The deposit book must be carefully guarded, for without its presentation at the savings bank money cannot be drawn. You cannot check against your savings bank account, as with a commercial bank.
HOW THE ACCOUNT GROWS
After the first account is opened the rest is easy.
On the second, as on all subsequent visits, the deposit book, with the amount to be entered, is handed to the receiving teller. He counts the money, makes a record of it for his own use, enters it on your book as a deposit, and hands the book back. That is all.
Whenever interest is due it is written down in the book as if it were a cash deposit.
The interest, if desired, will be paid in cash, but if allowed to remain, it begins at once to earn interest for itself.
Interest grows like a rolling snow ball. On such small beginnings great fortunes have been built.
Savings banks keep a reserve, made up of earnings in excess of interest and all expenses.
This reserve earns money.
The money so earned is reckoned as a net profit, and it may be distributed, and usually is, among its depositors as a “dividend.”
THE LIMIT OF DEPOSIT
Different banks have different limits of deposit, that is fixed sums beyond which they will not receive.
The limit is from one thousand to five thousand dollars.
When the fortunate depositor has reached the limit with one savings bank, there is no law to prevent his opening another account with another, or with any number of similar banks.
Remember the savings banks are not meant for capitalists, but for small depositors.
After deposits and interests have reached a total of $1,600, the interest will not go on earning interest, but will be regarded simply as a deposit.
This is in compliance with law.
Depositors, posted as to the law, open another account with another bank, and keep on till the interest limit is reached.
HOW TO DRAW MONEY
A savings bank depositor may either draw money himself or through some properly authorized person.
This is the method:
The deposit book is presented to the paying teller. The owner states the sum he wants to draw.
Having assured himself that the bearer of the book is the right person, the teller takes a receipt in a book kept for the purpose, for the amount, enters the same on the right hand or debit side of the book, and hands out the money.
There is a form of authorization for another to draw, printed on the deposit book. This must be copied and its directions complied with.
Most banks will not allow depositors to draw out less than a fixed sum, say $5.00.
This saves trouble, and prevents thoughtless depositors from going to the bank every time they want a dollar.
Before a depositor can draw a large sum from a savings bank he may be compelled, under the law, to give from one week to six weeks’ notice of his intention.
This provision may not prevent a run on the bank, but it gives the managers time to provide for it.
Read the rules in the deposit book.
HOW SAVINGS BANKS EARN
How can a bank that does not discount notes or deal in loans and commercial paper earn money? How can it pay interest?
While they may be individually small, the aggregate of all the deposits in a savings bank may, and often do, amount to many millions.
This money is not allowed to lie idle.
Under the skilled direction of the bank officers, the money, instead of lying idle in the vaults, is invested in many ways, but always in accordance with the laws of the state under which the bank is chartered.
Much of the money is invested in mortgages on real estate, never on personal property.
National bank stocks, sound railroad bonds, and other forms of reliable interest security are fields for the investment of savings bank funds.
Savings banks are subject to the periodic inspection of state officers appointed for the purpose.
The failure of a savings bank through bad investments or the dishonesty of officials is very rare.
Avoid all banks that promise more than the regular rate of interest.
Private banks may be, and usually are, honestly conducted, but to be safe, deposit only with a bank that is regularly chartered and is subject to the inspection of the law.
The savings bank is the best for the wage earner.
CHAPTER X
NOTES–DRAFTS
The promissory note is a most useful kind of commercial paper, and it is in general use in business.
If a man has not sufficient ready cash to pay for the real estate he is about to purchase, he makes up the difference by a note, which note is secured by a mortgage on the property.
Remember the mortgage must always be regarded as security. The note represents the debt.
Often wholesalers take a note as part or even full payment for a bill of goods to a retailer.
If the wholesaler needs money, he endorses these notes and putting them in his bank draws against them, less the discount he has to pay for the accommodation.
As has been shown, an account may be transferred and sold, but a note is more convenient for that purpose.
AN ILLUSTRATION
As with a check the maker of a note is known as a “drawer,” the person in whose favor it is drawn is the “payee.”
Notes may be written in pencil, but it is better and safer to write with ink on good paper.
Supposing you buy a team of horses, or it may be a bill of goods, from John Brown, for $350.
Now you have only $100 in cash. What are you to do?
Mr. Brown, knowing you to be reliable, says: “That’s all right, friend Jones. You pay me the $100 cash for which I will give you a receipt, then I will take your note for six months, payable at my bank.”
You agree to this; pay out the money, make and deliver the note and take the property in question, which is now yours as much as it had been his before the transfer.
The following would be a legal form in which to make the note:
$250. Summit, N. J.
October 10, 1910.
Six months after date I promise to pay to the order of John Brown…………..
Two hundred and fifty …… dollars,…. At the Lincoln National Bank of Summit
………. Value received.
George Jones.
No. 1. Due April 14, 1911.
Now, if before the expiration of this note, you want to make a payment on it of, say, $75, you take the money to Mr. Brown, who endorses on the back of the note, “Received on the within note $75, January 3rd.,” if that be the date, and signs, “John Brown.”
It may be well to remember that while a running account may be collected at any time, the law cannot prevent the maker of a promissory note from selling all his belongings and leaving the country before the note is due.
DAYS OF GRACE
Notes may be “time” notes, that is where there is a specified time for payment, or “demand” notes. The latter are collectable on presentation.
With the time notes “three days grace” are allowed after the expiration of the date for payment. No such favor is allowed in the case of demand notes.
These grace days do not seem businesslike. Why not add them to the date in the note? Well, it is a custom, quite as old as the greater part of our laws, and so it must be observed.
Under the law a note is payable at the home or business place of the drawer, unless otherwise specified.
INDORSING NOTES
A note secured by a mortgage has its payment guaranteed.
The usual way of securing the payment of a note given in business is to have it endorsed with a good name across the back, as in endorsing a check.
By writing your name across the back of another man’s note you announce to all the holders of that note that you know the maker and that if he does not pay it you will.
In most states the indorser of a note cannot be held responsible for payment, unless the holder notifies him, within twenty-four hours after the note comes due, that the maker cannot or will not pay.
If an indorsed note changes hands, each indorser is responsible to all endorsers who follow him and also to the last holder of the note.
If an indorser, that is, one into whose hands the note has come after the first endorsement, should not wish to guarantee payment, he writes before his name, “Without recourse to me.”
This is known as a “qualified endorsement.”
A NEGOTIABLE NOTE
Most notes are negotiable; that is because they may be sold, like any other personal property, or the ownership may be transferred from one person to another.
