance without the possession, was such a circumstance per se as made the transaction fraudulent in point of law. It was admitted, however, that if the want of immediate possession be consistent with the deed as it was in Buckland v. Roiston, and Lord Cadogan v. Kennet, and as it is if the deed be conditional, and the vendee is not to have possession until he has performed the condition, the stile was not fraudulent, for there the possession accompanied and followed the deed within the meriting of the rule.

After the English rule on this subject had been discussed, declared and settled, it was repeatedly held, that an absolute bill of sale of chattels, unaccompanied with possession, was fraudulent in law, and void as against creditors.¹⁷⁴ The change of possession was required to be substantial and exclusive, and not concurrently with the assignor. But, on the other hand, there have been many exceptions taken, and many qualifications annexed to the general rule; and it has become difficult to determine when the circumstance of possession not accompanying and following the deed, be per se a fraud in the English law, or only presumptive evidence of fraud, resting upon the facts to be disclosed att the trial. It certainly is not anything more if the purchaser was not a creditor at the time, and the goods were under execution, and the transaction notorious, and not, in point of fact, either clandestine or fraudulent.

In Kidd v. Rawlinson,¹⁷⁵ goods were purchased on execution by a stranger, and left in possession of the debtor for a temporary, and honest, and humane purpose, and as the parties did not stand in the relation of debtor and creditor, Lord Eldon, as Ch. J. of the C. B. held, that the title was in the vendee. He admitted, that a bill of sale of goods might be taken as security on a loan of money, and the goods fairly and safely left with the debtor. The decision in this case was conformable to one made by Lord Holt under similar circumstances;¹⁷⁶ and Lord Eldon, many years afterwards, when Lord Chancellor,¹⁷⁷ adhered to the same doctrine, and declared, that possession of chattels by the vendor was only prima facie evidence of fraud. If the property cannot be reached by bankruptcy, and the possession be according to the deed which creates the title, and the title be publicly created, it is not fraudulent.

Other cases have protected the purchaser of goods seized on execution, (and whether the purchase was from the sheriff or the defendant seemed to be immaterial,) from subsequent executions, though the goods were suffered to continue in the possession of the defendant, on the ground that the transaction was necessarily notorious to the whole neighborhood, and the execution notice to the world, and the cases being free from fraud in fact, were, under those circumstances, free from the inference of fraud in law.¹⁷⁸ The question of fraud in such cases is declared to be a question of fact for the jury. The purchaser of goods sold at auction, by trustees, under an assignment by an insolvent debtor, is also protected, though he leave the goods in the possession of the prior owner, provided it be a matter of fact to be found by a jury, that the assignment was not made with a fraudulent intent, and that the sale was notorious.¹⁷⁹

So, a person may lend his goods for another’s use, and, except in cases of bankruptcy under the statute of 21 J. I. they will be protected from the creditors of the person for whose use they were supplied.¹⁸⁰ In Steward v. Lombe,¹⁸¹ so late as 1820, the Court of C. B. even questioned very strongly the general doctrine in Edwards v. Harben, that actual possession was necessary to transfer the property in a chattel, and the authority of the case itself was shaken.

The law on this subject is still more unsettled in this country than it is in England.

In the Supreme Court of the United States, the doctrine in Edwards v. Harben has been explicitly and fully adopted, and it is declared, that an absolute bill of sale is itself a fraud in law, unless possession accompanies and follows the deed.¹⁸² This decision, of course, leaves open for discussion the distinction taken in that case between a bill of sale absolute, and one conditional upon its face, and also the conclusions in the other cases where the continuance of possession in the vendor is consistent with the deed. The principle of the decision at Washington has been adopted in the circuit courts of the United States, and we may consider it to be a settled principle in federal jurisprudence. In pursuance of the rule, if property be abroad, and incapable of actual delivery at the time, as in the case of a ship at sea, the possession must be assumed as soon as possible on the arrival of the vessel in port.¹⁸³

In Virginia, the same principle has been directly and repeatedly adjudged to be well settled; and it is declared, that an absolute bill of sale of personal property, with possession continuing in the vendor, is fraudulent per se as to creditors without other evidence of fraud, or being connected with other circumstances.¹⁸⁴ In South Carolina, the same doctrine was alluded to as being founded on the better authority;¹⁸⁵ and in one case in equity¹⁸⁶ it was decided, that if possession did not accompany a bill of sale of chattels which was not recorded, it was void as to creditors, though there was no doubt of the fairness of the transaction. Afterwards, in the Constitutional Court, the doctrine of the English law in Edwards v. Harben, was declared by all the judges to be a settled rule.¹⁸⁷ In Tennessee, also, the doctrine of the English law as stated in Edwards v. Harben, is clearly asserted.¹⁸⁸ So, in Kentucky, the same principle, under the modifications it has subsequently undergone in England, seems to have been adopted; fur after an absolute bill of sale, if the property remains in the possession of the vendor, it is held to be fraudulent, and evidence of a fair intent is inadmissible; and yet when such possession is not inconsistent with the sale, the fraud becomes a matter of fact for a jury.¹⁸⁹

