In order that the account may be proved by the books of the business, it is necessary that it shall be directly in the line of that business and not some account that has arisen from a transaction in a different line. 12. How should an account be made up as to gross sums and items? t To properly evidence an account it should never appear in a book of original entry in the form of a gross sum if it be possible to put it in the form of items or in detail. A gross sum of an account that admitted of itemizing would not ordinarily be taken as evidence. 13. What are Open and Liquidated accounts? Until an account is subjected to a reckoning and a certain balance is found to be due at some definite time, of which time and amount both debtor and creditor have knowledge, it is classified as an Open account. After the balance is cast and a due date established the account is said to be Liquidated. 14. What is an important result in the liquidation of an account? The balance of the account in favor of the creditor becomes interest bearing from the time of liquidation. 15. If a statement is rendered and no objection is made to its terms by the debtor, what is assumed? The silence of the debtor is taken as an admission that the rendering of the account is correct. If he intends to object he should do so within a reasonable time. A failure to object will not, however, prevent the debtor from introducing proof to show that the account is incorrect. 16. What is the legal effect where an account has been rendered and it has not been objected to within a reasonable time? It becomes an account stated and is presumptively deemed correct. 17. Under what circumstances can an account stated be impeached? Ordinarily, only by proof of fraud or mistake. 18. What is the effect of alterations, erasures, etc., in books to be used as evidence? Any book to be used as evidence should be free from everything that cannot be explained by the book itself. Erasures that will eradicate an entry should never be resorted to. Corrections should be made in such manner that both error and correction may appear, the one making plain the other. The law regards with suspicion anything offered as evidence that cannot be explained clearly. 19. Can an account be sold? An account may be assigned and sold and the purchaser take the same title that the seller had, subject to all defenses thereto. A form of assignment should be attached to the account or written upon the account itself. 20. How may a number of small claims against a debtor be joined for collection? Each creditor may assign his claim to some person who in turn sues for the sum of all the different claims. When collection is enforced, the amount is distributed among the claimants. By this plan the expense of collection may be greatly diminished. 21. What other advantage is sometimes secured by joining a number of claims by assignment? This method will sometimes bring the sum of the claims within the jurisdiction of a higher court, while the claims separately could not be sued in a court of record. The creditors can by this plan get the benefit of the process of law in the higher court. INTEREST AND USURY "The proof lies on him who affirms, not on him who denies." General Law Relating to Interest and Usury. 1. What is interest? Interest is the price paid for the use of money or the damage allowed for the forbearance of a debt. 2. How is the price paid for the use of money regulated? In most states by statute law. 3. Was interest allowed at common law? It was not, unless expressly stipulated by the parties. Where not thus stipulated, it is only allowed when authorized by statute. 4. What is the purpose of interest laws? (1) To prevent the charging of too high a rate of interest. (2) To fix a rate that shall be charged in case the contracting parties have failed to name a rate, or to provide where the contract was made not anticipating that it would become interest bearing. 5. Why should the law set a price on the use of money? (1) Money to a very great extent has a fixed value. (2) In all civilized countries it is a necessity to almost every individual to some extent, whether rich or poor. (3) Unlike other commodities, money does not lose its value by ordinary wear or use. 6. What are some things that affect the price of money? (1) The law of supply and demand. (2) The risk to the lender. (3) The profits of industry to the borrower. (4) The convenience of the loan. (5) The character of the government. (6) The condition of the resources of the country whether developed or undeveloped. 7. What rate of interest is collectible, the rate where the contract is made or where it is to be performed? This may be settled by agreement of the parties. If no agreement has been made the rule is that the rate where the contract is made shall govern. In a note or draft made in one state and payable in another, unless otherwise agreed upon, the rate where payable controls. 8. On what claims is interest allowed? (1) On any claim as to which the parties make an agreement to that effect. (2) Where necessary cash advances were made by one party to another and it is the established custom to charge interest. (3) On a claim or debt after it becomes due. (4) On book accounts after liquidation. (7) On notes and drafts after maturity. 9. Upon what is interest computed in mutual merchandise accounts? It is cast upon the annual balances. 10. Can interest be charged upon the various items of an account from the date of each, or from the time the account was rendered? From the time when the account was rendered. II. What is usury? Usury is the intentionally taking of more than the legal rate of interest for the use of money. It is also essential to bring the case within the statute of usury that the principal sum ioaned is to be repaid absolutely without depending upon any contingency. 12. What is absolutely necessary to make a contract usurious? Three things are necessary-first that the contract be for a loan of money, second that the price charged be more than the legal rate of interest, third an intent to violate the statute against usury. 13. Is compound interest usury? While the courts will not enforce the payment of compound interest, unless agreed upon after simple interest has become due, yet such payment is not usury. 14. What are some contracts where more than the legal rate is taken and yet are not usurious? The following are not usurious contracts: (1) Interest in advance, as in bank discount. (2) Where the excess over the legal rate is insurance against such a risk or hazard as may cause the lender to lose the interest and possibly the principal. (3) The sale of a note or draft, deducting more than the legal rate of interest unless the note or draft was written for the express purpose of thus negotiating a loan of money. (4) If more than the legal rate is taken through a mistake in computing interest. (5) Charging the borrower necessary expenses in perfecting the loan. (6) Demand loans of $5,000.00 and upwards made on collateral. 15. Is it usury if by the terms of the contract the payment of an excess of interest is entirely at the option of the borrower? It is not. 16. What are the effects of a contract being usurious? (1) The lender is usually subject to some penalty for the making of such a contract. (2) That any additional contracts made on the basis of the usurious contract are no better than the original contract—that is, if the original contract is void so are all others based on that contract. The rule is established that mortgages, trust deeds and all forms of securities are mere incidents of the debt and that if the debt be infected with usury, all securities connected with it are thereby vitiated and rendered unenforcible. 17. What are some of the penalties for charging usury? (1) Forfeit the excess of interest over the legal rate. (2) Forfeit all interest. (3) Forfeit both principal and interest. (4) Forfeit principal and interest and suffer a fine or fine and imprisonment in addition. 18. Who may take advantage of usury? Only the debtor. The right to plead usury is a privilege per |