First page of a letter of credit.First page of a letter of credit.XI. LETTERS OF CREDITThe usual instruments of credit by means of which travellers abroad draw upon their deposits at home are known ascircular letters of credit. These forms of credit are of such common use that every one should be familiar with their form. We reproduce here a facsimileof the first and second pages of a circular letter for £1000, copied with slight change of names from an actual instrument. The first page shows the credit proper authorising the various correspondents of the bank issuing it to pay the holder, whose signature is given on its face, money to the extent of £1000. The names of the banks who are authorised to advance money upon the letter are usually printed upon the third and fourth pages, though letters issued by well-known banking houses are usually recognised by any banking house to which they are presented.The second illustration shows how the holder of a particular letter availed himself of its advantages. It gives the names of the banks to which he presented his letter, and the amounts paid by each.With such a letter a traveller could make a trip around the world and not have in his pocket at any one time more gold or silver or bills than would be necessary to meet immediate expenses.Suppose that A. B. is about to make a European trip. He goes to a bank doing a foreign business, say Brown Bros. & Co. of New York City, and asks for a circular letter for £1000, for which he is obliged to pay about $4880. Copies of A. B.'s signature are left with Brown Bros. & Co., and may perhaps be forwarded to their foreign banking houses. When A. B. presents himself at a Glasgow or Paris bank with his letter of credit, and asks for a payment upon it, the banker asks him to sign a draft on Brown Bros. & Co., New York, or more likely on their London bank, for the amount required, which amount is immediately indorsed on the second page of the letter of credit, so that when the indorsements equal the face the letter is fully paid. A. B. is simply drawing upon his own account—that is, upon the money he deposited to secure the letter of credit.Payment is usually made upon the simple identification or comparison of signatures. If a traveller should lose his letter of credit he should notify at once the bank issuing it and, if possible, the banks upon which drawn.Second page of a letter of credit (used).Second page of a letter of credit (used).There are several other forms of travellers' credits in use. TheCheque Bank, an English institution with a branch in New York City, issues to travellers a book of cheques, each of which can be filled up only to a limitedamount, as shown by printed and perforated notices appearing on the face. For instance, for £100 one can buy a cheque-book containing fifty blank cheques, each good, when properly filled up, for £2. Each of these cheques is really a certified cheque, only it is certified in advance of issue. Any of the thousand or more foreign banks which are agents for theCheque Banksell these cheque-books, and cash the cheques when presented. The amounts that may be short drawn go toward the cost of a new cheque-book, or may be returned in cash. The American and other express companies have forms of travellers' cheque-books very similar to those issued by theCheque Bank.XII. JOINT-STOCK COMPANIESTo organise a stock company it is necessary for a number of persons to come together and make a certificate to the effect that they propose to form a company to bear a certain name, for the purpose of transacting a certain kind of business at a certain place. The certificate states that they propose to issue a certain number of shares of stock at a certain price per share, that the capital stock is to be a certain amount, and that the company is to continue to exist for a definite period of time. Blank forms for such certificate are supplied by the Secretary of the State where the company is being organised, and when such certificate is properly filled out, signed, and delivered to him, he issues a license, or charter, to the persons making such certificate, giving them permission to open books, sell stock, and carry on the enterprise outlined.State laws regarding stock companies differ very largely. Students of this course who desire to know the law in any particular State can easily secure the information by writing to the secretary of that State.The usual par value of a share of stock is $100. That is, if a company organises with a capital of $200,000, there will be 2000 shares to sell. Each person who buys or subscribes for the stock—that is, who joins the company—receives acertificate of stock. Our illustrations show two examples; one of a national bank, and the other of a manufacturing company. These certificates are transferable at the pleasure of the owners. The transfer is made usually by a form of indorsement on the back of the certificate, but to be legal the transfer must be recorded on the books of the company.A certificate of stock in a national bank.A certificate of stock in a national bank.The men subscribing in this way become responsiblefor the good management of the business and are obliged to act according to the laws of the State in which the company is organised. Usually they are not responsible individually for the liabilities of the concern beyond the amounts of their individual subscriptions.A certificate of stock in a manufacturing company.A certificate of stock in a manufacturing company.Every person who subscribes for stock owns a part of the business and is called ashareholder. All the shareholders meet together, and out of their number they choose a certain number ofdirectors. The directors choose a president and other necessary officers, and in a general way direct the policy of the company. As a rule directors have no salaries attached to their positions.General meetings of shareholders are held once a year to elect the directors and to hear the reports of the officers.The student should be familiar in a general way with the different classes of stock and with the technical terms familiar to stock companies. The more important of these matters are as follows:Directors. All the shareholders meet together and out of their number choose a certain number of directors. The directors choose a president and other necessary officers and fix the amount of salary which shall be paid such officers for their work.Capital Stock. This name is given to the gross capital for which the company is organised, without any reference to its value or to whether it has been fully paid in or not. Thepaid-in capitalis the amount received from the stockholders on the shares for which they have subscribed.Dividends. The directors of the company, after paying the expenses and laying by a certain amount for contingencies, divide the profits among the shareholders. These profits are called dividends, and in successful concerns such dividends as are declared quarterly, semiannually, or annually usually amount to good interest on the shareholders' investments.Treasury Stock. It often occurs that a new company finds it necessary to set aside a certain number of shares to be sold from time to time to secure working capital. Such stock is held in the treasury until it is needed, and is called treasury stock.Preferred Stock. Preferred stock is stock which is guaranteed certain advantages over ordinary stock. It is usually given to secure some obligation of the company, and upon it dividends are declared in preference to common stock. That is to say, if a man holds a share of preferred stock he will receive interest thereon outof the profits of the business before such profits are given in the form of dividends to shareholders generally. Preferred stock can be issued only when authorised by the charter of the company. The interest on the investment in the case of preferred stock is more sure, but the security itself is not any more secure than in the case of common stock.Guaranteed Stock. Guaranteed stock differs from preferred stock in this—that it is entitled to the guaranteed dividend (interest) before all other classes of stock, whether the company earns the necessary amount in any one year or not. This right is carried over from year to year, thus rendering the shares absolutely secured as to interest.Watered Stock. When stock is issued to the shareholders without increase of actual capital the stock is said to have beenwatered. A company may organise for, say, $10,000, and may want to increase to $50,000 without adding to the number of its shareholders. Each holder ofoneshare will, in this instance, receivefournew shares, and in future instead of receiving a dividend on one share will receive a dividend on five shares. The object of this is, quite commonly, to avoid State laws requiring certain corporations to pay excess of profit over a stated rate per cent. into the State treasury.Forfeited Stock. Stock is usually sold on certain explicit conditions, such as the paying of ten per cent. down and the balance in installments at stated intervals. If the conditions which are agreed to by the shareholder are not met his stock is declaredforfeited, or he can be sued in the same manner as upon any other contract.Assessments. Some companies organise with the understanding that a certain percentage of the nominal value of the shares is to be paid at the time of subscribing, and that future payments are to be made at such times andin such amounts as the company may require. Under these conditions the stockholders are assessed whenever money is needed. Such assessments are uniform on all stockholders.Surplus Fund. It is not customary to pay a larger dividend than good interest. The profits remaining after the expenses and dividends are paid are credited to what is called a surplus fund. This fund is the property of the shareholders and is usually invested in good securities.Franchise. A franchise is a right granted by the State to individuals or to corporations. The franchise of a railroad company is the right to operate its road. Such franchise has a value entirely distinct from the value of the plant or of the ordinary