Collier's Cyclopedia of Commercial and Social Information and Treasury of ...

PRINCIPLES OF COMMERCE.

HE practice of commerce is in a great measure dependent on mutual good faith, and the integrity of seller and buyer, and can in no case permanently flourish where these fundamental qualities are wanting. The first or great leading quality, therefore, in the character of a merchant, ought to be scrupulous honesty both in word and deed. The article which he proposes to dispose of must be exactly what he declares it to be, not inferior or in

any respect unsound in its nature. If it possess any blem

ishes, these must be announced to the buyer before the bargain is concluded, and, if necessary, though at a considerable loss, an allowance made for them. The merchant is not less called on to be faithful in the fulfillment of all promises which he may make, whether with respect to goods or their payment; because those to whom the promises have been made may on that account have made similar promises to others, and, therefore, the breaking of a single promise may prove injurious in every link of a whole train of transactions. Perfect honesty or integrity is a fundamental principle of trade; and the next most important are, strict regularity in all proceedings, according to established usage, and also steady perseverance. The merchant must give regular attendance during the hours of business, be regular in executing all orders and answering all letters; regular in the keeping of his books, and in the reckoning of his stock and moneys; in short, he must be methodic and careful in all branches of his concerns, for without this species of attention, the best business is apt to become confused, and to be ultimately ruined. What is true of individuals is true when applied to a whole nation. No people have ever attained opulence and high mercantile consideration, who have not possessed a character for integrity and regularity in all their dealings.

Besides these indispensable qualities in the individual character of a merchant or tradesman, there is required a happy combination of enterprise and prudence with the utmost coolness-enterprise to embrace favorable opportunities of buying and selling, and prudence and coolness to restrain from engaging in over-hazardous and ruinous speculations. In all his transactions, the man of business is understood to proceed upon a cool inflexible principle of doing that which is most advantageous for himself, without fear or favor; because in

commerce each party is supposed to be governed by motives of self-interest (always within the rules of honesty and pro. priety), and is under no obligation to deal from mere personal regard, or any kind of friendly consideration. In commerce there is, strictly speaking, no friendship. If there be friendship among the parties concerned, it is a thing aloof from business transactions-a matter of private arrangement-and is only to be regarded as such. On this account, even among the most intimate friends, there must be an exact mode of dealing, and the most accurate counting and reckoning. COMMERCIAL TERMS AND TRANSACTIONS. The following ex-lanations of the principal term used in commerce, will illustrate the mode of conducting business transactions.

Firm.-Every business, whether private or public, is conducted under a specified designation or title, called the name of the firm. This name may be that of a single individual to whom the business belongs, or of two or more individuals, or any title which it may be found advisable to adopt. Sometimes the name of a firm remains long after all who are indicated by it are dead; in such a case, the business has passed into the hands of new proprietors, who, though legally responsible for its obligations, are not, for some private reason, inclined to change the old and well-known title of their firm. A particular firm or business-concern is sometimes personified in the term house-as, Such a house does a great deal of business, etc.

Company.-Two or more individuals engaged in one business constitute a company or copartnery. each individual being called a partner. Companies are of two kinds, private and public. A private company is organized by a private arrangement among the parties, each having certain duties to perform and a certain share in the concern. In companies of the private and common description, no individual can leave the concern at his own pleasure, for by doing so he might seriously injure or embarrass his partners. He can withdraw only after giving a reasonable warning, by which time is allowed to wind up the concern, or place it in a condition to pay him back the capital which he has risked, or the profits which are his due. No partner, however, can transfer his shares to another person, by which a new member would be introduced into the firm without the consent of the partners. The profits of partnerships are divided according to a

specified agreement or deed of copartnery. Generally, in the case of partnerships of two or three persons, each receives the same share on the occasion of an annual division, but in other cases, a partner may not be entitled to more than a fourth or sixth part of what another receives The amount of capital which a partner invests in the concern, the service he can be to the business, and other circumstances, regulate the amount of his share. When each of two persons sinks the same capital, but one takes the whole of the trouble, then he on whom the trouble falls, who is called the active partner, is 'entitled to receive a stated sum in the form of salary over and above his share of profits. Whatever be the share which individual partners have in a concern, the whole are equally liable for the debts incurred by the company, because the public give credit only on the faith that the company generally is responsible. He who draws the smallest fraction of profit, failing the others, may be compelled to pay the whole debts.