No note is negotiable that does not bear on its face, the words, “Pay to bearer,” or “Pay to the order of,” followed by the payee’s name.
JOINT NOTES
When two persons sign a note they become jointly and individually responsible for its payment.
Such persons are known as “joint makers.”
If one signs his name on the back of a note before it has been handed to the payee, he makes himself not only an endorser, but a joint maker.
If the maker of such a note refuses to pay on the expiration of time stated, he is liable for the amount without any notification.
DISCOUNTING NOTES
If a business man borrows from a bank on his note, he must pay for the privilege.
Interest is a sum paid for the use of money.
Interest is reckoned as a certain percentage yearly on the principal.
Interest on interest is called “compound interest” and is unused in ordinary business transactions.
Instead of collecting interest when the amount borrowed on a note is due, or deducting it from the principal in advance, it discounts the note at the rate agreed on and pays the rest.
This is called bank discount and its rate is variable, depending on the abundance or scarcity of money.
Money is a marketable article, and the price, like that of wheat or cotton, is governed by supply and demand.
INTEREST ON NOTES
A note may be made payable “with interest,” or not, as the parties concerned may agree.
If nothing is said about interest in the note, no interest can be collected.
Again a note may go into details and specify that “the interest shall be ten per cent, payable semi-annually,” provided always that the rate shall not be higher than the legal interest of the state.
Excessive interest is known as “usury.” It invalidates all the interest, and in some places the principal is forfeited.
When the holder of an interest note receives interest payment he must record the date and sum on the back of the note.
PROTESTS
If a note comes due on Sunday or on a legal holiday, payment must be made on the following day.
Holidays are appointed by the separate states.
The United States recognizes no day as a holiday, except Sunday, and that is acknowledged through custom.
It is customary for banks to notify makers of notes held by them a few days before time set for payment; but this is not required by law.
If a note lies unpaid in bank the day set for payment, as soon as the office closes for regular business the note is protested.
The protest is made before a notary public; he is usually an employee of the bank.
In the protest formal objection is made against the breaking of the promise, and demanding that the matter be set right by the maker, or on his failure, by the indorser.
The indorser, who has to pay, has a claim for the amount on the maker of the note, as he would have for money loaned or goods sold, and he can sue to collect.
A note that is not paid within a fixed time is said to be “outlawed.”
Remember the indorser of a note must be notified within twenty- four hours of the failure of the drawer to make good.
NOTICES
The object in protesting a note is to fix the liability on the endorser.
If there be more than one endorser notice of protest must be sent to all at the same time.
It is better, where possible, to serve the notices on the indorsers in person.
The payee must also be notified.
ACCOMMODATIONS
There is a form of note sometimes used in business which is given without any consideration on the part of the maker. This is known as an “accommodation note.”
The maker of such a note does not expect to pay it, nor does the man in whose favor it is drawn expect to do so.
An accommodation note is an instrument by the sale of which, or through a bank, money may be raised for immediate use.
The maker in this case is a friend who loans his name.
As there was no value received such a note could not be collected by the payee.
But if it passes into the hands of a third party, who endorses it, then the maker of the note can be compelled to pay.
A LOST NOTE
A note may be lost or stolen.
The losing of a note does not release the maker from payment of the full amount on the date and at the place named.
The loser should at once notify the maker of his loss.
A man who buys, before its maturity, a lost or stolen note, may collect the full amount from the maker, provided the note is payable to “bearer” and no notice of the loss has been published.
When the maker of a lost note pays the amount to the original owner, he should receive from him what is known as a “bond of indemnity.”
This bond is to secure him against paying a second time.
NOTES ABOUT NOTES
There are some things worth remembering about promissory notes.
1. Never give one if you can pay cash. 2. A note made on Sunday is worthless in some states. 3. A note given under compulsion is worthless. 4. Notes made by a drunken person, or obtained by any form of fraud cannot be collected under law.
5. Notes bear interest only when so stated in body of note. 6. The holder of a note has a legal claim against every indorser. 7. Each indorser is responsible to every indorser who follows him. 8. Notes are valid without reference to the kind of paper, or whether they are written with pen or pencil. 9. Losing a note does not release the maker from payment. 10. If no time is set in a note for payment, it becomes due as soon as it is made.
11. Where a note is made in one state and is payable in another, it is governed by the laws of the state in which it is to be paid. 12. Notes payable on demand draw no interest until after they have been presented for payment.
13. If a note reads “with interest” and no rate is specified then it draws the legal interest in the state in which it was made. 14. Demand notes are not entitled to days of grace. 15. If no place of payment is named in a note, it should be presented to the maker personally in business hours. 16. The misspelling of a word or words in no way invalidates a note.
17. If a person who cannot write makes a note his mark should be properly witnessed.
18. The makers of a joint note must be sued jointly. 19. If the words and the figures in a note disagree, the words take precedence.
20. A note signed by a firm may be collected from either of the partners.
21. When a payment is made on a note secured by a mortgage, the amount is endorsed on the note, never on the mortgage. 22. A note given by a minor is void, unless given for actual necessities, like food and clothing.
23. If a note made by a minor is acknowledged when he comes of age it is binding and collectible.
CHAPTER XI
A DRAFT
A draft is a written order from the first party to the second party to pay to the third party a certain sum of money at a certain time.
The first party is called the “drawer.”
The second party is the “drawee.”
The third party is the “payee.”
There are two kinds of draft.
The first is usually where the cashier of one bank, through his own check, draws on another bank for the cash difference in their accounts with each other.
The second form of draft is the most usual and is the one we shall here consider.
The cashier’s draft is always for cash and the demand is always honored. The ordinary business draft may be for cash or for goods.
The business draft is usually honored, but there are circumstances under which it may be ignored.
TO MAKE A DRAFT
But let us suppose that the draft is all right and that a merchant, let us call him Henry Thomas, and suppose him a resident of Philadelphia, has a bill against James Taylor, of Cleveland, and he wants to collect it, without recourse to law. How will he go about it?
The bill is for $100.
Mr. Thomas writes this draft:
Philadelphia, Pa., Sept. 5, 1910.
At sight pay to the order of
Johnson National Bank of Philadelphia One hundred………………. dollars. With exchange
and charge same to
Henry Thomas.
To James Taylor,
Cleveland, Ohio.
Having drawn his draft, Mr. Thomas takes it to the Johnson National Bank for collection. The collection is actually made by some bank in Cleveland to which the Johnson has endorsed it over.
If Mr. Thomas wished he might have sent his draft direct to the Cleveland bank, but he no doubt thought it better to transact such matters through his own bank.