property of the corporation.Sinking Fund. A sinking fund is a fund set aside yearly for the purpose at some future time of sinking—that is, paying a debt.XIII. PROTESTED PAPERWhen a note is presented for payment at maturity and is not paid it is usuallyprotested; that is, a notary public makes a formal statement that the note was presented for payment and payment was refused. Notice of such protest is sent to the maker of the note and to each indorser.The bank should never hand to its notary any paper for protest until it has made sure that its non-payment has not been brought about by some error or misunderstanding. Quite often, even though the paper has been made payable at a bank, the notary sends a messenger with the note to the maker to make a formal demand for payment.In taking in collection paper, banks should obtain clear instructions from its owners as to whether or not it shouldbe protested in case of non-payment. It by no means follows that a formal protest is not desired because the paper bears no indorsements. Many banks make it a rule to protest all unpaid paper unless otherwise ordered.We often see attached to the end of a draft a little slip with the words: "No protest; tear this off before protesting." This is simply private advice to the banker informing him that the drawer does not wish to have the draft protested. It may be that he does not wish to wrong or injure the credit of or add to the expense of his debtor; or it may be that he considers the account doubtful and does not wish to add to his own loss the cost of protest fees.To hold an indorser, he must be properly notified of the non-payment of the note; and whether this has been done is a question of fact. If he was not properly notified this defence will avail whenever it is clearly proved. A great variety of defences may be successfully made by an indorser. A few of these defences are here briefly noticed: One is usury; another is the maker's discharge by the holder; nor can he be held when he has paid the note; nor when its issue was unlawful, nor when the note was non-negotiable, nor when his indorsement was procured by fraud. Finally, an indorser may avail himself of any defence existing between the holder and the maker or principal debtor. This is evidently a just principle, for the holder should have no more rights against an indorser than he has against the maker. If, therefore, the maker can interpose some just claim as a partial or complete defence the indorser should be permitted to avail himself of this claim.In order to recover from an indorser it must be proven that a formal and proper demand for payment was made upon the maker. The formal protest is usually undisputed evidence of this. The maker is liable in any event.A protest.A protest.To make the indorser's liability absolute it is necessary to demand payment at the specified place on the last day of the period for which the note was given, and to give due notice of non-payment to the indorser. For, as the contract requires the maker to pay at maturity, the indorser may presume, unless he has received a notice to the contrary, that the maker has paid the obligation.Ordinarily a notice of an indorsement by a partnership need not be sent to each member. Even after the partnership has been dissolved a notice to one partner is sufficient to bind the other members. If the note is owned jointly (that is, by parties who are not business partners) the indorsers are not liable as partners but as individuals. In such a case the notice of non-payment should be sent to each.Our illustration shows a facsimile of a protest notice.XIV. PAPER OFFERED FOR DISCOUNTOne of the most valuable parts of a banker's education is to learn whom to trust. Every bank should have a well-organised and thoroughly equipped credit department, in charge of some one who can be relied upon to investigate carefully all names referred to him by the officers. A banker has the right to expect the fullest confidence on the part of the borrower, and the borrower should furnish him with a complete and detailed statement of the condition of his affairs. It is safe to conclude that when a borrower refuses absolutely to give any information as to his financial condition his credit is not in the mostfavourableshape.Many of the banks have blank forms which they, from time to time, ask borrowers to fill out. These statements show in detail the assets and liabilities of the firm inquestion; they show the notes which are outstanding, the mortgages on real estate, and many other particulars, including the personal or individual credit of members of the firm, if a partnership.In estimating the value of paper offered for discount the following points should be considered:The total net worth of the borrower.The character of his business; whether it is speculative or staple.The borrower's record and standing in the community and his business habits.Whether he is in enterprise abreast with modern ideas and methods.The character of the merchandise owned by the borrower. What would it bring under the hammer? Groceries and raw material can usually be turned into cash at a forced sale at very small discount from current prices. Not so with hardware, glass, dry goods, boots and shoes, books, etc. Machinery and fixtures are not a bankable asset upon which to base credit.The banker should note his borrower's bills payable. Why did he give notes? Are they met promptly? Many houses prefer to sell their own paper in the open market, and keep their banks open for accommodations when they are unable to secure outside credit. The insurance carried should be considered; also the volume of business done. A large business on moderate capital, with long credits, will naturally have large liabilities, while a small business with a liberal capital and short credits should have small liabilities.Paper offered for discount is of a variety of kinds. The larger proportion of it is from customers of the borrower who have extended their credit by paying their accounts in notes instead of in cash. Such paper is really, though having two names, very little better thansingle-name paper, for it is not the maker's credit, but the payee's, which the bank usually considers. Many very small notes offered for discount usually indicate a very needy condition.There are many firms which carry two or more bank accounts, and others who sell their paper to out-of-town banks. In buying paper it is important to ascertain whether the firm is in the habit of taking up paper at one bank by floating a loan at another.Paper may be classified for purposes of discount as follows:Bills drawn by shippers on the houses to which the goods are shipped.Bills drawn by importers against commodities placed in brokers' hands for sale.Bills arising out of our manifold trades and industries.Drafts with bills of lading attached.Paper having personal indorsements.Paper secured by collateral.One-name paper.XV. CORPORATIONSStock companies are in a sense corporations, but the namecorporationhas in its common application a broader meaning.Public corporationsare those which are created exclusively for the public interest, as cities, towns, counties, colleges, etc.Private corporationsare created wholly or in part for the pecuniary benefit of the members, as railroad companies, banks, etc. Corporate bodies whose members at discretion fill by appointment all vacancies occurring in their membership are sometimes calledclose corporations. In this countrythe power to be a corporation is a franchise which can only exist through the legislature.In municipal corporations the members are the citizens; the number is indefinite; one ceases to be a member when he moves from the town or city, while every new resident becomes a member when by law he becomes entitled to the privileges of local citizenship.The laws which corporations may make for their own government are made under the several heads of by-laws, ordinances, rules, and regulations. These laws may be made by the governing body for any object not foreign to the corporate purposes. A municipal corporation, for example, makes ordinances for the cleaning and lighting of its streets, for the government of its police force, for the supply of water to its citizens, and for the punishment of all breaches of its regulations. A railway corporation establishes regulations for signals, for the running of trains, for freight connections, for the conduct of its passengers, and for hundreds of other things. But such by-laws and regulations must be in harmony with the charter of the corporation and with the general law of the land. For instance, a municipal corporation could not enforce a by-law forbidding the use of its streets by others than its own citizens, because by general law all highways are open to the common use of all the people. Again, a railway corporation could not make a rule that it would carry goods for one class of persons only, because as a common carrier the law requires that it carry impartially for all.As a general rule private corporations organised under the laws of one State are permitted to do business in other States. It is quite often to the advantage of a company to organise under the laws of one State for the purpose of doing business in another. For instance, there are many companies chartered under the laws ofMaine with headquarters in Boston. The Massachusetts laws require that a large proportion of the capital be actually paid in at the time of organising, while the Maine law has no such provision. For similar reasons many large companies doing business in New York or Philadelphia are organised under the laws of New Jersey.A corporation may make an assignment just as may an individual. If all the members die the property interests pass to the rightful heirs, and under ordinary conditions the corporation still exists.Afranchiseis a right granted by the State or by a municipal corporation to individuals or to a private corporation. The franchise of a railroad company is the right to operate its road. Such franchise has a value entirely distinct from the value of the plant or the ordinary property of the corporation.Anunlimited