October 14. 1916 



HORTICULTUEE 



515 



BUY YOUR FALL SUPPLIES NOW 



New Stock is in. Ready for You, A Rare Shipment of Im- 

 ported Goods Just Received. Hampers and Flower Bow^ls 



Stock up now and have the goods to show customers. Send for prices and 

 you will be astonished to see how much you can do with a little money when 

 you go straight to headquarters— THE FLORISTS' SUPPLY HOUSE OF AMERICA. 



H. BAYERSDORFER & CO. 



Manufacturers and 

 Importers 



1129 Arch Street, PHILADELPHIA, PA. 



Write for 

 Catalogue 



SOMETHING ABOUT ACCEPTING 

 DEBTORS' NOTES IN SETTLE- 

 MENT OF ACCOUNTS. 



For a long time I have had on file 

 a memorandum to write something 

 about the loose practice of accepting 

 the notes of a debtor in settlement of 

 an account. Other things have hereto- 

 fore crowded it out but the receipt of 

 the following letter from a Cincin- 

 nati, Ohio, reader who does not wish 

 his name disclosed, gives me the 

 chance I have been waiting for: 



Cincinnati. O. 

 We want some arlvice in advance about a 

 situation that is likely to arise in the near 

 future with one of our customers — a good 

 buyer, but not always prompt in his settle- 

 ments. On December 1st he owed us about 

 ?500, most of which was considerably over- 

 due. We bad been after bim to pay it 

 without result, until about the middle of 

 December he came in and proposed to give 

 us a note in payment for three months, 

 bearing interest. We accepted it. thinking 

 it a good way to put the account on an in- 

 terest basis, and now we hear that he is In 

 a bad way and only those who get in early 

 are likely to get anything. We would like 

 to go after him right away, but the note 

 is not due until March 16th. and it seems 

 that we must hold off until that time. 

 Please advise us if this conclusion is right 

 and tell us if there is any way to get out 

 of the situation we have placed ourselves In. 



This is pretty nearly a typical case. 

 The same thing is happening all the 

 time. Both wholesale and retail deal- 

 ers, especially the former, when some 

 customer gets behind, will propose a 

 note as the next best thing to cash. 

 And the idea is all right, if it is car- 

 ried out properly. The proper way to 

 carry it out is never — where there is 

 the slightest question about the pres- 

 ent and future standing of the debtor 

 — to accept the note in payment of 

 the account. It should be accepted 

 only as collateral security, with an 

 agreement that in case it becomes 

 necessary in the opinion of the credit- 

 or, the latter can immediately begin 

 suit on the original account. 



When a note is accepted in payment 

 of the account, you have merely post- 

 poned payment that far ahead, and no 



matter what happens to the debtor's 

 finances meanwhile, you can only sit 

 down and wait. 



The average business man does not 

 understand the difference between the 

 two ways of accepting the note, and he 

 therefore accepts it, as a rule, in a way 

 which could easily be construed into 

 an intent to take it in payment. 



The creditor who takes a note in 

 payment of an account is not only no 

 better off than he was before, but he 

 is really worse off because he cannot 

 enforce his claim as soon as he could 

 before he took the note. His original 

 claim on the book account was just as 

 clear and good, and almost as easily 

 proven in court, as his new claim on 

 the note. Therefore he gains nothing 

 by changing the form of his claim 

 from book account to promissory note, 

 but as I have already said, he actual- 

 ly loses. 



Everything depends on the way In 

 which the note tendered in settlement 

 is taken. The general rule is that a 

 promissory note given in settlement of 

 an account is not to be considered as 

 having been accepted in payment un- 

 less there is an agreement to that ef- 

 fect between the parties. Usually there 

 is never any actual agreement between a 

 creditor and his debtor, that a note 

 given by the latter shall be taken in 

 payment or not in payment. The 

 debtor, who is usually behind in his 

 accounts or he wouldn't tender the 

 note at all, says something like this: 

 "I'll give you a note to fix up (or clean 

 up, or settle, or cover) that account of 

 mine." The creditor takes the note 

 and later the court may have to decide 

 what was meant by "fix up," or "clean 

 up," or "settle," or "cover," or what- 

 ever the expression was. Remember 

 that the agreement may be implied 

 from the conduct of the parties, and 

 if the court holds that the note w^as 

 taken in payment it means that the 

 old account is dead, suit can never be 

 brought on it, the note has been sub- 

 stituted for it, and the only remedy is 

 to try to collect that, which can only 

 be attempted, as I have explained, 

 when it comes due. 



Where a note is taken ■without 

 stipulations of any kind, there Is al- 



ways the chance that a court may de- 

 cide in that way. There are many 

 cases in which this made all the dif- 

 ference between losing the account 

 and collecting it in full. 



Even where it is clear that a note 

 was not accepted in payment, but on- 

 ly as collateral security, the creditor 

 will not usually be allowed to bring 

 action on his original claim until the 

 note comes due, because when he ac- 

 cepted the note he gave the debtor that 

 much more time and the court will not 

 hllow him to go back on his promise. 



What is the best way to safeguard 

 one's self against such possibilities? 

 There are two main ways: 



First — Make the note payable on 

 demand or at sight instead of at some 

 future date. Such a note can be sued 

 on at any time. Naturally the debtor 

 will not always agree to this, for his 

 reason for giving the note is to gain 

 delay until some future time. He will 

 often agree to it, however, when the 

 creditor gives his word not to negotiate 

 the note or do anything with it before 

 a certain date unless it becomes neces- 

 sary. 



Second — If the note has to be 

 made payable at a future time, then 

 have the debtor sign a memorandum 

 when he gives it that the note is for 

 collateral security only, and granting 

 permission to the creditor, before the 

 note matures if he considers it neces- 

 sary, to begin suit on the original ac- 

 count. If the creditor does begin suit 

 on the original account before the note 

 matures, he must first give the note 

 back. 



The only thing I can say to my 

 friend from Cincinnati is that he can 

 answer his question by applying what 

 I have said above, to the facts of his 

 own case. If he can prove that he did 

 not take the note in payment — al- 

 though in his letter he says that he 

 did — he can proceed against his debtor 

 at once on the original account. If he 

 did take the note in payment — and the 

 fact that It bears interest is strong 

 evidence that he did— he must wait 

 until its maturity, no matter what hap- 

 pens. 



(Copt/right, January, 1916, by 

 Elton J. Buckley.) 