In Pennsylvania, the English doctrine is adopted and followed in its fullest extent. The general principle is explicitly and emphatically recognized, that on an absolute sale or assignment of chattels, possession must accompany and follow the deed, and vest exclusively in the vendee, or it is fraudulent in law, though there be no fraud in fact.¹⁹⁰ But as an exception to the general rule, it is admitted, that goods may, after they have been levied upon, or after a fair purchase of them at a sale on execution, be safely left in the possession of the defendant, without a necessary inference of fraud; though the exception in the case of a levy merely, was afterwards restricted to household furniture.¹⁹¹

Delivery of the goods is held to be as requisite in the case of a mortgage of goods, as of an absolute sale of goods under the statutes of 13 and 27 Eliz.; and merely stating on the face of the deed, that possession was to be retained, is not sufficient to take the case out of the statute, even in the case of a mortgage of goods; and the transaction has been adjudged to be fraudulent per se, and void against a subsequent bona fide purchaser without notice.¹⁹² The just policy and legal solidity of the rule that holds all such deeds of chattels fraudulent in law, were asserted in the case to which I have last alluded, with distinguished ability and effect. The retention of possession must not only be part of the contract, but it must appear to be for a purpose, fair, honest and necessary, or conducive to some fair object in view. Appearances must not only agree with the real state of things, but the real state of things must be honest and consistent with public policy. Such were the cases of Bucknel v. Royston, and Cadogan v. Kennet.

But where the motive of the sale is the security of the vendee, and the vendor is permitted to retain the visible ownership for the convenience of the parties, it is a fraud, though the arrangement be inserted in the deed of mortgage. The policy of the law will not permit the owner of personal property to create an interest in another, either by mortgage or absolute sale, and still continue to be the visible owner. The law will not stay to inquire whether there was actual fraud or not, and will infer it at all events, for it is against sound policy to suffer the vendor to remain in possession, whether an agreement to that effect be or be not expressed in the deed. It necessarily creates a secret encumbrance as to personal property, when to the world, the vendor or mortgagor appears to be the owner, and he gains credit as such, and is enabled to practice deceit upon mankind.

If the possession be withheld pursuant to the terms of the agreement, some good reason for it beyond the convenience of the parties, must appear, and the parties must leave nothing unperformed within their power, to secure third persons from the consequences of the apparent ownership of the vendor. If it be the sale or mortgage of articles undergoing a process of manufacture, to be delivered when finished, or of various other goods and chattels, and possession can properly be retained, there ought to be a specific inventory of the articles, so as to apprize creditors of what the conveyance covered, and to prevent the vendor from changing and covering property to any extent by dexterity and fraud.

The Supreme Court of Pennsylvania have regretted, that even in the excepted case of household furniture, the goods seized on execution may be left in the hands of the defendants. This was contrary to the common law, which would not endure the levying on goods only as a security,¹⁹³ and wisely gave a subsequent execution creditor the preference, if goods levied on by execution were suffered to remain in the hands of the defendant. The exception of household furniture, has notoriously occasioned collusion and fraud, and been productive of gross abuse. The levy was a very imperfect notice to third persons.¹⁹⁴

The same doctrine has been declared to be the law in New Jersey and Connecticut. In the former state, it was assumed as being too clear to be doubted; and in the latter, the point has been recently and fully discussed. Delivery of possession in the case of a sale or mortgage of chattels is necessary whenever it be practicable; and to permit the goods to remain in the hands of the vendor, is declared to be an extraordinary exception to the usual course of dealing, and requires a satisfactory explanation. There must be an actual, and not a colorable change of possession. The leading decisions in England, and in this country, in favor of the legal inference of fraud in such cases, are referred to, and the conclusion adopted, that on a sale or mortgage of goods, an agreement, either in or out of the deed, that the vendor may keep possession, is, except in special cases, and for special reasons to be shown to and approved by the court fraudulent and void, equally against creditors and bona fide purchasers.¹⁹⁵

Thus far the American decisions harmonize with those in England; and the stern conclusions of the doctrine, that fraud in the given case is an inference of law, are asserted in this country not only in a tone equally explicit and decided as in the English cases, but with much greater precision, and more powerful and convincing argument. There is another series of decisions, however, which have, under equal sanction, established a more lax and popular doctrine.