liabilitycorporation is one in which the stockholders are liable as partners, each for the full indebtedness.Alimited liabilitycorporation is one in which the stockholders, in case of the failure of the corporation, are liable for the amount of their subscriptions. The namelimitedis required by law to appear after the name of the company. If a subscription is entirely paid up there is no further liability—that is to say, the property of a shareholder cannot be attached for any debts of the company. Understand clearly that the namelimitedprinted after the name of a company does not indicate in any way that the capital or credit of the company is limited, only that the liability of the shareholders of the company is limited to the amounts of their shares.Adouble liabilitycorporation is one in which, in case of failure, the stockholders are further liable for amounts equal to their subscriptions. All national banks are double liability companies. If A owns $5000 stock in anational bank, and the bank fails, he loses his stock; and if the liabilities of the bank are large he may be obliged to pay a part or the whole of an additional $5000.XVI. BONDSWhen a railroad company, or a city or any other corporation desires to borrow money it is a common practice to issue instruments of credit calledbonds. A bond means something that binds. Bonds bear the same relation to the resources of a corporation that mortgages do to real estate.Corporation bonds are issued for a period of years. They usually have coupons attached which are cut off and presented at regular intervals for the payment of interest. A bondholder of a corporation runs less risk than a stockholder, first, as to interest: the corporation is obliged to pay interest on its bonds, but may at its own pleasurepassits dividends; secondly, the bondholder is a creditor, while the stockholder of the corporation is the debtor. On the other hand, if a concern is very successful, a shareholder may receive large dividends, while the bondholder receives only the stipulated interest. Abondis evidence of debt, specifying the interest, and stating when the principal shall be paid; acertificate of stockis evidence that the owner is a part-owner in the corporation or company, not a creditor, and he has no right to regain his money except by the sale of his stock, or through the winding up of the company's business.The namedebenturesis given to a form of municipal bond in common use. Nearly all the large sums of money used by States and cities for the building of State or municipal buildings, bridges, canals, water-works, etc.,are raised through the issue of bonds (debentures), which are sold, usually at a price a little below par, to large financial institutions, banks, and insurance companies. Generally speaking, such bonds are goodsecurities, and are marketable anywhere.A private bond.A private bond.At different times the United States government has issued bonds to relieve the treasury. These bonds are absolutely safe and are always marketable.Registered bondshave the name of the buyerregistered;unregistered bondsare payable tobearer.Municipal bondsare issued by cities and other municipalities to raise money for local improvements. If proper precautions are taken by buyers, municipal securities may be considered among the safest and most remunerative investments.When a new railroad enterprise is undertaken its promoters often expect to make the road not only supply the money for its construction but also give working capital in addition. This is done by the issue of mortgage bonds. Default in the payment of interest throws the road into the hands of a receiver. The securities immediately fall in value and are perhaps bought up by a syndicate of crafty speculators who are permitted to reorganise the road and its management. This is the history of many of our roads. There are exceptional cases, of course, but the investor should be familiar with the facts before buying railroad mortgages.Abottomry bondis a kind of mortgage peculiar to shipping. It is a conveyance of the ship as security for advances made to the owner. If the ship is lost the creditor loses his money and has no claim against the owner personally. It is allowable for a loan made upon such a bond to bear any rate of interest in excess of the legal rate. A vessel arriving in a foreign port may require repairs and supplies before she can proceed farther on her voyage, and in occasions of this kind a bottomrybond is given. The owner or master pledges the keel orbottomof the ship—a part, in fact, for the whole—as security.We have now upon the market stocks and bonds representing all conceivable kinds of property. Not only are properties of many kinds used to issue bonds upon, but many kinds of bonds are often issued upon the same property. Thus we find among our railroads not only first, second, and third mortgage bonds, but income bonds, dividend bonds, convertible bonds, consolidated bonds, redemption bonds, renewal bonds, sinking-fund bonds, collateral trust bonds, equipment bonds, etc., until they lap and overlap in seemingly endless confusion.Receiver's certificatesare issued by receivers of corporations, companies, etc., in financial difficulties, to secure operating capital; they are granted first rights upon the property and are placed above prior lien and first mortgage bonds.XVII. TRANSPORTATIONThe most common effect of cheapened transportation is to increase the distance at which it is possible for producer and consumer to deal with each other. To the producer it offers a wider market and to the consumer a more varied source of supply. On the whole, cheapened transportation is more uniformly beneficial to the consumer; its temporary advantage to the producer very often leads to overproduction. It has the effect also of bringing about nearly uniform prices the world over.The time was when nearness to market was of the greatest possible advantage. At the present time a farmer can raise his celery in Michigan or his beets in Dakota and market them in New York City about aseasily as though he lived on Long Island. It is no longer location which determines the business to be carried on in a particular place, but natural advantages more or less independent of location. But the railroad or the steamboat very often determines where a new business shall be developed. It is this quickening and cheapening of transportation that has given such stimulus in the present day to the growth of large cities. It enables them to draw cheap food from a far larger territory, and it causes business to locate where the widest selling connection is to be had, rather than where the goods or raw materials are most easily procured. It is the quick and comfortable transportation facilities which our large cities possess that have given strength to the great shopping centres. Shoppers for thirty or forty miles around can easily reach these centres, and the result is that trade gathers in centres rather than at local points. A city of a million population in the most productive agricultural section of country could not be fed if the food had to reach the city by teaming. With this growth of trade centres comes the increased gain of large dealers at the expense of the small; with it comes organised speculation and its attendant results, good and evil.Prior to the completion of the organisation of trunk or through lines, freight was compelled to break bulk and suffer trans-shipment at the end of each line, where a new corporation took up the traffic and carried it beyond. To prevent this breaking of bulk and to expedite the carriage of freight, fast freight lines on separate capitalisation were organised. The purpose of the interstate-commerce law is largely to prevent discrimination and corruption in freight charges, to secure for every person and place just and equal treatment at the hands of the transportation companies. The freight rates are arranged and regulated by the traffic associations, and the variousconditions and compromises necessary have made both classifications and rates about as complicated as anything possibly could be.The namedifferentialas applied to freight rates refers to the differences which are made by railroad companies. Certain roads are by agreement allowed to charge a lower rate than others running to the same points. To and from each of the eastern cities there are two classes of roads—thestandardlines and thedifferentiallines. The standard lines have the advantage of more direct connections; the differential lines reach the freight destinations by circuitous routes, in some instances by almost double the mileage. With a view to equalising these conditions the general traffic associations allow the differential lines to carry freight at a lower rate per mile than the rate charged by the standard lines.The transportation business of the United States is so varied and complicated that a proper study of its freight tariffs and classifications would require much more space than can be given the subject in these lessons.XVIII. TRANSPORTATION PAPERSThe common transportation papers, familiar to all shippers, are the (1)shipping receipt, (2)bill of lading, (3)waybill.Original receipts, stating marks and quantities of goods, go with each separate lot of merchandise to the freight sheds or vessels, and these are summed up in a formal bill of lading, for which they are exchanged when all the cases or bundles belonging to the particular shipment have been delivered. The duplicate receipt, or the part commonly markedinvoice, is kept by the receiver of the freight, and the other end, commonly markedoriginal,is given to the drayman. In making ordinary shipments it is not usual or necessary to make out a formal bill of lading. Of course, when no bill of lading is made out, the receipt should be preserved by the shipper. The full contract is usually printed on the receipt, but it must be remembered that a receipt is not a negotiable instrument and cannot be used as security for money.A shipping receipt (original).A shipping receipt (original).Abill of ladingis an acknowledgment by a transportation company of the receipt of goods specified, and