Or if Mr. Thomas lived where he was not in touch with a bank, he might have drawn through any person whom he knew in Cleveland.
On receiving the draft for collection, the Cleveland bank would at once give it to a clerk who would without delay present it to Mr. Taylor.
Mr. Taylor, having written his acceptance of the draft, is given three days grace in which to make payment.
In states where days of grace are not allowed, he would have to pay at once.
Mr. Taylor writes the word “accepted,” with the date and his name across the face of the draft, and if he does not pay cash, he states in the writing where payment will be made.
Of course, Mr. Taylor cannot be compelled to accept a draft. There may be good and honest reasons for his not doing so, but having accepted it, in business honor he is bound to pay it.
The term “Sight draft” explains itself, but the order to pay a draft may indicate, and often does, the number of days allowed for payment, after presentation.
FOR COLLECTION
What should be done by the man to whom a bill or a note is due, when the debtor lives in a place where there is no bank?
In that case he must learn in some way the name of a promising person to make the collection for him.
In this case he makes out the draft as before, and adds the words “for collection.” This acts as a bar to any transfer of the paper.
Most banks refuse to handle a draft marked “for collection.”
DISHONOR
Drafts are not necessarily duns.
Some country merchants prefer to pay their bills to wholesalers in that way, so that collecting drafts is no small part of the business of the ordinary bank.
While men are not compelled to meet drafts when presented, if the amount is due and he defaults or refuses to pay he injures his own credit.
In refusing a just draft he is said to “dishonor” it.
So sure are wholesalers that their drafts will be met by their distant debtors that they do not hesitate to draw against them when deposited for collection, regarding them as cash to their credit in bank.
PROTESTS
When a draft is not accepted or paid when due, if it be a time draft, it is protested in the same way as a note.
The protest of a draft serves as a notice to the drawer of its non-acceptance.
Like notes and checks, drafts may be transferred by a similar endorsement.
BUYING DRAFTS
If I wanted to pay a bill for $150 to Albert Holt, living at Wallace, Kansas, and did not wish to trouble him with a check, how would I go about it?
1. I might express the cash, which would be expensive. 2. I might send it in postal order, not always certain. 3. I might send it by a trusted hand, but might have long to wait before I found a friend going out to Wallace.
I am living in New York City, and am familiar enough with banking to know that New York is a great financial center and is in constant communication with nearly all the outside banks.
The outside banks keep money in deposit here, and the New York banks, particularly in the spring and autumn, keep deposits with their correspondents.
With my $150 and a small extra sum to pay my bank for drawing the draft, I go thither and buy a draft for the sum I owe Mr. Holt.
I mail this draft to my creditor and he can cash it without loss in his home bank. Here is the form:
No. 101.
Madison National Bank of New York. Pay to the order of Albert Holt,
One hundred and fifty dollars ($150.)… ………. L. N. Jones,
Cashier.
To Prairie National Bank,
Wallace, Kansas.
A GOOD PLAN
When you buy a draft which you mean to send off in payment of a debt, a good plan is to have it made payable to yourself.
Let us suppose it is the case of Albert Holt. You transfer the draft to him by writing across the back, “Pay to the order of Albert Holt,” and add your signature.
Now as all drafts are returned, as payment vouchers, to the banks from which they were issued, and as Mr. Holt must have signed the draft to get his money, it follows that there is a record of his having received it, and this has all the force of a receipt.
Do not endorse a draft with just your name, for in that case, anyone into whose hands it falls may collect. First write “Pay to the order of” the person for whom it is intended.
GOOD AS CASH
A draft made payable to yourself is as good as cash, and far safer to carry.
If you are identified at any bank between the Atlantic and Pacific, you can have your draft cashed.
All banks furnish blank drafts.
Never endorse a draft made payable to yourself, and this applies to a check, until you are about to use it.
It is a good plan never to sign your name until it is actually necessary.
Some people have the foolish habit of signing their names on stray bits of paper.
Do not get into this habit, even if there is no space to fill out a note or order above the signature.
CHAPTER XII
JUST MONEY
As has been before stated, money in its broadest meaning is a medium of exchange.
Anything that can pay a debt or purchase property, in any part of a country, is the money of that country.
Every civilized country has its own minted or printed money.
The usual mediums of circulation are gold, silver, nickel and copper, the latter alloyed more or less in the United States with nickel.
Government and bank bills, while having all the purchasing power of gold, are simply promises to pay in gold, or other coin of “redemption”, the amounts they represent.
The money of one country cannot legally be made to pay a debt in another country, unless both parties to the payment agree to it.
When gold is exchanged to settle the balances of trade between two countries, it is not reckoned, if coined, at its face value, but at its bullion value.
The word “pecunia” meant in ancient Greece and Rome a flock or herd.
In those days live stock were used as a medium of exchange, or money.
We keep the word and often use it as in “pecuniary” affairs, and when we call a moneyless man, “impecunious.”
UNITED STATES MONEY
The United States Government reserves to itself the right under the constitution, to coin and issue the money to be used by its own people.
Formerly we had two standards of value, gold and silver, or bimetalism.
If gold and silver were produced in relatively equal quantities, the world would go on trading with money of both kinds, but the proportions are not the same.
Among the Aztecs and Peruvians silver ranked with gold as two to one, that is, two pounds of silver would purchase as much as one pound of gold.
But when great silver mines were discovered and new methods were discovered for extracting the metal, it became more and more abundant, till it depreciated far below the former value it had in its relation to gold.
Most of the commercial nations decided to have but one standard of value, and that gold, long before the United States fell into line.
Our money measure is known as the decimal, or metric. It would be convenient, if we could follow the example of nearly all the other commercial nations, and use the metric system for all our weights and measures.
OUR METAL MONEY
In the United States Treasury at Washington, there are many million dollars in silver coins and bullion.
The gold standard has not driven silver out of circulation, for it is still found convenient to use it in settling immediately our smaller business transactions.
When the silver dollar was first coined, and indeed up to the present date, the intention was that it should contain about a dollar’s worth of silver, or 374 1/4 Troy grains of the pure metal. This amount of silver was supposed to represent permanently 24 3/4 grains of pure gold, and it did so represent its value at one time, and would have continued to do so, had the relative output of both metals been the same.
Our chief mint is in Philadelphia, where is coined all the copper, nickel, silver, and gold money in use.
To imitate these metals, even where the full value is given, constitutes the criminal offence called “counterfeiting.”
In former times, some of our older readers will remember them, the Government meant to have the metal in each coin of about its unstamped value in the market.