In North Carolina it is held, that whether a deed be fraudulent or otherwise, from the want of possession in the vendee, or within the operation of the statute of 13 Eliz. c. 5., was a question of fact, and not of law.¹⁹⁶ The Supreme Court of that state, in a very recent case,¹⁹⁷ carried the relaxation of the English rule to a very great extent. A bill of sale of a horse was absolute on its face, but taken as a security for a debt, and possession was left with the vendor. The property, after being kept by the debtor for six years, was seized on execution by another creditor, and the court decided; that such a transaction was only presumptive evidence of fraud for a jury, and as they had found no fraud in fact, the verdict was sustained.

In this state, the current language of the court originally was,¹⁹⁸ that the non-delivery of goods at the time of the sale or mortgage, was only prima facie evidence of fraud, and a circumstance which admitted of explanation. But in Sturtevant v. Ballard,¹⁹⁹ the subject received a more full and deliberate consideration, and the English and American authorities were extensively reviewed, and it was decided, that on a bill of sale of goods partly for cash, and partly to satisfy a debt, with an agreement in the instrument, that the vendor was to retain the use and occupation of the goods for the term of three months, the goods were liable to the intervening execution of a judgment creditor. It was considered to be a settled principle of law, that if the vendor be permitted to retain possession in the case of an absolute bill of sale of chattels, it was an act of fraud in law as against creditors, and that though the agreement appear on the face of the deed, it would be equally so unless some good motive was at the same time shown.

The rule applied equally to conditional as well as absolute sales, unless the intent of the parties in creating the condition was sound and legal. Fraud was the judgment of law on facts and intents, and it was a question of law when there was no dispute about the facts. The result of the investigation was, that. a voluntary sale of chattels, with an agreement, either in or out of the deed, that the vendor may keep possession, is, except in special cases, and for special reasons, to be shown to and approved of by the court, fraudulent and void as against creditors.

This decision was supposed to have established, on sound foundations; the rule of law in this state, so far as that rule depended upon the judgment of the Supreme Court. But though the decision has been cited and approved of in other states,²⁰⁰ it was doomed to have a very transient influence over its own tribunal. In Ludlow v. Hurd,²⁰¹ the late Chief Justice left it as a debatable point, whether the retaining possession of chattels by the vendor, after an absolute sale of them, was ipso facto fraudulent, or only a badge of fraud for the consideration of a jury; and in Bissell v. Hopkins,²⁰² the doctrine of the case of Sturtevant v. Ballard was entirely subverted.

In Bissell v. Hopkins, a debtor executed a bill of sale of a horse, and other chattels, to a creditor, in security for a preexisting debt. Nothing was said in the instrument about possession, or time of payment, though the bill averred a sale and delivery. The property, in fact, remained in the possession and use of the vendor by permission of the vendee, and after a period of fifteen months the debtor executed another instrument to the creditor, stating that there had been a settlement of accounts, and a balance adjusted, and that so much of the property “as remained on hand,” should remain liable, and that the horse, which it seems had retrained on hand, was “to remain for the present” with the debtor. At the time of the bill of sale, the vendor was indebted to other persons, and one of them, about six months thereafter, sued him, and obtained judgment and execution, and levied on the horse in possession of the debtor, at the period of sixteen months from the execution of the bill of sale. The horse was sold by the officer to the execution creditor, who had notice before the sale of the claim of the first vendee.

These facts being found by special verdict, and the conclusions to be drawn from them referred to the court, it was adjudged, that the first vendee was entitled to the property, for that there was neither fraud in law, nor fraud in fact, and that possession continuing in the vendor was only prima facie evidence of fraud, and might be explained.²⁰³

The Supreme Court of Massachusetts, in Bartlett v. Williams,²⁰⁴ declared the general rule to be, that possession must follow and accompany the deed, and that the possession of the vendor after the bill of sale, unexplained, would render the conveyance void as to the creditors. The doctrine in Edwards v. Harben was declared to be unquestionably sound, and it was not deemed inconsistent with it, but agreeable to the case of Robinson v. Donell,²⁰⁵ to adjudge, that if the vendee or mortgagee did not take possession immediately, it was sufficient if they did it before the right of a third person had intervened. But afterwards, in Holmes v. Crane,²⁰⁶ the court recede from their former doctrine on this point, and they concede, that on an absolute sale or mortgage of goods, the subsequent possession by vendor or mortgagor, is only prima facie evidence of fraud, and may be explained by proof; and that a mortgagor of goods may retain possession until the condition be broken, and that there must be fraud in fact to make it void.

The same relaxed doctrine was declared in Wheeler v. Train.²⁰⁷ It was there adjudged, that a debtor in failing circumstances, may convey furniture in payment, and stipulate with the creditor to have a lease of it for a year. The possession by the vendor, after a sale, was only evidence of fraud to be explained to a jury, and a debtor may mortgage, or make an absolute sale, under an agreement for possession for a given time, and it would not be fraud per se, but only evidence of fraud.

