constitutionality involves a further point according to the usual mode of solving the problem, namely, whether or not there is any reasonable basis for legislative belief that the statute is "really designed to accomplish a legitimate public purpose.' In deciding this question courts very properly feel themselves obliged to bear in mind that it lies very largely within the discretion of the legislature and not of the judiciary to determine what measures are reasonably adapted for the accomplishment of a "public purpose." There is, moreover, an established and wholesome doctrine that in order for an act to be declared unconstitutional, the case must be so plain that no reasonable doubt can be said to exist. Nevertheless, it is too much to expect unvarying unanimity on the part of judges on the question whether the actual provisions of a given statutory enactment can fairly be regarded as reasonably conceived to effectuate its avowed purpose as a protective police regulation. This question is essentially one of fact, and is obviously allied to the further question of the degree of "arbitrariness" in the legislative regulation or prohibition of contract. Judges are not omniscient and their occasional refusal to sustain the constitutionality of reform social legislation is more apt to arise from an inadequate presentation to them of the industrial facts and conditions upon which the police power is predicated than from mental attitudes or predilections based on environment and education.' Differences of opinion on the part of judges should, therefore, be expected from time to time, and in the border-line cases caustic comment over "five to four" decisions is clearly unjustified.

Two comparatively recent cases in which labor legislation by a state has been declared unconstitutional by the United States Supreme Court will serve to give point to the preceding dis

"It is not difficult, of course, to find a number of cases in which the courts have refused to take into consideration pertinent social and economic facts collected by investigating committees and legislative commissions. Perhaps the most conspicuous case of this sort is the now discountenanced decision of Ives v. South Buffalo Ry. Co. (1911), 201 N. Y. 271, in which the Court of Appeals of New York held a workmen's compensation act to violate the Fourteenth Amendment and the similar provisions of the Constitution of the State of New York.

cussion." One of these cases involved the constitutionality of a New York statute which made it a misdemeanor to require or permit an employee in a bakery or confectionery establishment to work more than sixty hours a week or more than ten hours a day, unless for the purpose of making a shorter working day on the last day of the week. The New York Court of Appeals, by a bare majority, held the statute to be constitutional as a proper exercise of the police power." The United States Supreme Court, however, by a bare majority, declared the statute to be unconstitutional." In both tribunals, the majority and minority judges, not only expressed fundamentally differing views with regards to the so-called "liberty of contract," " but also disagreed on the issues of fact as to whether a fair-minded man might regard the baker's occupation under modern industrial conditions as peculiarly unhealthful, and as to whether the character of the New York legislation was reasonably calculated to protect the health of employees in this industry.

13

The other illustrative case is one which dealt with the constitutionality of a statute supposedly advantageous to the cause of labor unionism. A Kansas statute, as contrued and applied by the highest state court, provided that an employer or his agent should be subject to criminal punishment in case he prescribed as a condition upon which a workman could secure employment under him (or could remain in the employment, when it was terminable at will), that the employee enter into an agreement not to become a member of any labor organization while so employed. The Supreme Court of Kansas sustained this statute but the Supreme Court of the United States, by a divided court,

For a collection of material on the law and the courts in relation to the development of what is generally known as the labor movement, see Final Report and Testimony Submitted to Congress by the Commission on Industrial Relations created by the Act of August 23, 1913, volume 11, pp. 10451-10928.

"People v. Lochner (1904), 177 N. Y. 145.

"Lochner v. State of New York (1905), 198 U. S. 45. Harlan, White, Day, and Holmes, JJ. dissented.

The later decision of Bunting v. State of Oregon, (1916) 243 U. S. 426, in which the Supreme Court of the United States (Justices White, Van Devanter, and McReynolds dissenting), upheld the constitutionality of an Oregon statute regulating hours of labor, indicates a changed attitude of the court with regard to legislation of this type.

