CHAPTER XXIII

THE EXECUTIVE'S LEGAL PROBLEMS*

Law is, after all, only the formulated rules of human conduct, a code of procedure and interpretation which is the outgrowth of the daily affairs of men.

Help versus Hindrance

-ALFRED BICKNELL.

The financing of a business discussed in the preceding chapters concerns vitally the executive's future-whether his enterprise is to wither into nothingness or develop into the flourishing concern upon which his ambitions are set. The latter result, a competent business man so much desires that he spares no effort-disdains no assistance which will aid him to reach it, and gives full heed to every possibility of danger which might defeat his end. In both of these directions-aids and safeguards-a knowledge of business law will help him.

The law sets up certain standards for the guidance of conduct, as the executive discovers, adversely or beneficially, again and again. Too often, unfortunately, business men conceive the law to be something of an arbitrary nuisance, a source of friction and a hindrance to them in carrying out their dealings. It is true that there are placed upon the statutes numerous laws which affect business unfortunately, and that with respect to many details and methods of court procedure the law's workings are costly and cumbrous. These deservedly are criticised by men schooled in modern methods of efficiency.

Nevertheless, business men must recognize in fairness that part of their objections, possibly a very large part, toward certain statutes are in reality not directed justifiably at the law

*Legal portion prepared by Messrs. Conyngton and Shidle.

itself and those who enforce it, but at those responsible originally for its passage. Moreover, the irritations caused them by what they term the law's arbitrariness must not be permitted to obscure the very great benefits secured from our legal system.

The Law of the Land

Business flourishes only where law prevails. No great business development is possible until a country has become civilized enough to have settled laws and orderly legal procedure. In countries like Mexico and the Balkan States no great business establishments are to be found and the great resources of these countries are not developed, or they are operated by foreign capitalists who rely for protection on the strong arm of their own land. The rule of each man for himself without regard to the just claims of others leads inevitably to savagery and stagnation.

As business is thus dependent on the existence of law and order, it follows that the greatest business development is found in those countries where there are established laws and settled government, which can be counted upon to operate in the same general way at all times.

In our own country we are fortunate in having one of the most advanced systems of law to be found in the civilized world. Its beneficent operation has always been ours and like the air we breathe or the water we drink we consider it a part of the order of nature, which it is not. All we enjoy of personal freedom and safety of life and security of property has been won by conflict, courage, and sacrifice on the part of our fathers. The so-called natural rights to life, liberty and the pursuit of happiness, are not found in a state of nature. They are the fruits of a long, painful struggle by our forefathers who loved liberty and self-expression. When these rights were won they were embodied in our system of

laws and government. We should prize all these more if we remembered how much they cost and how bare and hard our life would be if they were swept away and each man had to depend on his own arm and skill to protect himself, his family, and his scanty belongings from forces of fraud and aggres

sion.

Relation of Law to Business

A business man should realize that while our system of law regulates business in manifold directions, his industrial existence depends upon the fact that we live in a country of orderly government, and that the laws for the protection of property and the enforcement of contracts rarely fail to give the security to him that they should.

Most business operations are made possible only by the fact that we live under settled government according to which the rights of each party to a business transaction are defined and can be enforced. The object of all law is to define rights and to provide a remedy when those rights are infringed. In all of the law, the primary purpose is to do justice, to protect the man who is trying to do business fairly, and to check and restrain those who violate the law and who refuse to observe their contracts and obligations. In practice it is too often cumbersome and costly, but its theory is sound and its aims are the highest. Because it exists and can be invoked when necessary we are able to do business and collect what is owing to us and are protected from theft, injustice, and extortion. Our business goes on day after day, and robbery, fraud, and blackmail are exceptional. Most business men do business squarely and neither do nor suffer wrong and rarely have anything to do with the courts. It is to be remembered that for one case where a man has to enforce his rights through the somewhat tedious and costly procedure of our courts, there are nine hundred and ninety

nine cases where those same rights are enforced merely by the fact that the law exists, so that if the contract were broken, or the right denied, the injured party could have recourse to the law.

The Law of Contracts

Certain parts of the law of the land so particularly affect business and business operations that every man who engages in business must have clear ideas on these subjects.

For example, the law of contracts enters into every day's work. In fact, the major part of many businesses consists of making and fulfilling contracts. Notwithstanding this, it is strange how many otherwise intelligent business men are not clear on the elementary principles of contracts. To make a contract binding, certain things are requisite. Some contracts must always be in writing. Some other contracts will be implied without the parties saying anything about coming to an understanding or making an agreement.

An interesting case which came up a short time ago involving a prominent New York real estate dealer, illustrates well how a knowledge of business law may save the costs of expensive and needless litigation.

The New York dealer offered by letter a city lot to a client in Hot Springs, Arkansas, on January 30th. On February 7th, the client wrote accepting the offer on the terms proposed. On the same day, owing to changed real estate conditions, the dealer wrote to Hot Springs withdrawing his offer. The client's acceptance reached New York on February 9th. The Hot Springs man claimed that the dealer must fulfill his original offer because the acceptance had been sent before the letter of withdrawal was received.

His claim was upheld by the court on the ground that "an offer made by letter which is to be answered in that way cannot be withdrawn unless the withdrawal reaches the party to whom

it is addressed before he has accepted." A familiarity with the fundamentals of business law would have saved this real estate man both money and time.

Another point on which business men are apt to be careless is the necessity of being able to prove contracts so that in event of any subsequent disagreement it is possible to show exactly what the real agreement was. To enforce a right in court, evidence is necessary. Many, many times good cases are lost because the injured party cannot prove what he knows is true. A business man should know exactly what evidence is required for any contract he makes.

Again, some contracts are illegal and cannot be enforced. In most cases this does not necessarily mean that those making the contract are liable to any penalty or that there is anything criminal in the contracts, but for reasons of public policy the courts will not enforce them, but will leave the party to such an agreement without any remedy.

Again, some contracts can be enforced according to their terms and the parties who make them must perform them specifically. In other cases, when a party refuses to perform his part, the only remedy is to sue for money damages for the breach of contract.

The contract of sale is such a common one that at the present time business men are trying to secure the adoption of a uniform law concerning it in every state of the Union. Such a law has already been adopted in about fifteen states. In those states where it has not been adopted the same general principles prevail. It is obvious that the business man should know by heart the essential features of the law governing contracts of sale.

The Law of Agency

Another matter that continually comes up in business is the law of agency. Most men act at times as agents for