The Supreme Court of New Hampshire have established the same rules of law on this subject as those recently declared in Massachusetts and New York, and they have vindicated their opinion in a neat and able manner.²⁰⁸ They insist that the principal cases in England and in this country, on the other side, are borne down by the current of opposite authority. The position that devolves the question of fraud upon the court, requires the opinion to be formed on a single circumstance, and admits no explanation. The other position, which refers the question of fraud to a jury, looks to the whole transaction, and admits of every honest apology and explanation. If the vendor or mortgagor retains possession, no person suffers, unless a new credit be given, or an old one extended, under a mistaken belief that the property remained unsold. The few cases of that kind which may happen, ought not to introduce so stern a rule, as to make such conveyances void against every description of creditors.

It is greatly to be regretted, that the rules of law in so material a point, and one of such constant application, are so various and so fluctuating in this country. Since the remedy against the property of the debtor is now almost entirely deprived of the auxiliary coercion, intended by the arrest and imprisonment of his person, the creditor’s naked claim against the property ought to receive the most effective support, and every rule calculated to prevent the debtor from secreting or masking it to be sustained with fortitude and vigor. There is the same reason for the inflexible stability of the rule of law, that a vendor of chattels should not, at the expense of his creditors, sell them, and yet retain the use of them, as there is for that greatly admired rule of equity, that a trustee shall not be permitted to buy or speculate in the trust food on his own account; or for that other salutary and fixed principle, that the voluntary settlement of property shall be void against existing creditors. Such rules are made to destroy the very temptation to fraud, in cases and modes that are calculated to invite it, and because such transactions may be grossly fraudulent, and the aggrieved party not able to show it from the character of private agreements, and the infirmity of human testimony.

However innocent such transactions may be in the given case, they are dangerous as precedents, and poisonous in their consequences; and the wise policy of the law puts the sting of disability into the temptation, and bars the door against every species of imposition, which might be inaccessible to the eye of the court. If a debtor can sell his personal property, and yet, by agreement with the vendee, continue to enjoy it for six years, as in North Carolina, or for sixteen months, as in this state, in defiance of his creditors, who can set bounds to the term of enjoyment, or know when and where to be stow credit, or how he is to make out a case of actual fraud? Fraud, in fact, is reluctantly drawn by a jury, and their sympathies must be overcome by strong and positive proof, before they will readily assent to the existence of a fraudulent intent, which is so difficult to ascertain, and frequently so painful to infer.

The validity of assignments of their property by insolvent traders and others, has been another and a fruitful topic of discussion. A debtor, in failing circumstances, pray, by assignment of his estate in trust, and made in good faith, prefer one creditor to another, when no bankrupt, or other law, prohibiting such preference, and no legal lien binding on the property assigned, exists. This is a well settled principle in the English and American law, and admitted by numerous authorities.²⁰⁹ The assent of the creditors to be benefitted by the assignment, has been held to be essential to its validity, and the intervening attachment of another creditor, who is no party to the assignment, issued before such assent be given, has been preferred.²¹⁰

But this doctrine seems to be very much qualified and controlled, for the assent of the creditors need not be given at the time of the assignment, and a subsequent assent iii terms, or by actually receiving the benefit of the assignment, will be sufficient.²¹¹ The assignment has been held to be good against a subsequent attachment, if the creditor had assented to the assignment prior to the attachment;²¹² and the assignment has been supposed to be valid, even without such intervening assent, in the case of an assignment to trustees, fur the benefit of the preferred creditors. The legal estate passes and vests in the trustees; and a court of equity will compel the execution of the trust for the benefit of the creditors, though they be not, at the time, assenting and parties to the conveyance.²¹³ The assent of absent persons to an assignment, will be presumed, unless their dissent be expressed, if it be made for a valuable consideration, and be beneficial to them.²¹⁴

It is admitted, that the debtor may indirectly exert a coercion over the creditors through the influence of hope and fear, by the insertion of a condition to the assignment, that the creditors shall not be entitled to their order of preference unless within a given and reasonable time (for if no time, or an unreasonable time be prescribed, the deed is fraudulent:²¹⁵ they execute a release of their debts by becoming parties to the instrument of assignment containing such a release, or by the execution of a separate deed to that effect.²¹⁶ In Jackson v. Lomas,²¹⁷ there was a proviso to the assignment, that in case any creditor should not execute the trust deed, which contained, among other things, a release of the debts, by a given day, he should not be entitled to the benefit of the trust deed, and his share was to be paid back to the debtor. It seems to have been assumed throughout that case, that such a provision would not affect the validity of the assignment.