contracts for their delivery at a certain place, under conditions stated thereon, upon payment of freight and expenses. Bills of lading are negotiable and maybe transferred by indorsement, but are of no value apart from the goods to which they give title. A bill of lading goes with certainnamedgoods and cannot be transferred to other goods, even though of precisely the same kind and price. Marine bills of lading are usually made in triplicate; one is kept by the shipper, another by the vessel, and the third is sent by mail to the person to receive the goods.A steamship bill of lading.A steamship bill of lading.The parties to a bill of lading are three—the shipper, the consignee, and the transportation company. The declaration of having received the goods in good order and condition, and the consequent obligation, subsequently expressed, of delivering them in like good order and condition, is sensibly lessened in its importance by the additional clause now adopted by almost all transportation companies—namely: "Contents and condition of contentsof packages unknown." Should the goods or part of them be shipped in a damaged condition, or in a bad condition of packing, a note to that effect should be made by the transportation company on the bill of lading, which ceases then to be aclean bill of lading.A local waybill.A local waybill.Like any other instrument of credit, a bill of lading may be deposited with a creditor as security for money advanced (or it may be transferred to a buyer) by means of indorsement, and the property or goods will be thereby either mortgaged or assigned. Acting upon this principle, the shipper declares in the bill of lading that the goods shall be delivered unto the consignee or his assigns. When a shipper is unable to insert the name of the consignee at the time the bill of lading is made out, abill to orderis drawn up wherein the consignee's name is superseded by the wordsshipper's order, or simplyorder; it being thus understood that the goods shall be delivered to whomsoever presents, at point of destination, the bill of lading duly indorsed by the shipper. By such a simple arrangement as abill to orderthe merchant is enabled to sell the goods while they are at sea, or in transit, and a consignment of merchandise may change hands several times before arriving at its destination.When a case of merchandise to be shipped has been properly entered and weighed it is then ready to bemanifestedorwaybilled, as no shipment is allowed to go forward without a waybill. Thewaybillis simply a memorandum of the consignment, together with full and complete shipping directions, giving also the number of the car into which the case has been loaded, and the point to which the car is "carded." The freight conductor has waybills for all goods which he carries. They are turned over with the merchandise to the agent of the railroad at the point of destination.Our illustrations show (1)a shipping receipt—the half marked "original"; (2)a steamship bill of lading; (3)a local waybill.EXAMINATION PAPERNote.—The following questions are set as an indication of the sort of knowledge a student should possess who has carefully read the several papers of this course. The paper covers only about the first half of the course. The student is recommended to write out the answers carefully. Only such answers need be attempted as can be made from a study of the lessons.What in a general sense is meant when we speak of the currency of a country?Enumerate some of the advantages afforded to the community and to commerce in general by banking institutions.A bank cheque is a demand order for money, drawn by one who has funds in the bank. How does a cheque differ from an order on John Smith to pay bearer a certain sum of money?Why is it important that cheques should be very carefully drawn?(a) A cheque has no date. Does this make it void? (b) How about a cheque dated months ago? (c) Is a cheque dated on Sunday good? (d) Why are cheques sometimes dated ahead? (e) Are you at liberty to print your own form of cheque? (f) Is it necessary that your cheque be written on the prescribed blank form? (g) How would you write a cheque for 75 cents?How would you word a cheque to give to a personwho is unknown at your bank, but who wishes to draw the money over the counter?You are sending a cheque through the mails to John Brown, Philadelphia. How will you prevent the cheque from falling into the hands of the wrong John Brown?You identify A. B. at your bank. The cheque A. B. presented turns out to be a forgery. Are you responsible?A. B. transfers a cheque to you by a blank indorsement. It is then payable to bearer. How can you legally make it payable to your own order?What is meant by power-of-attorney? How should an attorney indorse cheques for any person for whom he is acting?If a note were about to be transferred to you by indorsement and delivery in payment of a debt, would it make any difference to you whether or not it was overdue? Explain in full.Tell how you would receipt for a payment of a note. Why is not an ordinary separate receipt sufficient?Why are notes protested? Why is a formal protest sometimes desired even though the paper bears no indorsements?If an indorser is compelled to pay a note, against whom has he a good claim?NOTE TO THE FOREGOING EXAMINATION PAPERIt is a mistake to answer questions for a student if he is able of himself to find the answers. A question which sets a student thinking, even though he cannot immediately find a satisfactory answer, affords educational training of considerable value. A few of the answers to the foregoing questions are as follows:5. (a) Not necessarily so. (b) Such a cheque would under ordinary conditions be all right. Cheques should be presented as soonafter date as convenient. (c) Cheques dated on Sunday are very commonly paid. Cheques or notes delivered on Sunday are void. The delivery makes the contract, not the dating. (d) That the maker may have a few days in which to deposit sufficient money to meet them. (e) You are at liberty to print your own form of cheque or to write it out in full if you wish. (g) Write the words "Seventy-five cents" plainly along the money line.8. Yes.BUSINESS GEOGRAPHYTHE TRADE FEATURES OF THE GREAT COMMERCIAL NATIONSI. THE TRADE FEATURES OF THE BRITISH ISLESLONDON AS A FOOD CONSUMERLondon is the greatest seat of trade and commerce in the world. Its commercial greatness is evidenced by its greatness of population. Its inhabitants number over 6,000,000. The houses in which this vast population lives, would, if placed end to end, make a continuous street that would stretch across all Europe and Asia. The mere effort of providing food for this vast population necessitates an enormous commerce. Half a million of beeves are required every year to supply its meat market; also 2,000,000 sheep and 8,000,000 fowls. To supply its fish market 400,000,000 pounds of fish are required, and 500,000,000 oysters. Grain, flour, fruit, butter, eggs, cheese, sugar, tea, and coffee, are brought to London daily in such quantities that the prices of these commodities all the world over are based upon what they will fetch in London. Whole nations and provinces and districts get their subsistence from industries that have for their end the supplying of some of this enormous food demand. Denmark, for example, owes its entire prosperity of recent years to its profitable manufacture of butter for the London market. Brittany and Normandy, in France, are almost wholly occupied in supplying that market with poultry and eggs. The islands of Jersey and Guernsey derive their principal wealth, not, as might be supposed, from the sale of milk and butter, but from the supplying of London with potatoes. Canada during the last six or eight years has built up with London an immense trade in cheese, a trade that exceeds in importance any other that Canada has, while even our own home States—Illinois, Iowa, and Wisconsin, for example—have found new sources of wealth in catering to the London dairy trade. "Elgin" and "Ames" creamery butters are products well known to the London consumer.LONDON THE COMMERCIAL CENTRE OF THE WORLDWhat is the reason of London's wonderful prosperity? Already its population is one fifth the entire population of England and Wales, and it is increasing at the rate of about 20 per cent. per decade. Three hundred people are added to the number every day in the year, a rate of 110,000 inhabitants in the course of the year. It is now one half greater than the total population of all Ireland. London's Scotch population is almost as numerous as that of Edinburgh, while its Irish population is quite as numerous as that of Dublin. Every civilised country is represented among its people, and every civilised tongue is spoken among them. A sea of brick and mortar, even now fifteen miles long and ten miles broad, it is growing at the rate of a new house every hour of its existence. Its streets are already 28,000 miles in length, and these are spreading out so rapidly that every year many whole villages and townships are enmeshed by them. Every day 1,000,000 people enter London by railway, and atleast 500,000 people have occupations in it in the daytime who reside beyond its limits at night. Fifty thousand people have occupations in it in the night-time who reside beyond its limits during the day. It is the largest importing centre in Great Britain, and the largest in the world, and its exports are exceeded only by Liverpool, and not always by Liverpool. It is also the centre of the world's financial business. For example, traders in the East Indies who ship cargoes of spices and other Eastern produce to America, draw in settlement on London rather than on New York, while traders in America who ship cargoes of cotton to Marseilles or Riga, draw in settlement on London rather than on Paris or St. Petersburg. What is it that thus makes London the chief seat of population in the world, the commercial metropolis of the world, the great financial clearing-house of the world?LONDON THE CENTRE OF THE LAND SURFACE OF THE GLOBE
First page of a letter of credit.First page of a letter of credit.
