Putnam's Handy Law Book for the Layman

Suppose one signs his name to a subscription paper, calling for the payment of money, to build a church, for example, and the designated amount has been subscribed, can a subscriber refuse to pay? He cannot. Suppose he withdraws before the subscriptions have been completed, what then? He can refuse. If a subscription has not been completed, death operates as a revocation and the subscriber's estate is not held for the amount. Sometimes a moral obligation to pay money is a good consideration for a promising to pay it. Thus if one owes another for a bill of goods, and the debt has ceased to be binding by lapse of time, yet he should afterwards promise to pay, he could be held on his promise because there was a good consideration for the debt. Lastly a contract may be modified by mutual agreement without another consideration.

Another element in a contract is mutuality, a meeting of minds in the same sense. In every contract there is an offer made by one party and an acceptance or refusal by the other. When an acceptance occurs, there is a meeting of minds, or an assent. Very often the parties do not understand each other, they acted hastily, ignorantly perhaps, their minds did not really meet in the same sense. In such cases there is no contract.

Generally the acceptance must be at the time of receiving the offer. If it is not, there is no meeting of minds, no assent. A person however may make an offer on time, this is common enough. When this is done the other party must furnish some kind of consideration to make the offer good for anything, otherwise the offerer can withdraw his offer whenever he pleases. Many an offeree has been disappointed by the action of the other party in withdrawing his offer, yet the offerer has been clearly within his rights in doing so when he has received no consideration for giving the other party time to think over his offer.

An eminent jurist has said "that an offer without more is an offer in the present to be accepted or refused when made. There is no time which a jury may consider reasonable or otherwise for the other party to consider it, except by the agreement or concession of the party making it. Until it is accepted it may be withdrawn, though that be at the next instant after it is made, and a subsequent acceptance will be of no avail."

If no time is given, or no consideration for the time given, an offer therefore may be withdrawn as soon as made if not accepted. A person may suddenly think of something which leads him to withdraw his offer as soon as it is out of his mouth, and in doing so is within his rights, but if he does not, how long does his offer last? A reasonable time. What this is depends on many things, one of the questions like so many others in the law to which no definite answer can be given. An offer to sell some real estate was accepted five days afterward, this was held to be within a reasonable time. One can readily imagine cases in which five days would not be thus regarded, or even five hours.

When does assent occur in contracts made by correspondence? The rule is in nearly every state (Massachusetts being the chief exception) where an offeree has received an offer by letter and has put his acceptance in the postoffice, the minds of the parties have met and made a contract. The post-office is the agency of the offerer both to carry his offer and bring back the return. If the offeree should use a different agency, the telegraph for instance, to convey his acceptance, it would not be binding until the offerer had received and accepted it. Of course, an offerer by letter may withdraw his offer at any time. Suppose he should receive an acceptance by letter or telegraph but deny it, and insist that no contract had been made. Then the controversy would turn on the proof. If the acceptance had been by letter, and the offeree could prove that the offeree had written and mailed it, the offeree's proof would be complete. If the offeree sent a telegram, then he would be obliged to prove the delivery of the dispatch. Suppose one should mail a letter of acceptance, but before its receipt by the offerer, should send a telegram declining the offer which was received before the letter of acceptance? The acceptance would stand, for as there had been a meeting of minds when the letter was put into the postoffice, the offeree could not afterwards withdraw his offer. A person who makes an offer cannot turn it into an acceptance. An old uncle wrote to his nephew that he would give thirty dollars for his horse and added, "If I hear no more about the matter, I consider the horse is mine." The game did not work, for no man can both make and accept an offer at the same time, and that is what the foxy uncle tried to do.