Whatever might have been the understanding in that case, such a conclusion is not well warranted by the language of the American cases, and a deed with such a reservation would be invalid in this country. The debtor may deprive the creditor who refuses to accede to his terms, of his preference, and postpone him to all other creditors, but then he will be entitled to be paid out of the residue of the property, if there should he any, after all the other creditors who released and complied with the condition of the assignment are satisfied. If the condition of the assignment be, that the share which would otherwise belong to the creditor who should come in and accede to the returns and release, shall, on his refusal or default, be paid back to the debtor, or placed at his disposal by the trustees, it is deemed to be oppressive and fraudulent, and destroys the validity of the whole assignment.²¹⁸

Nor can the debtor, in such an assignment, make a reservation, at the expense of his creditors, of any part of his property or income for his own benefit. Such a reservation, if not made intentionally to delay, hinder, and defraud creditors, has been supposed not to affect the validity of the residue, or main purpose of the assignment, and that if the part of the estate assigned to the creditors should prove insufficient, they might resort to the fund so reserved by the aid of a court of equity. The case of Estwick v. Caillaud,²¹⁹ and the language of other cases, were in favor of this opinion.²²⁰ But later authorities have given to such reservations the more decided effect of rendering fraudulent and void the whole assignment, and no favored creditor or grantee can be permitted to avail himself of any advantage over the creditors, under an assignment which, by means of such a reservation, is fraudulent on its face.²²¹ These latter decisions contain a just and salutary check of the abuse of the debtor’s power of assignment and distribution; for, as was observed in the case of Riggs v. Murray,²²² “if an insolvent debtor may make sweeping dispositions of his property to select and favorite creditors, yet loaded with durable and beneficial provisions for the debtor himself, and encumbered with onerous and arbitrary conditions and penalties, it would be impossible for courts of justice to uphold credit, or to exact the punctual performance of contracts.²²³

IX. Of sales at auction.

An auctioneer has not only possession of the goods which he is employed to sell, but he has an interest coupled with that possession. He has a special property in the goods, and a lien upon them for the charges of the sale and his commission, and the auction duty. He may sue the buyer for the purchase money, and if he gives credit to the vendee, and makes delivery without payment, it is at his own risk.²²⁴ If the auctioneer has notice, that the property he is about to sell does not belong to his principal, and he sells notwithstanding the notice, he will be held responsible to the owner for the amount of the sale.²²⁵ So, if the auctioneer does not disclose the name of his principal at the time of the sale, the purchaser is entitled to look to him personally for the completion of the contract, and for damages for its non-performance.²²⁶

In the sale of real property at auction, care should be taken that the description of it be accurate, or the purchaser will not be held to a performance of the contract. But if the description be substantially true, and be defective or inaccurate in a slight degree only, the purchaser will be required to perform the contract, if the sale be fair, and the title good. Some care and diligence must be exacted of the purchaser. If every nice and critical objection be admissible, and sufficient to defeat the sale, it would greatly impair the efficacy and value of public judicial sales; and, therefore, if the purchaser gets substantially the thing for which he bargained, he may generally be held to abide by the purchase, with the allowance of some deduction from the price by way of compensation for any small deficiency in the value by reason of the variation.²²⁷

A bidding at an auction may be retracted before the hammer is down. Every bidding is nothing more than an offer on one side, which is not binding on either side until it is assented to, and that assent is signified on the part of the seller by knocking down the hammer.²²⁸

If the owner employs puffers to bid for him at an auction, it has been held to be a fraud upon the real bidders. He must not enhance the price by a person privately employed by him for that purpose. It would be contrary to good faith, as persons resort to an auction under a confidence that the articles set up for sale will be disposed of to the highest real bidder. A secret puffer employed by the owner is not fair bidding, and is a fraud upon the public; nor can the owner privately bid upon his own goods. All secret dealing on the part of the seller is deemed fraudulent. If he be unwilling that his goods should be sold at an under price, he may order them to be set up at his own price, and not lower, or he may previously declare, as a condition of the sale, that he reserves a bid for himself. This was the doctrine declared by Lord Mansfield in Bexwell v. Christie,²²⁹ and again by Lord Kenyon in Howard v. Castle,²³⁰ and in each case with the approbation of the Court of K. B. The governing principle was, that the buyer should not be deceived by any secret maneuver of the seller.