The usual instruments of credit by means of which travellers abroad draw upon their deposits at home are known ascircular letters of credit. These forms of credit are of such common use that every one should be familiar with their form. We reproduce here a facsimileof the first and second pages of a circular letter for £1000, copied with slight change of names from an actual instrument. The first page shows the credit proper authorising the various correspondents of the bank issuing it to pay the holder, whose signature is given on its face, money to the extent of £1000. The names of the banks who are authorised to advance money upon the letter are usually printed upon the third and fourth pages, though letters issued by well-known banking houses are usually recognised by any banking house to which they are presented.
The second illustration shows how the holder of a particular letter availed himself of its advantages. It gives the names of the banks to which he presented his letter, and the amounts paid by each.
With such a letter a traveller could make a trip around the world and not have in his pocket at any one time more gold or silver or bills than would be necessary to meet immediate expenses.
Suppose that A. B. is about to make a European trip. He goes to a bank doing a foreign business, say Brown Bros. & Co. of New York City, and asks for a circular letter for £1000, for which he is obliged to pay about $4880. Copies of A. B.'s signature are left with Brown Bros. & Co., and may perhaps be forwarded to their foreign banking houses. When A. B. presents himself at a Glasgow or Paris bank with his letter of credit, and asks for a payment upon it, the banker asks him to sign a draft on Brown Bros. & Co., New York, or more likely on their London bank, for the amount required, which amount is immediately indorsed on the second page of the letter of credit, so that when the indorsements equal the face the letter is fully paid. A. B. is simply drawing upon his own account—that is, upon the money he deposited to secure the letter of credit.
Payment is usually made upon the simple identification or comparison of signatures. If a traveller should lose his letter of credit he should notify at once the bank issuing it and, if possible, the banks upon which drawn.
Second page of a letter of credit (used).Second page of a letter of credit (used).
There are several other forms of travellers' credits in use. TheCheque Bank, an English institution with a branch in New York City, issues to travellers a book of cheques, each of which can be filled up only to a limitedamount, as shown by printed and perforated notices appearing on the face. For instance, for £100 one can buy a cheque-book containing fifty blank cheques, each good, when properly filled up, for £2. Each of these cheques is really a certified cheque, only it is certified in advance of issue. Any of the thousand or more foreign banks which are agents for theCheque Banksell these cheque-books, and cash the cheques when presented. The amounts that may be short drawn go toward the cost of a new cheque-book, or may be returned in cash. The American and other express companies have forms of travellers' cheque-books very similar to those issued by theCheque Bank.
To organise a stock company it is necessary for a number of persons to come together and make a certificate to the effect that they propose to form a company to bear a certain name, for the purpose of transacting a certain kind of business at a certain place. The certificate states that they propose to issue a certain number of shares of stock at a certain price per share, that the capital stock is to be a certain amount, and that the company is to continue to exist for a definite period of time. Blank forms for such certificate are supplied by the Secretary of the State where the company is being organised, and when such certificate is properly filled out, signed, and delivered to him, he issues a license, or charter, to the persons making such certificate, giving them permission to open books, sell stock, and carry on the enterprise outlined.
State laws regarding stock companies differ very largely. Students of this course who desire to know the law in any particular State can easily secure the information by writing to the secretary of that State.
The usual par value of a share of stock is $100. That is, if a company organises with a capital of $200,000, there will be 2000 shares to sell. Each person who buys or subscribes for the stock—that is, who joins the company—receives acertificate of stock. Our illustrations show two examples; one of a national bank, and the other of a manufacturing company. These certificates are transferable at the pleasure of the owners. The transfer is made usually by a form of indorsement on the back of the certificate, but to be legal the transfer must be recorded on the books of the company.
A certificate of stock in a national bank.A certificate of stock in a national bank.
The men subscribing in this way become responsiblefor the good management of the business and are obliged to act according to the laws of the State in which the company is organised. Usually they are not responsible individually for the liabilities of the concern beyond the amounts of their individual subscriptions.
A certificate of stock in a manufacturing company.A certificate of stock in a manufacturing company.
Every person who subscribes for stock owns a part of the business and is called ashareholder. All the shareholders meet together, and out of their number they choose a certain number ofdirectors. The directors choose a president and other necessary officers, and in a general way direct the policy of the company. As a rule directors have no salaries attached to their positions.General meetings of shareholders are held once a year to elect the directors and to hear the reports of the officers.
The student should be familiar in a general way with the different classes of stock and with the technical terms familiar to stock companies. The more important of these matters are as follows:
Directors. All the shareholders meet together and out of their number choose a certain number of directors. The directors choose a president and other necessary officers and fix the amount of salary which shall be paid such officers for their work.
Capital Stock. This name is given to the gross capital for which the company is organised, without any reference to its value or to whether it has been fully paid in or not. Thepaid-in capitalis the amount received from the stockholders on the shares for which they have subscribed.
Dividends. The directors of the company, after paying the expenses and laying by a certain amount for contingencies, divide the profits among the shareholders. These profits are called dividends, and in successful concerns such dividends as are declared quarterly, semiannually, or annually usually amount to good interest on the shareholders' investments.
Treasury Stock. It often occurs that a new company finds it necessary to set aside a certain number of shares to be sold from time to time to secure working capital. Such stock is held in the treasury until it is needed, and is called treasury stock.
Preferred Stock. Preferred stock is stock which is guaranteed certain advantages over ordinary stock. It is usually given to secure some obligation of the company, and upon it dividends are declared in preference to common stock. That is to say, if a man holds a share of preferred stock he will receive interest thereon outof the profits of the business before such profits are given in the form of dividends to shareholders generally. Preferred stock can be issued only when authorised by the charter of the company. The interest on the investment in the case of preferred stock is more sure, but the security itself is not any more secure than in the case of common stock.
Guaranteed Stock. Guaranteed stock differs from preferred stock in this—that it is entitled to the guaranteed dividend (interest) before all other classes of stock, whether the company earns the necessary amount in any one year or not. This right is carried over from year to year, thus rendering the shares absolutely secured as to interest.
Watered Stock. When stock is issued to the shareholders without increase of actual capital the stock is said to have beenwatered. A company may organise for, say, $10,000, and may want to increase to $50,000 without adding to the number of its shareholders. Each holder ofoneshare will, in this instance, receivefournew shares, and in future instead of receiving a dividend on one share will receive a dividend on five shares. The object of this is, quite commonly, to avoid State laws requiring certain corporations to pay excess of profit over a stated rate per cent. into the State treasury.
