before it is paid for, but it may be noted that the status of property held under a conditional sales contract is rather peculiar. Under the terms of the contract the title remains in the seller until after all of the purchase price has been paid. However, from an equitable viewpoint the buyer acquires an interest in the property with his first payment and his interest increases with every installment that he has paid, and it is apparently for this reason that the legislatures of the various states and the courts take the view that there is no crime committed by the buyer in disposing of unpaid for property purchased on a conditional sales contract.

However, there are a few states prescribing a criminal penalty for disposing of property of this character before it is paid for. Many states, however, do provide a penalty if property held by the buyer is disposed of before a chattel mortgage given by him as part of the purchase price is fully satisfied.

Briefly stated, the requirements of the different states with respect to conditional sales contracts are outlined in the Appendix, though it is well to bear in mind that the requirements are often changed and a credit man should keep up to date, regardless of whether changes occur by legislative enactments or through court decisions.

In case of default in payment on the part of the buyer of any property purchased under a conditional sales contract the seller usually has two remedies, and

in many states he must elect as to which of the two he will pursue. In many states if the seller elects to collect his claim by bringing action, the bringing of an action and the securing of a judgment automatically passes title. In most cases it is better for the seller to recover his property and resell, and in many states this can be done without legal process and with scant formality of any kind. The agent of the seller merely takes possession and that ends the transaction. But, of course, if the buyer opposes the taking of the property legal action is necessary, usually by way of replevin or foreclosure.

From a wide experience in dealing with conditional sales contracts, the writer has formed an impression that it is the tendency of the courts to protect the buyer as much as they can in case of default, and this is natural, as otherwise unscrupulous sellers would immediately upon default take possession of property that had been almost entirely paid for. On the other hand, there are unscrupulous buyers that would take advantage of sellers, and the form of a contract that does not clearly set forth all conditions and rights of the parties in case of default lessens the seller's security. Sellers of machinery probably meet with more technical difficulties than sellers of other classes of property. Several forms of conditional sales contracts are shown in the Appendix, covering machinery and other classes of personal property.

Credit men should train their salesmen to see that all conditional sales contracts are in proper form, that there is no ambiguity in the terms of payment and that the contract is properly executed by the buyer. Frequently the buyer is a corporation, and in case of controversy the seller might be called upon by the attorney for the buyer to prove that the individual executing on behalf of the buyer had authority to so execute. For this reason salesmen should be taught to insist that the individual signing for a corporate buyer show his authority for signing. This will indicate to the credit man whether that individual does have authority to make the purchase.

The sale of goods under conditional sales contracts covers such a broad field, and so many intimate questions arise, that no attempt has been made to give a complete analysis of the situation in all states; but credit men can always ascertain the laws of the states in which they are doing business covering the various phases of conditional sales, and if the credit man's field covers the entire United States there are several digests of the subject that will be of assistance in the solving of problems that arise daily.

CHAPTER X

TRADE ACCEPTANCES

There has been much interest displayed recently in the use of Trade Acceptances, and many educational campaigns have been started through the efforts of the Federal Reserve Banks, the American Trade Acceptance Council, and individual institutions who realize their value.

On the other hand, there are prejudices to overcome prejudices existing not only in the mind of the dealer, but also in the minds of some bankers. This is natural, however, as every deviation from definite channels in the progress of the world has always met with opposition. For several years after automobiles came into use certain classes of people sneered at the owner of one, and a man who drove a car was regarded as a "snob" and not even entitled to the use of the highways. The automobile has, however, proven its worth, and so, regardless of prejudices and scepticism, the Trade Acceptance will prove its worth in American business.

The Federal Reserve Board in its circular of July, 1915, defines a Trade Acceptance as "A bill of exchange drawn to order having a definite maturity and payable in dollars in the United States, the obligation to pay

which has been accepted by an acknowledgment, written or stamped, and signed, across the face of the instrument, by the company, firm, corporation or person upon whom it is drawn; such agreement to be to the effect that the acceptor will pay at maturity, according to its tenor, such a draft or bill without qualifying conditions."

The objections to the Trade Acceptance that it is not practical, that its use encourages inflation, or that it enables a certain class to obtain credit by juggling, or that it will drive out the practice of cash discounts, or that the details of making settlement through the use of Trade Acceptances are too burdensome, do not seem to stand the test of careful consideration.

Likewise the exponents of the use of Trade Acceptances may have hurt their cause by overstating the advantages. It is a mistake to say that the Trade Acceptance is the only proper instrument of credit, or that it will drive out the use of promissory notes and abolish the cash discount system, and that it is the only form of settlement which shows patriotism.

Why is not a promissory note a proper instrument of credit under some circumstances just as much as a Trade Acceptance is a proper instrument of credit? Why should Acceptances drive promissory notes out of existence? Single-name and two-name notes will always have a function in our credit relations. Why should a man who sells his goods for cash be expected