But the doctrine of those cases has since been considered as laid down rather too broadly. Lord Rosslyn and Sir William Grant have each questioned the soundness of the doctrine.²³¹ The latter seemed to think, that if bidders were employed by the owner merely for the purpose of taking advantage of the eagerness of them to screw up and enhance the price, it would be a fraud; but that he might lawfully, even without making the fact publicly known, employ a person to bid for defensive precaution, and with a view to prevent a sale at an under value. This relaxation of the former rule was also approved of in Steel v. Ellmaker,²³² and the Chief Justice in that case suggested, that the tone of Lord Mansfield’s morality was, perhaps, too lofty for the common transactions of business. He held, that the owner might lawfully instruct the auctioneer to bid in the goods for him at a limited price to prevent a sacrifice. In Bramley v. Alt,²³³ it was held, that a sale was not fraudulent because a puffer had been employed, if there were real bidders who bid after the puffers had ceased; and in Smith v. Clarke, a specific performance was decreed against a vendee, though the person who bid immediately before him was employed to bid under the private direction of the vendor, for the purpose of preventing a sale under a specified sum.

It would seem to be the conclusion from the latter cases, that the employment of a bidder by the owner would or would not be a fraud, according to circumstances tending to show innocence of intention, or a fraudulent design. If he was employed bona fide to prevent a sacrifice of the property under a given price, it would be a lawful transaction, and would not vitiate a sale. But if a number of bidders were employed by the owner to enhance the price by a pretended competition, and the bidding by them was not real and sincere, but a mere artifice in combination with the owner to mislead the judgment, and inflame the zeal of others, it would be a fraudulent and void sale.²³⁴

But the original doctrine of the K. B. is the better doctrine, and the most just and salutary. In sound policy, no person ought, in any case, to be employed secretly to bid for the owner against the bona fide bidder at a public auction. It is fraud in law on the very face of the transaction, and the owner’s interference and right to bid, in order to be admissible, ought to be intimated in the conditions of sale; and such a doctrine is understood to have been recently declared at Westminster Hall.

It has been made a question, how far auction sales were within the provisions of the statute of frauds; but it is now understood to be settled, that the auctioneer is the agent of both parties, and lawfully authorized by the purchaser, either of lands or goods, to sign the contract of sale for him as the highest bidder. The writing his name as the highest bidder in the memorandum of the sale by the auctioneer, immediately on receiving his bid, and knocking down the hammer, is a sufficient signing of the contract within the statute of frauds, so as to bind the purchaser. Entering the name of the buyer by the auctioneer, in his book, is just the same thing as if the buyer had written his own name. The purchaser who bids, and announces his bid to the auctioneer, gives the auctioneer authority to write down his name. There is no difference in the construction of the fourth and seventeenth sections of the statute of frauds of 29 C. II. ch. 2.²³⁵ as to what is a sufficient signing of the contract by the party to be charged. The English law, as originally declared in the case of Simon v. Motivos,²³⁶ has been repeatedly recognized, and considered as the established doctrine in respect to auction sales of lands and chattels, by the English and American courts.²³⁷

X. Of the vendor’s right of stoppage in transitu.

This right, which has been already alluded to, requires a more particular discussion. It is the right which the vendor, when he sells goods on credit to another, has of resuming the possession of the goods, while they are in the hands of a carrier or middle man, in their transit to the vendee, and before they arrive into his actual possession, on his becoming bankrupt or insolvent. The right exists only as between the vendor and vendee; and as the property is vested in the vendee by the contract of sale, it call be revested in the vendor during its transitus to the vendee, under the existence of the above circumstances.²³⁸

This right is very analogous to the common law right of lien. The latter right enables the vendor to detain goods before he has relinquished the possession of them; and this right of stoppage enables him to resume them before the vendee has acquired possession, and to retain them until the price he paid or tendered. If the price be paid or tendered, he cannot stop or retain the goods for money due on other accounts. The right of stoppage does not proceed upon the ground of rescinding the contract, but as a case of equitable lien.²³⁹ It assumes its existence and continuance; and, as a consequence of that principle, the vendee, or his assignees, may recover the goods, on payment of the price, notwithstanding he had actually stopped the goods in transitu, provided he be ready to deliver them upon payment,²⁴⁰ if he has been paid in part, he may stop the goods for the balance due him, and the part payment only diminishes the lien pro tanto on the goods detained.²⁴¹ There must be actual payment of the whole price, before the right to stop in transitu, in case of failure of the vendee, ceases. Though a bill of exchange has been accepted by the vendor, for the price, and endorsed over by him to a third person, even that will not take away the right; and if the bill be proved under a commission of bankruptcy against the vendee, it will only be considered a payment to the extent of the dividend.²⁴²

The right of stoppage in transitu came from the courts of equity, and was first established in Wiseman v. Vandeput,²⁴³ and its apparent equity recommended the adoption of it in the courts of law as a legal right. It would be very unreasonable to allow the goods of the vendor to be appropriated to the payment of other creditors of the vendee, who fails before payment, and before the goods have actually reached him. The right has, accordingly, been greatly favored and encouraged, and many distinctions made relative to its continuance and termination; and yet it is now declared, that a court of equity, from whence the right originated, has no jurisdiction to interfere and support it by process of injunction. Lord Eldon said, there was no instance of stopping in transitu by a bill in equity.²⁴⁴ The English law on the subject of this right, and the class of cases by which it is asserted and established, have been very generally recognized and adopted in our American courts.²⁴⁵

(1.) Of the persons entitled to exercise this right.