Forfeited Stock. Stock is usually sold on certain explicit conditions, such as the paying of ten per cent. down and the balance in installments at stated intervals. If the conditions which are agreed to by the shareholder are not met his stock is declaredforfeited, or he can be sued in the same manner as upon any other contract.
Assessments. Some companies organise with the understanding that a certain percentage of the nominal value of the shares is to be paid at the time of subscribing, and that future payments are to be made at such times andin such amounts as the company may require. Under these conditions the stockholders are assessed whenever money is needed. Such assessments are uniform on all stockholders.
Surplus Fund. It is not customary to pay a larger dividend than good interest. The profits remaining after the expenses and dividends are paid are credited to what is called a surplus fund. This fund is the property of the shareholders and is usually invested in good securities.
Franchise. A franchise is a right granted by the State to individuals or to corporations. The franchise of a railroad company is the right to operate its road. Such franchise has a value entirely distinct from the value of the plant or of the ordinary property of the corporation.
Sinking Fund. A sinking fund is a fund set aside yearly for the purpose at some future time of sinking—that is, paying a debt.
When a note is presented for payment at maturity and is not paid it is usuallyprotested; that is, a notary public makes a formal statement that the note was presented for payment and payment was refused. Notice of such protest is sent to the maker of the note and to each indorser.
The bank should never hand to its notary any paper for protest until it has made sure that its non-payment has not been brought about by some error or misunderstanding. Quite often, even though the paper has been made payable at a bank, the notary sends a messenger with the note to the maker to make a formal demand for payment.
In taking in collection paper, banks should obtain clear instructions from its owners as to whether or not it shouldbe protested in case of non-payment. It by no means follows that a formal protest is not desired because the paper bears no indorsements. Many banks make it a rule to protest all unpaid paper unless otherwise ordered.
We often see attached to the end of a draft a little slip with the words: "No protest; tear this off before protesting." This is simply private advice to the banker informing him that the drawer does not wish to have the draft protested. It may be that he does not wish to wrong or injure the credit of or add to the expense of his debtor; or it may be that he considers the account doubtful and does not wish to add to his own loss the cost of protest fees.
To hold an indorser, he must be properly notified of the non-payment of the note; and whether this has been done is a question of fact. If he was not properly notified this defence will avail whenever it is clearly proved. A great variety of defences may be successfully made by an indorser. A few of these defences are here briefly noticed: One is usury; another is the maker's discharge by the holder; nor can he be held when he has paid the note; nor when its issue was unlawful, nor when the note was non-negotiable, nor when his indorsement was procured by fraud. Finally, an indorser may avail himself of any defence existing between the holder and the maker or principal debtor. This is evidently a just principle, for the holder should have no more rights against an indorser than he has against the maker. If, therefore, the maker can interpose some just claim as a partial or complete defence the indorser should be permitted to avail himself of this claim.
In order to recover from an indorser it must be proven that a formal and proper demand for payment was made upon the maker. The formal protest is usually undisputed evidence of this. The maker is liable in any event.
A protest.A protest.
To make the indorser's liability absolute it is necessary to demand payment at the specified place on the last day of the period for which the note was given, and to give due notice of non-payment to the indorser. For, as the contract requires the maker to pay at maturity, the indorser may presume, unless he has received a notice to the contrary, that the maker has paid the obligation.
Ordinarily a notice of an indorsement by a partnership need not be sent to each member. Even after the partnership has been dissolved a notice to one partner is sufficient to bind the other members. If the note is owned jointly (that is, by parties who are not business partners) the indorsers are not liable as partners but as individuals. In such a case the notice of non-payment should be sent to each.
Our illustration shows a facsimile of a protest notice.
One of the most valuable parts of a banker's education is to learn whom to trust. Every bank should have a well-organised and thoroughly equipped credit department, in charge of some one who can be relied upon to investigate carefully all names referred to him by the officers. A banker has the right to expect the fullest confidence on the part of the borrower, and the borrower should furnish him with a complete and detailed statement of the condition of his affairs. It is safe to conclude that when a borrower refuses absolutely to give any information as to his financial condition his credit is not in the mostfavourableshape.
Many of the banks have blank forms which they, from time to time, ask borrowers to fill out. These statements show in detail the assets and liabilities of the firm inquestion; they show the notes which are outstanding, the mortgages on real estate, and many other particulars, including the personal or individual credit of members of the firm, if a partnership.
In estimating the value of paper offered for discount the following points should be considered:
The banker should note his borrower's bills payable. Why did he give notes? Are they met promptly? Many houses prefer to sell their own paper in the open market, and keep their banks open for accommodations when they are unable to secure outside credit. The insurance carried should be considered; also the volume of business done. A large business on moderate capital, with long credits, will naturally have large liabilities, while a small business with a liberal capital and short credits should have small liabilities.
Paper offered for discount is of a variety of kinds. The larger proportion of it is from customers of the borrower who have extended their credit by paying their accounts in notes instead of in cash. Such paper is really, though having two names, very little better thansingle-name paper, for it is not the maker's credit, but the payee's, which the bank usually considers. Many very small notes offered for discount usually indicate a very needy condition.
There are many firms which carry two or more bank accounts, and others who sell their paper to out-of-town banks. In buying paper it is important to ascertain whether the firm is in the habit of taking up paper at one bank by floating a loan at another.
Paper may be classified for purposes of discount as follows:
Stock companies are in a sense corporations, but the namecorporationhas in its common application a broader meaning.Public corporationsare those which are created exclusively for the public interest, as cities, towns, counties, colleges, etc.Private corporationsare created wholly or in part for the pecuniary benefit of the members, as railroad companies, banks, etc. Corporate bodies whose members at discretion fill by appointment all vacancies occurring in their membership are sometimes calledclose corporations. In this countrythe power to be a corporation is a franchise which can only exist through the legislature.
In municipal corporations the members are the citizens; the number is indefinite; one ceases to be a member when he moves from the town or city, while every new resident becomes a member when by law he becomes entitled to the privileges of local citizenship.
The laws which corporations may make for their own government are made under the several heads of by-laws, ordinances, rules, and regulations. These laws may be made by the governing body for any object not foreign to the corporate purposes. A municipal corporation, for example, makes ordinances for the cleaning and lighting of its streets, for the government of its police force, for the supply of water to its citizens, and for the punishment of all breaches of its regulations. A railway corporation establishes regulations for signals, for the running of trains, for freight connections, for the conduct of its passengers, and for hundreds of other things. But such by-laws and regulations must be in harmony with the charter of the corporation and with the general law of the land. For instance, a municipal corporation could not enforce a by-law forbidding the use of its streets by others than its own citizens, because by general law all highways are open to the common use of all the people. Again, a railway corporation could not make a rule that it would carry goods for one class of persons only, because as a common carrier the law requires that it carry impartially for all.
As a general rule private corporations organised under the laws of one State are permitted to do business in other States. It is quite often to the advantage of a company to organise under the laws of one State for the purpose of doing business in another. For instance, there are many companies chartered under the laws ofMaine with headquarters in Boston. The Massachusetts laws require that a large proportion of the capital be actually paid in at the time of organising, while the Maine law has no such provision. For similar reasons many large companies doing business in New York or Philadelphia are organised under the laws of New Jersey.
A corporation may make an assignment just as may an individual. If all the members die the property interests pass to the rightful heirs, and under ordinary conditions the corporation still exists.