Offers and rewards are often made through the newspapers. Thus the owner of a carbolic smoke ball offered to pay a specified sum to any one who suffered from influenza after using one of his smoke balls in accordance with directions if he was not cured. A person who failed to receive the benefit advertised recovered the reward. Two other cases may be mentioned that illustrate the uncertainty of the law. An excited farmer offered the following reward, "Harness stolen! Owner offers $100 to any one who will find the thief, and another $100 to prosecute him!" The farmer cooled off and declined to pay after the thief was caught and the court relieved him, declaring that his advertisement was not an offer to pay a reward, but simply an explosion of wrath. In another case a man's house was burning, and he offered $5,000 to any one who would bring down his wife dead or alive. A brave fireman accomplished the feat. This offerer too cooled off and declined to pay, but he did not escape on the ground that this was only an explosion of affection, and was obliged to pay.

Lastly a contract dates from the time of acceptance, and is construed or interpreted by the law of the place where it was made. If it is to be performed in another place, then the parties must be governed by the law of that place in performing it.

A contract having been made, next follows its execution. When a contract is not executed, or not executed properly, the party injured usually may recover his loss. Sometimes the contract states what the offending or wrongful party must pay should he fail to execute it. Many questions have arisen from such agreements. Suppose a contractor agrees to build a home for another and to finish it within a fixed time, and, failing to do so, shall forfeit or pay to the other $5,000 as a penalty for his failure. One would think that if he failed to execute it the other party could demand the $5,000. But the courts have a way of their own in looking at things. Suppose the contractor's failure did not in fact result in any loss whatever to the other party? The courts in such a case are very reluctant to enforce the agreement. If there had been a loss, something like that amount, then the courts would compel him to pay. In other words, the most general rule is, notwithstanding such a clearly written agreement, the courts seek to do justice between the parties. Whenever the parties do not attempt to fix the damages themselves, should their contract not be fulfilled, then the amount that may be recovered depends on a great variety of circumstances. Suppose a woman should go to a store to buy a piece of silk. She asks if the piece shown to her by the saleswoman is all silk, who makes an affirmative reply. The buyer knows much more about it than the saleswoman, which is often the case in buying things, and knows it is half cotton, can the buyer recover anything? Surely she has not been deceived. The seller may have tried to fool her but did not, and having failed, the buyer has no legal ground for an action. On the other hand, if the buyer was ignorant, knew nothing about silk and had been deceived by the seller, then she would have a clear case. This is one of the fundamentals in that large class of cases growing out of deceit. The party seeking redress, must have been deceived, and also injured by the deceit in order to recover. The remedies that may be employed whenever contracting parties have failed, or partly failed to fulfill their agreements or promises will be considered under other heads. See Deceit; Drunkenness; Quasi Contract.

Corporations.– There are many kinds of corporations. Those most generally known are business corporations; and though many of them are very large, legally they are private corporations. A railroad corporation, though performing a public service, nevertheless is a private corporation.

Public corporations are formed for governing the people and are often called municipal corporations. They are created or chartered by the legislatures of the states wherein they exist. Formerly, all private corporations in this country were granted charters by the legislative power, and many corporations are doing business by virtue of the authority thus granted to them. More recently general statutes have been enacted whereby individuals may form such corporations without the aid of a legislature. Authority has been conferred on the courts, secretary of state, or other official to grant to individuals, who may apply for them, charters on complying with the requirements of these statutes. There are other kinds of corporations, religious, charitable and the like; only one other need be mentioned, to which the term quasi has been applied. These resemble corporations in some ways, and this is the reason for calling them quasi corporations. A county or school district is such a corporation. The supervisors of a county, or the trustees of a school district, can make contracts, own and manage real estate for their respective bodies, sue and be sued like the officers of other corporations.

By the general comity existing between the states corporations created in one state are permitted to carry on any lawful business in another, and to acquire, hold and transfer property there like individuals.