The right extends to every case in which the consignor is substantially the vendor, and it does not extend to a mere surety for the price, nor to any person who does not stand in the character of vendor or consignor, and rest his claim on a proprietor’s right.²⁴⁶ A factor or agent, who purchases goods for his principal, and makes himself liable to the original vendor, is so far considered in the light of a vendor, as to be entitled to stop the goods.²⁴⁷ So, a principal who consigns goods to his factor upon credit, is entitled to stop them if the factor becomes insolvent; and a person who consigns goods to another to be sold on joint account, is likewise to be considered in the character of a vendor, entitled to exercise this right.²⁴⁸ The vendor’s right is so strongly maintained, that while the goods are on the transit, and the insolvency of the vendee occurs, the vendor may take them by any means not criminal. The validity of the right depends entirely on the insolvency of the vendee.²⁴⁹ It is not requisite that he should obtain actual possession of the goods before they come to the hands of the vendee. A demand of the goods of the carrier, or notice to him to stop the goods, or an assertion of the vendor’s right by an entry of the goods at the customhouse, or a claim and endeavors to get possession, is equivalent to an actual stoppage of the goods.²⁵⁰

(2.) Of that situation of the goods, which allows or defeats the right.

The transitus of the goods, and consequently the right of stoppage, is determined, by actual delivery to the vendee, or by circumstances which are equivalent to actual delivery.

There are many cases in which a constructive delivery will not destroy the right. The delivery to a carrier or packer, to and for the use of the vendee, or to a wharfinger, is a constructive delivery to the vendee; but it is not sufficient to defeat this right, even though the carrier be appointed by the vendee. It will continue until the place of delivery be, in fact, the end of the journey of the goods, and they have arrived to the possession, or under the direction of the vendee himself. If they have arrived at the warehouse of the packer, used by the buyer as his own, or they are landed at the wharf where the goods of the vendee were usually landed and kept, the t:ansitus is at alt end, and the right of the vendor extinguished.²⁵¹ The delivery to the master of a general ship, or of one chartered by the consignee, is, as we have already observed, a delivery to the vendee or consignee, but still subject to this right of stoppage, which has been termed a species of jus postliminii.²⁵² And yet, if the consignee had hired the ship for a term of years, and the goods were put on board. to be sent by him on a mercantile adventure, the delivery would be absolute, as much as a delivery into a warehouse belonging to him, and it would bar the right of stoppage.²⁵³

The idea that the goods must come to the corporal touch of the vendee is exploded; and it is settled, that the transitus is at an end, if the goods have arrived at an intermediate place, where they are placed under the orders of the vendee, and are to remain stationary until they receive his directions to put them again in motion for some new and ulterior destination.²⁵⁴ In many of the cases where the vendor’s right of stopping in transitu has been defeated, the delivery was constructive only; and there has been much subtlety and refinement on the question, as to the facts and circumstances which would amount to a delivery sufficient to take away the right. The point for inquiry is, whether the property was to be considered as still in its transit; for if it has once fairly arrived at its destination, so as to give the vendee the actual exercise of dominion and ownership over it, the right is gone.²⁵⁵ A complete delivery of part of an entire parcel or cargo, terminates the transitus, and the vendor cannot stop the remainder.²⁵⁶

A delivery of the key of the vendor’s warehouse to the purchaser,²⁵⁷ or paying the vendor rent for the goods left in his warehouse,²⁵⁸ or lodging an order from the vendor for delivery with the keeper of the warehouse,²⁵⁹ or delivering to the vendee a bill of parcels, with an order on the storekeeper for the delivery of the goods;²⁶⁰ for demanding and marking the goods by the agent of the vendee at the inn where they had arrived, at the end of their journey;²⁶¹ or suffering the goods to be marked and resold, and marked again by the under purchaser;²⁶² have all been held to amount to acts of delivery, sufficient to take away the vendor’s lien, or right of stoppage in transitu. On the other hand, if the delivery be not complete, and some other act remains to be done by the consignor, the right of stoppage is not gone.²⁶³ So, while a vessel is performing quarantine at the port of delivery, and the voyage not at an end, the consignor’s right of stoppage has been held not to be divested, even by a premature possession on behalf of the consignee.²⁶⁴ That doctrine has, however, been since contradicted and overruled by Lord Alvanley, in Mills v. Ball,²⁶⁵ and by Mr. J. Chambre, in Oppenheim v. Russell;²⁶⁶ and the better opinion now is, that if the vendee intercepts the goods on their passage to him and takes possession as owner, the delivery is completed, and the right of stoppage is gone. But if the goods have arrived at the port of delivery, and are lodged in a public warehouse for default of payment of the duties, they are not deemed to have come to the possession of the vendee so as to deprive the consignor of his right.²⁶⁷

(3.) Of acts of the vendee affecting the right.

