Where for any reason possession is to be left with the seller, the only safe method for the buyer is to take a formal bill of sale and to file it on record in the proper office of registry for the locality.

Notes:

I.

2.

If a sale is made the seller should not keep the goods. If the seller is allowed to keep the goods and sells them to an innocent buyer, the first buyer ordinarily loses.

$95. Conditional Sales

It is possible for the seller to give the purchaser possession of the article that has been sold, and still to retain the ownership himself until the full price or a certain amount of the price has been paid. This can be done only by agreement, however, and where sales are made on the instalment plan it is very common to provide in the agreement of sale that the ownership shall not pass from the seller to the buyer until the last instalment has been paid. Such sales are known as "conditional sales."

The law always enforces such an arrangement as between the buyer and the seller. For the sake of ready proof and avoidance of misunderstandings, the contract should be in writing and must be so expressed in many states. A common plan is for part payments to be made as rent, with a proviso that the title passes to the purchaser when the last instalment is paid.

The difficulty arises from the fact that, as the buyer has the property in his own possession, third persons are likely to be misled into believing that he owns it and has the right to dispose of it. Most of the states get around the difficulty by providing that the seller must file the contract in an office of public record. Everybody is then required to know that it. exists, as in the case of a mortgage. If the seller does not

put the contract on record, and the buyer is dishonest enough to dispose of the property to a third person who had no knowledge of the seller's rights, the seller. loses the property in the majority of instances.

§ 96. State Laws on Conditional Sales

In the following states conditional sales are good against third parties without acknowledgment or filing in any public

office:

Arkansas
California
Idaho

Nevada
Rhode Island
Tennessee
Utah

Indiana

The District of Columbia, Massachusetts, Oregon and Louisiana have substantially the same law with a few exceptions.

In the following states the contract recorded is merely signed by the purchaser:

In some of these states more formality is required if the contract is for the sale of railroad equipment.

Those states which demand a record require different formalities in order to permit the contract to be put on record.

§ 97. Requirement of Affidavits to Conditional Sales Contracts Some states require an affidavit by the seller stating certain facts of the sale. These are Michigan, Nebraska, New

Hampshire, Ohio, Pennsylvania, and Wyoming. In others, if the signature to the contract is attested by a witness, the witness may prove it, and it is then admitted to record; very few of the states require that the contract shall be acknowledged in person by the buyer. Colorado, Connecticut and District of Columbia require acknowledgment where the sale is over $100 in amount. In Iowa it may be acknowledged by either the seller or buyer and is then entitled to be admitted to record; while in Florida the seller must acknowledge in person, or his or its signatures must be proved by one of two subscribing witnesses.

§ 98. Rights in Illinois and Pennsylvania

In Illinois the rights of the seller under a conditional sale will not hold against a third party to whom the buyer may have sold the goods. The seller may protect himself, however, by taking a chattel mortgage on the article sold and recording that. In Pennsylvania where the property is not attached or to be attached to realty, the seller makes a contract to lease the property, the purchaser to pay a regular rental instead of instalments and to give back the property at the end of the rental period. Then a clause is added giving the purchaser the right to elect to keep the property instead of returning it at the expiration of the lease. Where the property covered is attached or to be attached to realty, then either a conditional sale contract or a lease with option to purchase may be used, but it must be recorded with an affidavit.

§ 99. Protection Against Landlord's Lien

In those states where a landlord has a lien on property in rented buildings, the contract of conditional sale should be recorded before the property is moved into the building in order to protect it against his lien.

If fixtures such as gas and electric chandeliers, etc., are

sold under a contract of conditional sale, they will be protected by recording the contract and may be removed as readily as any other personal property. If, however, the property sold was afterwards attached to the building itself and could not be removed without injury to it, such as a mantel or built-in china closets and book-shelves, the only remedy which the seller has is to claim a lien against the building for the amount due him.

§ 100. Protection Against Destruction of Property

Where the property is destroyed while it is held under a contract of conditional sale, the decisions are in conflict. In some states the buyer loses; in others the seller; and in other states the matter has not been decided. Usually, under such circumstances, the buyer refuses to make further payments but may be held liable for the value of the goods. Unless the buyer can afford such a possible loss, it is prudent to provide for insurance.

Notes:

I.

2.

If a sale on condition is to be made, and the value of the article justifies it, a lawyer should be employed.

If articles are to be sold on instalments in different states, the laws of each must be considered and much care will be required in making the contract.2

REVIEW QUESTIONS

I. When does title pass in "a sale"?

2.

When does title pass under a sale "on trial" or "on approval"?

3. When does title pass when goods are manufactured under order?

2 The standard authority on this general subject is Haring's "Conditional Sale

Laws," published by the author, Fred Benson Haring, Buffalo, N. Y.

4. When does title pass when goods are ordered to be shipped by

rail?

5. If the buyer desires to leave the goods he has bought with the seller, how can he protect his title?

6. If the buyer after taking title leaves the goods with the seller, who sells them to a third party, does the third party take good title in your state? What recourse would the original buyer have?

7. How can the seller part with possession and yet keep title? What is such an arrangement called?

8. In your state what is the law as to conditional sales?

9. In your state if a farmer bought a binder on instalments and it was burned down when he had paid but half the purchase price, whose would the loss be?