FORMATION OF CORPORATIONS

Formerly charters were granted to corporations for a long term of years, or forever. The policy of the law has changed in this regard, and the duration of their existence is limited to a comparatively short period. The life of a national bank is only for twenty years; at the end of that period the charter is renewed, and the charters of the older national banks have been renewed several times. Perpetual charters are infrequently granted, and some of the older ones have been limited by legislative or judicial action. A private corporation had perpetual authority to build and maintain a bridge across the Susquehanna River at Harrisburg, nor could any other company build one within the distance of ten miles above or below. Notwithstanding this clear and exclusive grant, another company was formed which attempted to build a bridge within a mile of the other. The old company tried to prevent by law the new company from building the bridge. The court said that "perpetual" did not mean literally perpetual, but a long time, that the old company had enjoyed its exclusive grant a long time, long enough, and that the new company was justified in its undertaking.

A corporation has no heirs like an individual; it continues through succession, one sells his interest or stock to another, and thus it lives to the end of its charter unless it fails or, through some other event, comes to an end. Suppose a stockholder buys all the stock of the other members, does the corporation still exist? It does for a limited time. How long? No court has answered this question. It depends on the particular case. The courts also say, that he can sell his stock to other individuals and thus practically revive a dying corporation. A stockholder who had bought all the stock of a corporation claimed that he should be taxed as a corporation, which was at a lower or favored rate than that paid by individuals. The court said the game would not work, that for the purposes of taxation the concern must be regarded as an individual. So the stockholder knew more after that decision than he did before.

CAPITAL

Every private corporation has a capital composed usually of money, which is advanced or paid by its members or shareholders. Among the reasons for forming corporations two may be stated. It is a way for collecting money from many sources needful for an enterprise; the many contributors are like the small streams that unite and create a great reservoir. The other reason is, the contributors are free from the liabilities that attach to every member of a partnership for its entire indebtedness. A stockholder may indeed, if his corporation does not succeed, lose a part or all of the capital he has contributed, but no more or only a fixed amount, as will be hereafter explained.

Almost anyone can subscribe for stock, with a few limitations. A minor cannot subscribe for stock, nor can his guardian act for him. Doubtless they do subscribe in some cases; the practical difficulties will be shown in another connection. A married woman cannot always subscribe, unless by virtue of a statute. What usually happens when she wishes to subscribe is to act through a friend, who, after the corporation is fully formed, transfers the stock to her. There is no legal stone in the way of such a course.

Sometimes fictitious subscriptions are made to induce others to subscribe for stock. Whenever the fraud is found out an innocent subscriber can do one of three things. If he has paid for his stock, he can bring an action to recover it; if he has not paid, he can refuse to do so, and set up the fraud as a defense. He can do another thing, accept the stock and sue for the damage he has sustained by the deceit that has been practiced on him. The discovery of a fictitious subscriber among the number, after all have subscribed, where his action in subscribing did not affect their action, will not justify them in not fulfilling their obligation to pay for their shares.

The issuing of a share certificate is not an essential condition of ownership. It is merely evidence of it, like the deed of a piece of real estate. All the shareholders of a corporation are the owners whether any certificates are issued to them or not. Of course a stockholder desires to have his certificate for obvious reasons.

Whenever the capital stock of a company is increased, each shareholder has a right to his proportionate number of the new shares on fulfilling the terms on which they are issued before they can be offered to the public. Occasionally a clique seeks to get control of a corporation by the issue of new stock and taking it among themselves. They can be defeated for the courts carefully guard the rights of all stockholders to take their shares of new stock before it can be offered to, and taken by others.

Of late years private corporations have been issuing a kind of stock, called preferred, that must be explained. Formerly such stock was more like a loan of money to a company, and was issued primarily as the most feasible way of getting a fresh supply of money capital. The lenders or takers of the stock received a fixed per cent. on their money, which was paid before the common shareholders received anything. His preference or dividend was not guaranteed, but the probability of regular payment was so strong in most cases that his shares usually possessed a real value. Preferred shareholders are not liable for the debts of their corporations, and the right to vote at any meeting of the shareholders is sometimes given to them, though not always. The tendency of the day is to confer this right on them. Whether, when the amount of the preferred stock is increased, the preferred shareholders are entitled to subscribe for their proportionate amount, like common shareholders, is an open question.