A resale of the goods by the vendee does not of itself, and without other circumstances, destroy the vendor’s right of stoppage in transitu.²⁶⁸ But if the vendor has given to the vendee documents sufficient to transfer the property, and the vendee, upon the strength of them, sells the goods to a bona fide purchaser without notice, the vendor would be divested of his right. A bill of lading usually has the word assigns: the goods are to be delivered to the consignee or his assigns, he or they paying freight; and a great question has accordingly arisen, and been very elaborately discussed and litigated in the English courts, whether the bill of lading could be negotiated by the consignee like a bill of exchange, and what legal rights were vested in the assignee. In the case of Lickbarrow v. Mason,²⁶⁹ it was decided by the K. B. that a bona fide endorsement, for a valuable consideration, of a bill of lading by the consignee, to an assignee, who had no notice that the goods were not paid for, was an absolute transfer of the property, so as to divest the consignor of his right of stoppage in transitu as against such assignee. There is no case on mercantile law which has afforded a greater display of acute investigation. The judgment of the K. B. was reversed in the Exchequer Chamber, and Lord Loughborough took a masterly view of the whole subject, and completely overthrew the doctrine of the negotiability of bills of lading.²⁷⁰ The case then went to the house of Lords, where Mr. Justice Butler most ably supported the decision of the K. B.²⁷¹ A new trial was awarded,²⁷² and a special verdict taken, and judgment given thereon without discussion; the judges of the K. B. declaring, that notwithstanding the decision in the Exchequer Chamber, they retained their former opinions.²⁷³

The question, therefore, remains to a certain degree, still floating and unsettled; though it seems now to be considered as the law at Westminster Hall, that if a bill of lading be assigned bona fide for a valuable consideration, it is a transfer of the property; and in the case of the consignee, if it be made without notice of the insolvency of the consignee, the property is absolutely vested in the assignee of the consignee, and the consignor has in that case lost his right to stop.²⁷⁴ It is likewise considered to be the law in this country, that the delivery of the bill of lading transfers the property to the consignee; and it seems to be conceded, that the assignment of it by the consignee will pass the property.²⁷⁵

But it must not be understood that the consignee can, in all cases, by his endorsement of the bill of lading to a third person, even for a valuable consideration, and without collusion, defeat the right of the consignor to stop the goods. It will depend upon the nature and object of the consignment, and the character of the consignee. As a general rule, no agreement made between the consignee and his assignee, can defeat or affect this right of the consignor; and the consignor’s right to stop in transitu is prior and paramount to the carrier’s right to retain as against the consignee.²⁷⁶ A factor having only authority to sell, and not to pledge the goods of his principal, cannot divest the consignor of the right to stop the goods in transitu, by endorsing or delivering over the bill of lading as a pledge, any more than he could by delivery of the goods themselves by way of pledge; and it is the same thing whether the endorsee was or was not ignorant that he acted as factor.²⁷⁷

If the assignee of the bill of lading has notice of such circumstances as render the bill of lading not fairly and honestly assignable, the right of stoppage as against the assignee is not gone; and any collusion or fraud between the consignee and his assignee will, of course, enable the consignor to assert his right. But the mere fact that the assignee has notice that the consignor is not paid, does not seem to be sufficient to render the assignment defensible by the stopping of the cargo in its transit, if the case be otherwise clear of all circumstances of fraud; though if the assignee be aware that the consignee is unable to pay, then the assignment will be deemed fraudulent as against the rights of the consignor.²⁷⁸

Sir William Scott observed,²⁷⁹ that this privilege of stoppage was a proprietary right, recognized by the general mercantile law of Europe, as well as by that of England. The French law has gone very far towards the admission of the right, to the full extent of the English rule. It allows the vendor to stop the goods in their transit to the consignee, in case of his nonpayment or failure, provided the goods have not been in the mean time sold bona fide according to the invoices and bills of lading, or altered in their nature or quantity; and the estate of the insolvent vendee be indemnified against all necessary expenses and advances on account of the goods; and the assignees of the vendee will be entitled to the goods or, payment of the price,²⁸⁰ The civil law, and the laws of those European nations which have adopted the civil law, do not consider the transfer of property to be complete, even by sale and delivery, without payment or security for the price, unless credit be given. In case of insolvency, the seller may reclaim the goods as being his own property, even from the possession of the buyer.²⁸¹