LEGAL PHASES OF COOPERATIVE ASSOCIATIONS 107 
In some instances associations have issued certificates of indebted- 
ness and have agreed to pay them at a certain time through the 
making of deductions of a fixed amount, say, of 1 cent per pound on 
products handled. Obviously, if the volume of products handled is 
insufficient to permit the raising of a fund sufficient to pay the cer- 
tificates on maturity, a question would arise regarding the right of 
the holders of the certificates then to take action on them. In such 
cases it is submitted that suit could not be successfully brought on 
the certificates on their maturity if they were not paid at that time, 
because both parties assumed that a fund sufficiently large could be 
raised during the period in question. This assumption indulged in 
by both parties, proving to be incorrect, would automatically defer 
the time at which suit could be brought on these certificates. In 
other words, as the certificates were to be paid out of a fund to be 
raised in a specified manner, the holders of the certificates can not 
complain if payment is not made on the date fixed because of the 
smallness of the fund, there being no dishonesty. 
One of the objections that may be raised to the use of the re- 
volving-fund plan of financing is the fact that a serious situation 
may be created if an association, in a given season, has a greatly 
reduced volume. This is true whether the amount of the deduction 
that may be made for the payment of certificates of indebtedness 
is fixed or not, because (assuming that the amount of the deduction 
that may be made for the payment of certificates of indebtedness 
is not fixed) if the volume of products handled by an association in 
a given year is small because of a crop failure, for instance, then 
the members who deliver to the association would complain if large 
deductions were made from the returns for their products. 
Some associations issue certificates of indebtedness that do not 
have a fixed maturity date, with the understanding that the certifi- 
cates are to be paid in the order in which issued, as funds are avail- 
able for this purpose. Certificates thus issued may have a restricted 
sales value because of the uncertainty incident to their time of pay- 
ment. On the other hand, from the standpoint of the association, 
there are obvious advantages in issuing certificates that do not have 
a fixed maturity date; especially is this true if the certificates are 
to be paid through the making of deductions of a fixed amount. 
Ordinarily, certificates of indebtedness are transferable so that a 
member who receives a certificate of indebtedness may borrow there- 
on or may sell it to any person who wishes to buy it. 
Each certificate of indebtedness should show on its face the exact 
terms and conditions under which it is issued. Especially is this true 
in the case of transferable certificates. Nearly all certificates of 
indebtedness bear interest, but of course it is entirely optional with 
an association whether the certificates it issues bear interest. 
If an association saw fit to do so, deductions for financing purposes 
could be made which would be evidenced by common or nonvoting 
preferred stock, or by bonds instead of certificates of indebtedness. 
ASSOCIATIONS OPERATING IN VARIOUS STATES 
May an association formed under the laws of one State do business 
in other States ? If an association desires to enter into marketing 
contracts with producers in States other than that in which organ- 