In those days the cent was as large as our present silver half dollar, and the copper two-cent piece was a monster in the way of coinage.
Now our copper and nickel coins are small and can be carried without testing strength of pockets. They are regarded as money “tokens.”
Silver coins that are punched can be refused in the settlement of a debt.
Punched gold coins should always be refused, for they are never of their face value.
Silver coins may be used in the settlement of bills up to $5.00.
Gold coins are, of course, legal tender up to any amount.
PAPER MONEY
We usually class all paper money as “bills.”
There are three classes of bills, all quite different in their inception and meaning. These are–
1. National bank notes.
2. Treasury notes or “greenbacks.”
3. Treasury certificates.
BANK NOTES
A national bank note is the guaranteed promise of some national bank to pay coin or its equivalent to any one presenting the note at the bank and asking to have the exchange made.
This exchange is called “redeeming.”
If you examine a bank bill you will notice that it is drawn much like an ordinary business “demand” note, made payable to “bearer,” and signed by the bank president and cashier.
For every dollar of its own sent out in the form of a bill by a national bank, the Government holds a dollar of the bank’s collateral to guarantee the redemption of the note if the bank should fail.
National bank notes are received in all business transactions, because they are secured by the Government, yet there are cases in which even the Government will not receive them in payment of a claim, nor pay them out itself.
1. All import duties must be paid in gold. 2. The Government pays the interest on its own bonds in gold.
The Bureau of Engraving and Printing–a department of the United States Treasury–makes and prints all the national bank notes.
On all these notes the names of the United States Treasurer and the United States Register appear. The names look like signatures, but they are facsimilies and are printed with the note.
The notes are printed on specially prepared paper, to imitate which is regarded as a counterfeit.
Soiled and worn out bank notes may be exchanged for fresh ones at the Treasury Department.
“GREENBACKS”
Greenbacks are treasury notes. The name comes from the color in which they first appeared in the years of our Civil War.
The treasury note is really an engraved promissory note of the United States Government made payable to the bearer, and bearing the signatures of the Treasurer and Register of the Treasury.
These notes are issued in denominations of from five to ten thousand dollars.
Formerly there were one and two-dollar treasury notes issued, and we still find some of these “old-timers” in circulation.
There are so many treasury notes in circulation that the Government, vast though its bullion and coin reserves are, could not redeem them if presented at once.
The treasury note is a legal tender for any amount of indebtedness.
The Government prints the following guarantee on every treasury note:
“This note is, by law, to be considered as good as coin. Any one to whom you pay it must reckon it as equivalent to a dollar (or face value in dollars) in value.”
TREASURY CERTIFICATES
The treasury certificate is, in form, very much like the treasury note, and it bears the signatures of the same officers.
Treasury certificates are of two kinds, gold and silver.
The gold certificates are printed in yellow.
The silver certificates are light black and white.
These certificates are issued against the great reserves of gold and silver that are kept to redeem them.
The use of the gold certificate saves the loss of the gold that comes through abrasion when handled.
A five-dollar silver certificate is much more convenient to carry than five silver dollars.
These certificates, as may be seen, are issued for the convenience of the public.
Certificates of either character will be redeemed to any amount, in the metals for which they call, if presented at the United States Treasury at Washington, or at any of the sub-treasuries to be found in our larger cities.
WORN-OUT NOTES
Only those familiar with the work can realize the great quantities of bank bills, treasury notes, and certificates continually being made and sent out from Washington.
While a stream of clean, fresh paper of enormous value is going out to be spread all over the country, another stream of soiled, torn and altogether disreputable-looking paper is flowing back to the Treasury.
The filthy paper is quite as valuable as the clean, so it is properly checked, recorded, and credited before new paper is sent out in its place.
They are now trying to make old bills presentable by washing them at the Department. Meanwhile, most of them are ground again into pulp, made into new paper, and all the first processes gone through with to make the paper into money.
CHAPTER XIII
OUR POSTAL BUSINESS
Up to a few years ago, it was the city, town and village dweller who reaped the greatest benefit from the post office.
In dense communities carriers leave the mail at the place to which it is addressed. Where this is not done the walk for the mail is not far.
Now the purpose of our Government, which is of the people and by the people, is to treat all the people alike.
However, up to a few years ago the farmer, our most essential producer, had not a fair deal.
Fortunately things have changed and are still changing for the better.
Rural Free Delivery was an idea as just as it was grand, and as welcome as it was necessary.
The good work began October 1, 1896.
The purpose of rural free delivery is to accommodate dwellers in the country, whether farmers or not.
Through this branch of the service mails are carried daily, on fixed lines of travel, to people who otherwise would have to go long distances to reach a post office.
The Government requires that the states or counties shall keep in good condition the roads traversed by the mail carriers.
Gates must not obstruct, and it is required that every unfordable stream shall be bridged.
It is further required, as a condition for establishing a line for rural free delivery, that each route of twenty-four or more miles in length shall have at least one hundred families resident on either side.
CLASSIFIED MAIL MATTER
Mail matter is divided into four classes. For each class a different rate is charged.
First Class:–All letters, and all other written matter, with a few exceptions, pay two cents for each ounce, or fraction of an ounce.
Second Class:–Newspapers, magazines, and other periodicals, one cent for each four ounces or fraction of four ounces. Publishers of periodicals, sending direct from place of publication, get a lower rate,–one cent a pound.
Third Class:–Books, circulars, and other printed matter, one cent for two ounces or fraction of two ounces.
Fourth Class:–Merchandise and miscellaneous articles, weighing not over four pounds, one cent for each ounce or fraction of an ounce.
POSTAL RULES
1. On a tag, or the paper on which the address is written, the sender of third class matter may write “from” and add his own name and address.
2. On the blank leaf of a book, forwarded as third class matter, the sender may write a dedication or inscription, but it must not be in the form of a letter.
3. Fourth class matter must be so wrapped that the postal authorities can examine the contents without much trouble. 4. Such articles as glass, nails, needles or other matter that might work injury if it came loose, must be enclosed in two separate wrappings, or a double case.
5. Poisons, explosives, inflammable substances, and live animals are excluded from the mails.
6. Firearms may only be sent in detached parts. 7. All alcoholic liquors are regarded as explosive.
FOREIGN RATES
The rates to Canada are the same for all classes of matter as in the United States, except that seeds, scions, bulbs, cuttings, and roots are one cent per ounce.
To Cuba all the rates are the same as for domestic matter.
Rates with Mexico are the same as if mailed between our own states. Packages are limited to 4 pounds 6 ounces, except that single books may weigh more. Merchandise must be sent by parcel post.