Afranchiseis a right granted by the State or by a municipal corporation to individuals or to a private corporation. The franchise of a railroad company is the right to operate its road. Such franchise has a value entirely distinct from the value of the plant or the ordinary property of the corporation.
Anunlimited liabilitycorporation is one in which the stockholders are liable as partners, each for the full indebtedness.
Alimited liabilitycorporation is one in which the stockholders, in case of the failure of the corporation, are liable for the amount of their subscriptions. The namelimitedis required by law to appear after the name of the company. If a subscription is entirely paid up there is no further liability—that is to say, the property of a shareholder cannot be attached for any debts of the company. Understand clearly that the namelimitedprinted after the name of a company does not indicate in any way that the capital or credit of the company is limited, only that the liability of the shareholders of the company is limited to the amounts of their shares.
Adouble liabilitycorporation is one in which, in case of failure, the stockholders are further liable for amounts equal to their subscriptions. All national banks are double liability companies. If A owns $5000 stock in anational bank, and the bank fails, he loses his stock; and if the liabilities of the bank are large he may be obliged to pay a part or the whole of an additional $5000.
When a railroad company, or a city or any other corporation desires to borrow money it is a common practice to issue instruments of credit calledbonds. A bond means something that binds. Bonds bear the same relation to the resources of a corporation that mortgages do to real estate.
Corporation bonds are issued for a period of years. They usually have coupons attached which are cut off and presented at regular intervals for the payment of interest. A bondholder of a corporation runs less risk than a stockholder, first, as to interest: the corporation is obliged to pay interest on its bonds, but may at its own pleasurepassits dividends; secondly, the bondholder is a creditor, while the stockholder of the corporation is the debtor. On the other hand, if a concern is very successful, a shareholder may receive large dividends, while the bondholder receives only the stipulated interest. Abondis evidence of debt, specifying the interest, and stating when the principal shall be paid; acertificate of stockis evidence that the owner is a part-owner in the corporation or company, not a creditor, and he has no right to regain his money except by the sale of his stock, or through the winding up of the company's business.
The namedebenturesis given to a form of municipal bond in common use. Nearly all the large sums of money used by States and cities for the building of State or municipal buildings, bridges, canals, water-works, etc.,are raised through the issue of bonds (debentures), which are sold, usually at a price a little below par, to large financial institutions, banks, and insurance companies. Generally speaking, such bonds are goodsecurities, and are marketable anywhere.
A private bond.A private bond.
At different times the United States government has issued bonds to relieve the treasury. These bonds are absolutely safe and are always marketable.Registered bondshave the name of the buyerregistered;unregistered bondsare payable tobearer.Municipal bondsare issued by cities and other municipalities to raise money for local improvements. If proper precautions are taken by buyers, municipal securities may be considered among the safest and most remunerative investments.
When a new railroad enterprise is undertaken its promoters often expect to make the road not only supply the money for its construction but also give working capital in addition. This is done by the issue of mortgage bonds. Default in the payment of interest throws the road into the hands of a receiver. The securities immediately fall in value and are perhaps bought up by a syndicate of crafty speculators who are permitted to reorganise the road and its management. This is the history of many of our roads. There are exceptional cases, of course, but the investor should be familiar with the facts before buying railroad mortgages.
Abottomry bondis a kind of mortgage peculiar to shipping. It is a conveyance of the ship as security for advances made to the owner. If the ship is lost the creditor loses his money and has no claim against the owner personally. It is allowable for a loan made upon such a bond to bear any rate of interest in excess of the legal rate. A vessel arriving in a foreign port may require repairs and supplies before she can proceed farther on her voyage, and in occasions of this kind a bottomrybond is given. The owner or master pledges the keel orbottomof the ship—a part, in fact, for the whole—as security.
We have now upon the market stocks and bonds representing all conceivable kinds of property. Not only are properties of many kinds used to issue bonds upon, but many kinds of bonds are often issued upon the same property. Thus we find among our railroads not only first, second, and third mortgage bonds, but income bonds, dividend bonds, convertible bonds, consolidated bonds, redemption bonds, renewal bonds, sinking-fund bonds, collateral trust bonds, equipment bonds, etc., until they lap and overlap in seemingly endless confusion.
Receiver's certificatesare issued by receivers of corporations, companies, etc., in financial difficulties, to secure operating capital; they are granted first rights upon the property and are placed above prior lien and first mortgage bonds.
The most common effect of cheapened transportation is to increase the distance at which it is possible for producer and consumer to deal with each other. To the producer it offers a wider market and to the consumer a more varied source of supply. On the whole, cheapened transportation is more uniformly beneficial to the consumer; its temporary advantage to the producer very often leads to overproduction. It has the effect also of bringing about nearly uniform prices the world over.
The time was when nearness to market was of the greatest possible advantage. At the present time a farmer can raise his celery in Michigan or his beets in Dakota and market them in New York City about aseasily as though he lived on Long Island. It is no longer location which determines the business to be carried on in a particular place, but natural advantages more or less independent of location. But the railroad or the steamboat very often determines where a new business shall be developed. It is this quickening and cheapening of transportation that has given such stimulus in the present day to the growth of large cities. It enables them to draw cheap food from a far larger territory, and it causes business to locate where the widest selling connection is to be had, rather than where the goods or raw materials are most easily procured. It is the quick and comfortable transportation facilities which our large cities possess that have given strength to the great shopping centres. Shoppers for thirty or forty miles around can easily reach these centres, and the result is that trade gathers in centres rather than at local points. A city of a million population in the most productive agricultural section of country could not be fed if the food had to reach the city by teaming. With this growth of trade centres comes the increased gain of large dealers at the expense of the small; with it comes organised speculation and its attendant results, good and evil.
Prior to the completion of the organisation of trunk or through lines, freight was compelled to break bulk and suffer trans-shipment at the end of each line, where a new corporation took up the traffic and carried it beyond. To prevent this breaking of bulk and to expedite the carriage of freight, fast freight lines on separate capitalisation were organised. The purpose of the interstate-commerce law is largely to prevent discrimination and corruption in freight charges, to secure for every person and place just and equal treatment at the hands of the transportation companies. The freight rates are arranged and regulated by the traffic associations, and the variousconditions and compromises necessary have made both classifications and rates about as complicated as anything possibly could be.
The namedifferentialas applied to freight rates refers to the differences which are made by railroad companies. Certain roads are by agreement allowed to charge a lower rate than others running to the same points. To and from each of the eastern cities there are two classes of roads—thestandardlines and thedifferentiallines. The standard lines have the advantage of more direct connections; the differential lines reach the freight destinations by circuitous routes, in some instances by almost double the mileage. With a view to equalising these conditions the general traffic associations allow the differential lines to carry freight at a lower rate per mile than the rate charged by the standard lines.
The transportation business of the United States is so varied and complicated that a proper study of its freight tariffs and classifications would require much more space than can be given the subject in these lessons.
The common transportation papers, familiar to all shippers, are the (1)shipping receipt, (2)bill of lading, (3)waybill.
Original receipts, stating marks and quantities of goods, go with each separate lot of merchandise to the freight sheds or vessels, and these are summed up in a formal bill of lading, for which they are exchanged when all the cases or bundles belonging to the particular shipment have been delivered. The duplicate receipt, or the part commonly markedinvoice, is kept by the receiver of the freight, and the other end, commonly markedoriginal,is given to the drayman. In making ordinary shipments it is not usual or necessary to make out a formal bill of lading. Of course, when no bill of lading is made out, the receipt should be preserved by the shipper. The full contract is usually printed on the receipt, but it must be remembered that a receipt is not a negotiable instrument and cannot be used as security for money.