held it to be contrary to the Fourteenth Amendment." Mr. Justice Pitney, in speaking for the majority, took the following position: "In that portion of the Kansas statute which is now under consideration-that is to say, aside from coercion, etc.— there is no object or purpose expressed or implied, that is claimed to have reference to health, safety, morals, or public welfare, beyond the supposed desirability of leveling inequalities of fortune by depriving one who has property of some part of what is characterized as his ‘financial independence.' In short, an interference with the normal exercise of personal liberty and property rights is the primary object of the statute, and not an incident to the advancement of the general welfare." The dissenting judges, on the other hand, held that the legislation in question was justified because under present-day conditions a prohibition of economic coercion against labor unions tends to promote industrial peace, and consequently the maintenance of the safety and security of the community. In the words of Mr. Justice Day, who delivered one of the dissenting opinions: "It would be difficult to select any subject more intimately related to good order and the security of the community than that under consideration-whether one takes the view that labor organizations are advantageous or the reverse. It is certainly as much a matter for legislative consideration and action as contracts in restraint of trade.'

To prevent misapprehension on the part of those who dissent from the majority view in one or both of the cases under discussion, it should not be left unsaid that a careful examination of all decisions by the Supreme Court of the United States will reveal relatively few cases in which that Court has not maintained a liberal attitude with respect to the police power of the states.1

"Coppage v. Kansas (1915), 236 U. S. 1. Day, Holmes, and Hughes, JJ. dissented.

15 See the articles by Charles Warren, The Progressiveness of the United States Supreme Court, 13 Col. L. Rev., 294, and A Bulwark to the State Police Power-The United States Supreme Court, 13 Col. Rev. 667.

CHAPTER II

SCOPE AND CLASSIFICATION OF BUSINESS LAW

1

§11. The Field of Business Law.-In many countries the law governing business activities forms a separate and distinct branch of jurisprudence, and is administered in special mercantile courts. Where the Anglo-American law prevails it is not so. In our legal system no sharp distinction exists between traders and non-traders, and we have no independent body of rules peculiar to business. With us, therefore, the scope of business law, or commercial law, cannot be outlined with the precision which is characteristic of scientific legal classification. These terms, nevertheless, have a well-understood meaning in our common speech. They are currently used to denote the aggregate of those rules of the general law that have frequent and direct application to the conduct of business. Business law is, therefore, a concept whose boundaries are somewhat shadowy, but this is of course true of all general words which have no technical meaning, and have the sanction of usage merely because they are convenient collective terms of reference.

§12. Analysis of the Activities of Business Men.-Every well-considered attempt to select and to organize for purposes of practical presentation those rules of law which govern the more familiar business relations and business transactions, must be grounded upon a clear analytical knowledge of business operations.

The subject matter of business may be divided roughly into the external relations and the internal affairs of an establishment. Both sets of relations are largely governed by contractual principles, but in the interpretation of the contracts involved, there is a considerable amount of implication based on the ordi

'Cf. §§18, 19 infra.

nary usages of business, or on positive law. To understand either the contractual portion or that portion which shades off from it by degrees into the absolute requirements of the law from without, it is necessary to keep very close to the facts of business.

§13. Classification of Business Law.-The external relations concretely take the form of buying and selling. The expressions must be understood in very broad sense, so as to include the purchase and sale of services as well as of things. Again, room must be left in the definition of our terms for the most complicated contractual relations that link up one business with another to the very point of organizing them together as parts of a business unit. In one sense, the distinction between such a close organization and the most ordinary touch-and-go exchange of commodities is a difference of degree rather than of kind, and the law of external business relations may, therefore, be looked upon as a means toward that larger organization which makes a unit of all society. The first three parts of the book will treat of these external relations under the following heads: I. Engaging in Business. II. The Law of Contracts, with special reference to the relation of buyer and seller. III. The Enforcement of Legal Obligations, with special reference to the law of debtor and creditor.

The first part of the work deals with a part of the law which was very largely neglected during the last century because the law, in response to the current political and economic theories of laissez-faire, had reached a point where it had not only ceased to regulate business, but where it had questioned its own power to do so. The reaction of the last generation in an opposite direction has been very violent at times and the older concepts of the law had to be very much strained to meet the new conditions. It is, therefore, quite necessary for the business man of today to understand the legal consequences of the mere act of engaging in business, even before a single contract is made.

The second division of the subject, that of contracts, is one that reached its culmination in the nineteenth century in AngloAmerican law. The law of sales, as a particular branch of the