To all other countries, in what is known as the “Postal Union”, the rates for letters are five cents for each half ounce or fraction thereof.
Postal cards two cents each, double four cents.
Registration fees or letters or other articles, four cents each.
Ordinary letters for foreign countries, except Canada, Cuba and Mexico, must be forwarded, whether any postage is paid on them or not.
All other mailable matter must be prepaid.
Alaska, Hawaii, Guam, Tetuila, the Philippines and Porto Rico are regarded as insular or territorial possessions of the United States, and are entitled to the same postal rates.
STAMPS
Postage stamps may be purchased at any United States post office, or at any place authorized to sell them.
Anyone may sell postage stamps as he would any other personal asset.
If stamps are bought to be enclosed in a letter, they should never be of a higher denomination than twos and ones, as they are easily disposed of.
Letters should always be stamped on the upper right-hand corner of the envelope.
Packages should be stamped in the same way and on the addressed side.
The using of cancelled stamps is a felony.
Foreign stamps have no value on letters or parcels mailed in the United States.
A domestic, unstamped letter will not be forwarded.
If a stamped letter is found to require more postage, the amount lacking is stamped on the letter, and must be paid by the receiver.
Stamped envelopes and stamped wrappers are sold by the post office at the usual rates of postage, with the cost of the paper added.
If a stamped envelope or wrapper is spoiled, the stamp must not be cut off and used by pasting on another envelope or wrapper, for it will be treated as if no postage were paid.
Such spoiled wrappers or envelopes will be exchanged, without charge, by the postmaster, for stamps of the same value.
POSTAL CARDS
Never use a postal card to dun a debtor.
Never send a confidential message on a postal card.
Foreign postal cards, that is those bearing a foreign stamp, cannot be used in the United States.
An international postal card can be bought.
Postal cards and letters may be redirected and forwarded without extra charge, where the address of the receiver has been changed. Packages require a renewal of payment in such cases.
REGISTERING LETTERS
A letter or a parcel may be registered to further insure its safe delivery.
When a letter or parcel is registered, it must have the sender’s name and address written across the left-hand end of the envelope and on the reverse side.
In addition to the stamps required ordinarily, eight cents in stamps or in a regularly prepared stamp, is the registration fee.
The clerk, receiving a registered parcel, gives the sender a receipt for the same. After the letter has reached its destination, the sender gets a second receipt, through the post office, signed with the receiver’s name.
The receiver of a registered parcel signs two receipts, one for the post office and the other for the sender.
SPECIAL DELIVERY
The purpose of what is known, in connection with the post office, as the “Special Delivery System”, is to insure the delivery of any letter or package to the person, to whom it is addressed, as soon as it reaches his post office.
In addition to the regular post charge, a fee of 10 cents is added for special delivery. This is in the form of a special stamp, though when this cannot be had, the same amount in ordinary stamps may be attached.
In the case noted, the sender should write in line with the stamps, “special delivery.”
Special delivery messages are delivered, not by ordinary carriers, but by special delivery messengers.
The special delivery letter is used when immediate knowledge is necessary. It saves a long telegram.
MONEY ORDERS
Money, in limited sums, may be sent through the post office. One advantage of sending money in this way is that it practically insures the sender against loss.
All post offices are not money order offices.
A post office money order may only be sent to those places where there are such offices.
At all post offices, authorized to send money orders, proper blanks can be had on which the sender can write his order.
Any sum may be sent by postal order, from one cent to one hundred dollars.
The fee is from three to thirty cents.
Read the blank carefully; it is simple, but be sure you understand it before filling out the order.
If in doubt, ask the clerk.
Having filled out the order, hand it to the clerk with the sum required, and the additional fee.
The clerk then prepares and hands out an order for the amount, on the postmaster of the town to which you are sending your letter, and this you enclose to your correspondent.
CASHING POST OFFICE ORDERS
The money order never contains the name of the sender; this the postmaster of the office from which it is sent supplies in a separate communication to the postmaster who is to pay.
No money passes from one office to the other.
A post office order is like a draft drawn by one postmaster on another. The one credits the sum, the other debits it.
The holder of an order will not get his money unless he is known to the paying postmaster or is identified.
Before paying an order the postmaster requires the holder to receipt it.
A post office money order, like a check or draft, may be transferred to another for collection.
Banks receive transferred money orders as if they were cash deposits.
The party to whom orders are transferred must go through the same forms at the office, where payment is made, as if he was the original payee.
ADVICE
It is not necessary to register letters containing checks. Never write “personal” on a business letter.
Always enclose a stamp for reply when writing to a stranger.
See that the addresses on your letters are distinctly legible.
CHAPTER XIV
TELEGRAMS–THE TELEPHONE
To send a telegram, you or your messenger must take what you have written to the nearest telegraph office.
You may write a telegram on any kind of paper, provided always that the writing is plain.
All telegraph offices are provided with regular blank forms, which may be had without cost, and it is better to use these when they are available.
The blank is properly ruled, with lines for the date, for the address of the one to whom it is to be sent, and for the message.
CHARGES
The telegraph company charges a fixed sum for a message of, say, ten words. These words do not include the name and address of the sender.
The amount of the charge is always dependent on the distance between the office from which the message is sent and the one at which it is received.
Every word over ten, in the message, pays an extra fee, dependent again on the distance.
Getting just what you mean into ten words may seem difficult when you have a lot to say, but it is surprising how you can boil the message down when each additional word costs five or more cents.
It may pay to practice this.
If it is actually necessary to make your meaning clear by the addition of more words, do not hesitate at the cost.
If you are known at the telegraph office, you can send a message to be collected from the receiver.
Never permit the receiver to pay for a message that is exclusively on your own business.
Always make and keep a copy of every important telegram you send away. Do not neglect this.
If you have neglected to keep a copy of a telegram, or having made one have lost it, you may get a copy from the telegraph office, provided the application be made within six months of the sending of the message.
Telegrams are delivered by the company’s messengers.
You must give receipt to the messenger on the delivery of a telegram.
Where the receiver lives a long distance from the telegraph office, it is customary to pay the messenger an additional fee, depending on the distance.
The charges for telegrams to be sent at night and delivered in the morning, are much lower than for day messages.
For an additional charge, less than the original, messages may be repeated back to insure their accuracy.
Read over to the official, or still better, have him read your message over in your presence, that you may be sure he understands it as written.
You cannot hold others responsible for your own mistakes.
TELEGRAPHING MONEY
You can telegraph money with as much safety as you can send it through a bank.
In handling money in this way, the telegraph company does not act as a banker but as a carrier.