A shipping receipt (original).A shipping receipt (original).
Abill of ladingis an acknowledgment by a transportation company of the receipt of goods specified, and contracts for their delivery at a certain place, under conditions stated thereon, upon payment of freight and expenses. Bills of lading are negotiable and maybe transferred by indorsement, but are of no value apart from the goods to which they give title. A bill of lading goes with certainnamedgoods and cannot be transferred to other goods, even though of precisely the same kind and price. Marine bills of lading are usually made in triplicate; one is kept by the shipper, another by the vessel, and the third is sent by mail to the person to receive the goods.
A steamship bill of lading.A steamship bill of lading.
The parties to a bill of lading are three—the shipper, the consignee, and the transportation company. The declaration of having received the goods in good order and condition, and the consequent obligation, subsequently expressed, of delivering them in like good order and condition, is sensibly lessened in its importance by the additional clause now adopted by almost all transportation companies—namely: "Contents and condition of contentsof packages unknown." Should the goods or part of them be shipped in a damaged condition, or in a bad condition of packing, a note to that effect should be made by the transportation company on the bill of lading, which ceases then to be aclean bill of lading.
A local waybill.A local waybill.
Like any other instrument of credit, a bill of lading may be deposited with a creditor as security for money advanced (or it may be transferred to a buyer) by means of indorsement, and the property or goods will be thereby either mortgaged or assigned. Acting upon this principle, the shipper declares in the bill of lading that the goods shall be delivered unto the consignee or his assigns. When a shipper is unable to insert the name of the consignee at the time the bill of lading is made out, abill to orderis drawn up wherein the consignee's name is superseded by the wordsshipper's order, or simplyorder; it being thus understood that the goods shall be delivered to whomsoever presents, at point of destination, the bill of lading duly indorsed by the shipper. By such a simple arrangement as abill to orderthe merchant is enabled to sell the goods while they are at sea, or in transit, and a consignment of merchandise may change hands several times before arriving at its destination.
When a case of merchandise to be shipped has been properly entered and weighed it is then ready to bemanifestedorwaybilled, as no shipment is allowed to go forward without a waybill. Thewaybillis simply a memorandum of the consignment, together with full and complete shipping directions, giving also the number of the car into which the case has been loaded, and the point to which the car is "carded." The freight conductor has waybills for all goods which he carries. They are turned over with the merchandise to the agent of the railroad at the point of destination.
Our illustrations show (1)a shipping receipt—the half marked "original"; (2)a steamship bill of lading; (3)a local waybill.
Note.—The following questions are set as an indication of the sort of knowledge a student should possess who has carefully read the several papers of this course. The paper covers only about the first half of the course. The student is recommended to write out the answers carefully. Only such answers need be attempted as can be made from a study of the lessons.
Note.—The following questions are set as an indication of the sort of knowledge a student should possess who has carefully read the several papers of this course. The paper covers only about the first half of the course. The student is recommended to write out the answers carefully. Only such answers need be attempted as can be made from a study of the lessons.
NOTE TO THE FOREGOING EXAMINATION PAPERIt is a mistake to answer questions for a student if he is able of himself to find the answers. A question which sets a student thinking, even though he cannot immediately find a satisfactory answer, affords educational training of considerable value. A few of the answers to the foregoing questions are as follows:5. (a) Not necessarily so. (b) Such a cheque would under ordinary conditions be all right. Cheques should be presented as soonafter date as convenient. (c) Cheques dated on Sunday are very commonly paid. Cheques or notes delivered on Sunday are void. The delivery makes the contract, not the dating. (d) That the maker may have a few days in which to deposit sufficient money to meet them. (e) You are at liberty to print your own form of cheque or to write it out in full if you wish. (g) Write the words "Seventy-five cents" plainly along the money line.8. Yes.
It is a mistake to answer questions for a student if he is able of himself to find the answers. A question which sets a student thinking, even though he cannot immediately find a satisfactory answer, affords educational training of considerable value. A few of the answers to the foregoing questions are as follows:
5. (a) Not necessarily so. (b) Such a cheque would under ordinary conditions be all right. Cheques should be presented as soonafter date as convenient. (c) Cheques dated on Sunday are very commonly paid. Cheques or notes delivered on Sunday are void. The delivery makes the contract, not the dating. (d) That the maker may have a few days in which to deposit sufficient money to meet them. (e) You are at liberty to print your own form of cheque or to write it out in full if you wish. (g) Write the words "Seventy-five cents" plainly along the money line.
8. Yes.
London is the greatest seat of trade and commerce in the world. Its commercial greatness is evidenced by its greatness of population. Its inhabitants number over 6,000,000. The houses in which this vast population lives, would, if placed end to end, make a continuous street that would stretch across all Europe and Asia. The mere effort of providing food for this vast population necessitates an enormous commerce. Half a million of beeves are required every year to supply its meat market; also 2,000,000 sheep and 8,000,000 fowls. To supply its fish market 400,000,000 pounds of fish are required, and 500,000,000 oysters. Grain, flour, fruit, butter, eggs, cheese, sugar, tea, and coffee, are brought to London daily in such quantities that the prices of these commodities all the world over are based upon what they will fetch in London. Whole nations and provinces and districts get their subsistence from industries that have for their end the supplying of some of this enormous food demand. Denmark, for example, owes its entire prosperity of recent years to its profitable manufacture of butter for the London market. Brittany and Normandy, in France, are almost wholly occupied in supplying that market with poultry and eggs. The islands of Jersey and Guernsey derive their principal wealth, not, as might be supposed, from the sale of milk and butter, but from the supplying of London with potatoes. Canada during the last six or eight years has built up with London an immense trade in cheese, a trade that exceeds in importance any other that Canada has, while even our own home States—Illinois, Iowa, and Wisconsin, for example—have found new sources of wealth in catering to the London dairy trade. "Elgin" and "Ames" creamery butters are products well known to the London consumer.
What is the reason of London's wonderful prosperity? Already its population is one fifth the entire population of England and Wales, and it is increasing at the rate of about 20 per cent. per decade. Three hundred people are added to the number every day in the year, a rate of 110,000 inhabitants in the course of the year. It is now one half greater than the total population of all Ireland. London's Scotch population is almost as numerous as that of Edinburgh, while its Irish population is quite as numerous as that of Dublin. Every civilised country is represented among its people, and every civilised tongue is spoken among them. A sea of brick and mortar, even now fifteen miles long and ten miles broad, it is growing at the rate of a new house every hour of its existence. Its streets are already 28,000 miles in length, and these are spreading out so rapidly that every year many whole villages and townships are enmeshed by them. Every day 1,000,000 people enter London by railway, and atleast 500,000 people have occupations in it in the daytime who reside beyond its limits at night. Fifty thousand people have occupations in it in the night-time who reside beyond its limits during the day. It is the largest importing centre in Great Britain, and the largest in the world, and its exports are exceeded only by Liverpool, and not always by Liverpool. It is also the centre of the world's financial business. For example, traders in the East Indies who ship cargoes of spices and other Eastern produce to America, draw in settlement on London rather than on New York, while traders in America who ship cargoes of cotton to Marseilles or Riga, draw in settlement on London rather than on Paris or St. Petersburg. What is it that thus makes London the chief seat of population in the world, the commercial metropolis of the world, the great financial clearing-house of the world?