Telegraph money orders are a great convenience, when one wants to send cash to a distant point in a hurry.
Country telegraph offices do not, as a rule, transmit money; that function is left to the offices in the larger centers.
THE METHOD
One wishing to “wire money” will find at the telegraph office suitable blanks; they are furnished gratis.
On lines provided for the purpose and properly indicated, as in a postal order form, write the name and address of the person to receive the money, with the amount.
This paper, properly signed, is handed to the clerk with the money to be sent and the fee for transmission.
The fee is double that charged for an ordinary message of the same length.
If, for any reason, the person to whom the money is sent cannot be found within forty-eight hours, the money is returned to the sender, but the fees are retained, as the company is not to blame for failure.
The receiver of a money order, if unknown, must identify himself as he would at a bank, and he must receipt for the money.
If the person to receive the money is an entire stranger in the place to which the money is sent, the sender knows it, and he provides for the situation by signing, on the reverse of the application, an order to the distant operator to pay the money to the person named within, without further identification.
When a telegraph operator receives a money order, he at once seeks out the person to whom it is sent, and pays the money in accordance with his instructions as to identification.
THE TELEPHONE
The telephone, local and long distance, is fast superceding the telegraph as a medium for speedy business communications.
Its use is not confined to large cities as at first.
Nearly every village is now in communication with the outer world through the telephone.
The world has just awakened to the needs of its food producer, the farmer.
In Norway, which is not a rich country, the telephone has been introduced on the farms. The rates are low and the benefits are inestimable.
On our large farms, in the West, telephones have been in use for some time as an essential part of the machinery.
Now, there is a move on foot to make them available for every farmer in the more settled regions.
While business can be conducted over the telephone, as if the speakers stood face to face, yet such transactions not being recorded, will not stand in law, if one of the parties should dispute the other’s word.
CHAPTER XV
BUSINESS BY EXPRESS
There are two kinds of expresses, viz.: local and general. The names describe the provinces of each, though a general express may do a local business.
All express companies are common carriers.
The carrying business done by our express companies is enormous. They have their own special cars attached to passenger and fast freight trains, and their goods are given special departments in water transportation.
If living between two towns, it is always better to have your letters and express business done through one office.
INSTRUCTIONS
When ordering material by express, make sure that you give the address, to which you wish it sent, in such a way that a mistake on the part of the forwarder will be out of the question.
If you send away goods by express, make sure that they are securely packed, and be equally sure that the address is clearly written and in a large hand. It would be better if the address could be painted on with a brush.
If you should send perishable stuff, like meat, flowers, glass, or fruit, be sure to label the package “perishable” or “Handle with care, glass.”
On long distance transportation prepayment is required; on short distances it is optional.
It is always better to get from the express agent a receipt for the matter taken in charge.
Take care to put your own address on the lower left-hand corner of the package to be sent.
If the person to whom the parcel is sent cannot be found, the address will enable the express company to notify the sender at once of the fact.
When sending any goods by express, it is always prudent to notify the person for whom they are intended of the fact by mail, and also to state the company by which the matter was sent and the date of shipment.
THE COMPANY’S DUTY
The express company must always require, on delivering goods, a receipt from the receiver.
If the goods should be received by a second person, on behalf of the consignee, he must sign the consignee’s name, and under that his own.
If a package appears to be damaged in transmission, the express company must permit the receiver to examine it before signing. He may refuse to sign or to accept in any way, if the goods are injured, or not as he ordered.
Express companies are responsible for all damages sustained by goods while in their charge.
COLLECTIONS BY EXPRESS
All the large express companies have the machinery for collecting accounts and notes whenever they have branch offices.
Such companies are reliable collectors. Their services are prompt and their charges reasonable.
Where an express company fails to collect, notice is promptly given with the reasons for failure.
When you wish an express company to collect, it will be necessary for you to make out a statement of the account. This is placed in a special envelope, provided by the company. It is properly indorsed and handed to the company’s representative.
The company charges a small fee for collection, whether it succeeds or not. In any case the fee is not much above a fourth of one per cent, unless there should be unusual trouble.
C. O. D. BY EXPRESS
As you know, C.O.D. means “cash on delivery”.
Cash on delivery orders constitute no small part of every express company’s business.
When goods are forwarded in this way, the sender furnishes with the goods an itemized bill duly receipted. The express company’s charges should be included in the bill.
The express agent is sure to collect the bill before he lets the goods leave his keeping.
MONEY BY EXPRESS
Should you desire to send money by express, it will be well to go to the company’s office before you pack it up.
Express companies have special receptacles or envelopes in which to store coin or bills. There is no charge for these.
The sender must himself seal the packages containing the money, and write on them the address of the consignee, also the amount enclosed.
Having received the packages, the express agent ties them up, affixes his official seal, which is so arranged that the package cannot be opened or tampered with, without breaking. This done, he gives the sender a receipt. This should be cared for as a vital part of the record.
The charges for sending money by express may or may not be paid in advance. They vary with the amount to be carried and the distance.
Packages of money are receipted for in the usual way. They are delivered only to the legal consignee, unless a second person should appear with an order, amounting to a power of attorney, and which the company cannot reject.
MONEY ORDERS
The foregoing by no means limits the express company’s usefulness or field of opportunities.
Express companies issue money orders much as does the Post Office Department.
As with the post office, the fees for orders vary, but no order is issued for more than fifty dollars.
If you want to send such an order, the express company will furnish the proper blank for you to fill out.
On this form must be written out very plainly the name and address of the person to whom the order is to be sent, with the amount, in words and in figures.
On receiving the money the express agent gives to his customer two papers; one is the company’s receipt for the money, the other is the order itself.
The order instructs the agent at the point to which it is to be sent to pay the sum named to the person named.
To complete the order the sender should sign his name in a place indicated for the purpose on the back of the paper.
This done, the order can be sent to the person for whom it is intended, in an ordinary envelope.
The receiver of an express money order can have it cashed at the express office in his town, or sign it and place it in his own bank as if it were cash.
CHAPTER XVI
ABOUT RAILROADS
Not everything about railroads, that would be a tremendous undertaking, but just enough to show what everyone should know about them as carriers of goods.
The express companies have practically a monopoly of the transportation of the smaller packages of goods requiring quick transit and immediate delivery, but the longer, heavier, and slower freight are in the hands of the railroads, and where it can be done, and time is not a first factor, the steamboat takes the place of the train.
BILLS OF LADING
As most of the goods in changing hands are carried by steamboat or railroad, the method of shipment should be understood by everyone who may be called on to use one or the other means of transportation.
The person shipping goods in this way is the “consignor.”
The person to whom the goods are shipped is the “consignee”.
The goods shipped are described in a paper called a “bill of lading.”
A bill of lading is a written contract, or statement of the goods shipped, their condition, and the time of shipment.
Bills of lading and receipt blanks are furnished at the offices of the transportation companies.
Two copies of the bill of lading should be made out. One of these is signed by the consignor and the other by the transportation agent.
The copy signed by the consignor is kept by the agent, and the copy signed by the agent is retained by the consignor, as a voucher for the goods shipped.
This receipt should be mailed to the consignee.
When the consignee gets this bill of lading, it is a voucher to the freight agent, where the goods are to be delivered, as to the ownership.
It is usual for the agent at the point of shipment to send a copy of the bill of lading to the agent where the goods are received. In this way he can compare the consignment with the consignee’s bill.
EXPENSE BILLS
It is not usual to pay freight bills at the point of shipment, that being left till the goods reach their destination.
The agent at the place of delivery makes out an “expense bill,” which is an itemized statement of the freight charges, and must be paid by the consignee before delivery.
This done, the consignee must sign a receipt for the goods delivered, and the affair is closed.
A BILL AND A DRAFT
Before wholesale houses or manufacturers ship goods, they are either paid for or they have a business understanding with the consignee as to when and how the payment is to be made.
There are occasions, however, when no such arrangement has been made, and a man not well known to the merchant orders goods shipped by freight.
In a case like this, the merchant may ascertain through a commercial agency–the agencies make it their business to keep posted in such matters–the standing of the man giving the order.
Trade has its risks and the merchant, even where the information is not quite assuring, may decide to fill the order and ship it.
As with express companies, goods may be sent as freight, C. O. D.
This is done by means of a bill of lading, to which is attached a draft. The shipper bills the goods to himself at the point to which they were ordered.
To the bill of lading he attaches a draft for the sum involved, but this, instead of being forwarded to the consignee by mail, is sent to him through a bank for collection.
Now before the consignee can get the bill of lading, which authorizes him to receive the goods, he must pay the draft.
The bill, which is in the shipper’s name, is then endorsed over to the payer of the draft.
Country merchants and sometimes farmers send produce by freight to be sold on commission in the city.
AN INVOICE
Delhi, N. Y., Sept. 9, 1910.
Invoice of Merchandise shipped by Harry T. Jackson
and consigned to Brown, Smith & Co., Newburg, N. Y.
to be sold on commission.
120 bbls. Potatoes
70 ” green apples
40 Crates tomatoes.
Mark plainly all goods shipped.
CHAPTER XVII
TAXES
Generally speaking, tax bills are paid with reluctance.
This is no doubt due to the fact that with every other form of payment one has something tangible to show for the expenditure.
If every good citizen could be brought to see that his private interests are closely linked with public affairs, he would take more interest in the local politics of his town and county, and so have a voice in the expenditure of taxes by selecting the best men to do the work for him.
Taxes are forced contributions levied on citizens to provide money for public expenses, such as law and order, schools, charities and public institutions.
All tax laws are made by the men who pay the taxes.
You say “No” to this.
“The tax laws are made by the legislators up at the state capital.”
Very true; but who nominates and elects the legislators? Did you not put them into office?
“No, the bosses did that,” you reply.
True again, but good men are in the majority and if they did their duty to their country and themselves, there would be no bosses and taxes would be honestly spent.
KINDS OF TAXES
Tax laws are enacted by Congress, and by the legislatures of our many states. Taxes cannot be collected without this authority.
State taxes are collected for the state use only.
United States taxes are expended for the benefit of all the people of all the states.
Taxes may be further divided into direct and indirect.
Direct taxes are, at present, only employed by the states. They are levied on realty and personal property, and are paid by the particular person named in the tax bill presented by the authorized collector.
The amount of these taxes vary each year, depending on the public requirements.
They are based on assessments made by officers appointed for the purpose and generally known as assessors.
CUSTOMS DUTY
Though there is no demand made on each individual to pay the indirect taxes required by the Government, yet indirectly every person who spends little or much money is paying them.
The Government’s chief means of raising the great sums of money needed yearly to carry on its machinery is by customs duties and internal revenue collections.
The customs revenue is obtained from a tax levied on certain articles imported from foreign countries.
This customs tax is called a tariff.
The question as to the goods that shall be subject to a tariff and the amount to be levied on the same, is one that has long perplexed statesmen and been a leading party issue.
The merchant, to whom the goods are assigned from a foreign port, must pay the duty levied on them by a Government Appraiser before he can take them away.
Private parties, landing from abroad at any of our ports of entry, are required, before getting their baggage, to write out a declaration of the things contained in their trunks. But this declaration does not prevent the customs inspectors from making a careful personal examination. All things found dutiable, whether declared or not, are set apart and held until the assessment or duty is paid.
The evasion of a customs duty is called “smuggling” and is punished by the confiscation of the goods, and penalties in the way of fine and imprisonment.
There are people who would consider it a sin to cheat their butcher, but see no wrong in cheating the Government.
To the merchant who pays tariff duties the amount involved is a direct tax.
When the merchant sells his goods to the retailer or consumer, he adds the tariff to his freight, insurance, interest, etc., as direct purchase cost. This is strict business, but the consumer pays all the bills with the profit added.
INTERNAL REVENUE
The second great source of Government revenue is derived from the internal revenue tax, or excise duties.
Manufacturers of alcohol, whether as wine, whiskey, or beer, and the producers of tobacco, in its manufactured forms, have to pay an excise tax in proportion to the amount and character of their products.
As with the customs tax, the excise tax is added by the manufacturer to the cost of production, so that at last it is the consumer who pays it.
STAMPS
While the manufacturers of alcohol pay the excise tax in bulk, that is on the number of gallons produced, the manufacturers of cigars and tobacco have to attach to each separate package a distinct internal revenue stamp.
These stamps are purchased from the internal revenue collectors, appointed by the Government to certain districts. The stamps show at a glance that the proper tax has been paid, just as the postage stamp affixed to a letter proves that the price for carrying it and delivering it has been paid.
As it is a penal offence to use a postage stamp a second time, so it is a punishable offence to attempt the use of a cancelled or torn internal revenue stamp.
If demanded, the Government will give a receipt for the sum received from any one for considerable sales of postal or revenue stamps.
STATE TAXES
State taxes, as has been stated, are levied on real and personal property. Some states have in addition a poll tax. This is levied on the individual without any regard to his property, and a receipt for it may be a requirement before a citizen is permitted to vote.
Of course the real estate and personal property taxes are not the same in all the states, for each state must raise every year the sum necessary to meet its own special requirements.
The intention of all tax laws is to have every citizen’s contribution bear the same proportion to the whole amount to be raised that his possessions bear to the aggregate property of all the owners in the commonwealth.
EXEMPT FROM TAXES
All our state laws exempt from taxation certain kinds of property.
The state cannot tax the property held by itself for the common use.
The buildings and related properties of religious bodies and societies are not taxable.
Such educational institutions as colleges, seminaries, and private charities are not taxed.
Cemeteries and other places where the dead are disposed of are not taxed.
County buildings, city parks, public schools, penal institutions, fair grounds for public use and similar property is never taxed.
INSUFFICIENT TAXES
There have been times in the life of the Government, and in the building up of the states, when the funds necessary for maintenance from taxes, heavy though these have been at times, have not been sufficient to meet the essential expenditures.
This was particularly the case with our Government during the trying days of our Civil War.
States entering on great public works, for the benefit of the commonwealth, frequently cannot raise the necessary money by the usual forms of taxation.
In these cases loans have to be made, that is the Government and the state go out and borrow from those who have it to spare, the necessary money.
The Government, the state, and it may be the city or county, gives to the party providing the money what is known as bond or bonds, each of a fixed amount and bearing a fixed rate of interest, payable as a rule semi-annually.
PERSONAL PROPERTY
There is no form of property so easy to assess for the purpose of taxation as real estate, that is the land and the buildings, for the last selling value of this property is a matter of public record, and then the assessors, who should be men of honesty and good judgment, are generally posted as to the value of the property under consideration.
When, however, it comes to the taxation of personal property, which means any kind of property that can be detached and carried about, it is a different matter.
Just as many people, otherwise regarded as honest, do not think it a great wrong to get the better of the Custom House, so many reputable people are inclined to revolt against the tax on personal property and to conceal their actual possessions from the assessor, nor is this peculiarity confined to the poor.
Any man may be legally compelled to swear to the accuracy of his statement, and if it is found that he has knowingly sworn to a false statement, he may be brought to task for perjury.
What is known as “personal property” varies in many of the states.
Personal property generally includes, merchandise in possession; all fixtures, all furniture in home, offices, and factories; all live stock, all money on hand and in banks; other men’s notes, not transferred; all stocks and bonds and other forms of security.
TOWN TAXES
Townships or counties, if properly authorized by charter or the votes of the people, may levy special taxes for special purposes within the limits of their own jurisdictions, or they may in the same way sell bonds to carry out some work that has been decided on for the common weal.
Two or more towns, or counties, may join in the same way to carry out a project of benefit to both, provided that the burden of the undertaking be equitably assessed.
PAYMENTS
All tax bills are due and collectable on presentation, but this is never enforced.
A time is, however, fixed beyond which payment cannot be deferred.
A sufficient amount of any property may be sold at auction to satisfy a tax bill.
Of old, and still in some places, the road taxes were paid in cash, but more frequently by work on the roads, either by the individual man, or in connection with his team, each day’s work of one or both being fixed at a regular rate.
TAXING CORPORATIONS
The state does not tax the individual members of a corporation for property held in common. The same result is secured better by taxing the corporation as a body. This applies to banks, railroads, and incorporated manufacturing establishments.
Savings banks are taxed lightly. Every depositor is liable for a personal property tax proportioned to the amount of his credit.
To make collection easy the savings bank always pays the amount of this tax in bulk, and then charges it to the expense account of the establishment, so that indirectly the depositors pay after all, as their dividends are reduced by just the amount of the tax.
TAXES IN GENERAL
When a man owns property in different towns, counties, or states, he is regarded as so many individuals, and must pay each as the local demands require. No matter where a man’s personal property is placed, the rule is to tax him for the whole at the place of his usual residence.
The landlord and the merchant each pays a direct tax to the collector, but it would be a business error to think that in so doing either or both is carrying more than his share of the total taxation.
The landlord keeps in mind the added expense when he comes to adjust leases with his tenants. The merchant, who pays taxes on his stock and so adds to his expense account, should not be blamed if he keeps this in mind when he fixes the selling prices of his goods.
THE RETURNS
Taxes duly paid, honestly collected, and properly expended should never be regarded as a burden.
From no equal expenditure of money do the people get so much good.
The public schools, the public highways, the protection of life and property, public hospitals, public libraries, residences for the old, the blind, the orphaned and the insane, as well as secure places for the lawless, are built and maintained by the taxpayer.
As a rule all these things are done honestly and well, notwithstanding the outcry to the contrary.
If there be dishonesty in places, it is the fault quite as much of the voter who selected him as of the official culprit himself.
We must take all the responsibility of our agents, whether they be public or private.
Every good citizen should feel that his public duty is an important private business.
CHAPTER XVIII
CONTRACTS, LEASES, AND GUARANTEES
The law books define a contract to be “An agreement between two or more persons to do or not to do a certain stated thing or things, for a consideration.”
The consideration is a vital part of every contract.
There can be no binding contract without a consideration.
The other requisites of a contract are–
1. It must be possible of accomplishment. 2. It must be in accordance with law.
3. Its performance must not injure the public. 4. The parties to a contract must be competent to do the things to which they pledge themselves.
5. A drunken or an insane man cannot make a contract. 6. All parties to a contract must be agreed.
THE CONSIDERATION
No contract can be held as binding where the consideration is not named.
A promise, verbal or in writing, to do something for a certain party, cannot be enforced.
A promise to do the same thing for a stipulation named is a contract and may be enforced.
A gift is not a form of contract. Once made it cannot be legally taken back.
WRITTEN AND VERBAL CONTRACTS
There are certain forms of contract which cannot be legally enforced, unless they are in writing.
1. All contracts for the sale of real estate. 2. Contracts that are not to be performed for a year or more. 3. All contracts, to answer for the debt and obligations of another, must be in writing.
If the contracting parties put but a part of their agreement in writing the law will recognize only the written part. The whole must be in writing, or the agreement will not hold.
Verbal contracts are not safe.
Although the law does not require even contract to be in writing, yet, as it never declares that a contract must be verbal, it is the part of prudence, wherever possible, to put every contract in writing.
Owing to defects of memory even honest men may, and frequently do, disagree as to the terms of a verbal contract.
Because the party with whom the contract is made is a close friend, one is apt to depend on a verbal agreement, but the closer the friend or relative, the more reason there is for an exact written contract, if we would keep the friend.
FORMS OF CONTRACT