Public companies are very different; they consist of a large body of partners, or proprietors of shares, the aggregate amount of which forms a joint stock, and hence such associa> tions are called joint-stock companies. They are public, from being constituted of all persons who choose to purchase shares, and these shares or rights of partnership are also pub licly salable at any time without the consent of the company The value of a share in a joint-stock company is always the price it will bring in the market; and this may be either greater or less, in any proportion, than the sum which its owner stands credited for in the stock of the company. Unless specially provided for in the fundamental deed of copartnery, every member of a joint-stock company is liable in his whole personal property or fortune for the debts of the con

cern.

It is an axiom in commerce, that business is much better conducted by single individuals for their own behoof, than by companies of any kind; as respects joint-stock associations, they are only useful in very great concerns requiring enormous capital and involving serious risks of loss.

Capital. The capital of a merchant is strictly the amount of money which he embarks in his trade, or trades upon, that is, employs for buying goods, paying wages of servants, and liquidating all debts when due. When trading within the limits of his capital, business is done upon a secure footing; but if he proceeds beyond these in any material degree, he is said to be over-trading, and is exposed to the chance of ruin or very serious embarrassment Trading beyond the amount of available capital, is, nevertheless, a prevailing error, and causes innumerable bankruptcies. With a comparatively small capital, a tradesman may carry on a large business, by receiving payments shortly after making his outlays By this means, there is a rapid turning over of money, and small profits upon the various transactions speedily mount up to a large revenue. For example, if a tradesman turn over his capital twelve times in the year, at each time receiving money for what he sells, he can afford to do business on a twelve times less profit than if he could turn over the same capital only once in a year. This leads to a consideration of credit.

Credit. Credit in business is of the nature of a loan, and

is founded on a confidence in the integrity of the person credited, or the borrower. An individual wishes to buy an article from a tradesman, but he has not money to pay for it, and requires to have it on credit, giving either a special or implied promise to pay its value at a future time. This is getting credit; and it is clear that the seller is a lender to the buyer. In all such cases, the seller must be remunerated for making his loan. He cannot afford to sell on credit on the same fa vorable terms as for ready money; because, if he were to receive the money when he sold the article, he could lay it out to some advantage, or turn it over with other portions of his capital. By taking credit, the buyer deprives the seller of the opportunity of making this profit, and accordingly he must pay a higher price for the article, the price being increased in proportion to the length of credit. It very ordinarily happens that the seller himself has purchased the article on credit; but this only serves to increase its price to the consumer, and does not prevent the last seller from charging for the credit which he gives and the risk of ultimate non-payment which he runs. Credit for a short period is almost essential in all great transactions; but when going beyond fair and reasonable limits, it acts most perniciously on trade, by inducing heedless speculation, and causing an undue increase in the number of dealers with little or no capital. An excessive competition among these penniless adventurers is the consequence; each strives to undersell the other, with the hope of getting money to meet his obligations, and thus vast quantities of goods are sometimes thrown upon the market below the original cost, greatly to the injury of the manufacturer and the regular trader. What are called "gluts in the market" frequently ensue from causes of this nature.

Orders.--An order is a request from one dealer to another to supply certain goods An order, when in writing, should be plain, explicit, and contain no more words than are necessary to convey the sense in a simple, courteous manner. The same rule applies to all letters of business, which, by the practice of trade, are confined to their legitimate object. A business man's letters should be plain, concise, and to the purpose; no quaint expressions, no book-phrases; and yet they must be full and sufficient to express what he means, so as not to be doubtful, much less unintelligible.

Counting-house-In French bureau; in Dutch kantoor. The counting-house is the office in which a merchant's literary correspondence, book-keeping, and other business is conducted. The counting-house should be a model of neatness and regularity. Its furniture consists chiefly of desks for the clerks and the books of the establishment, which are secured at night in an iron or fire-proof safe. Almost every different business requires a different set of books, but the mode of keeping them is generally the same, The usual set of books comprises a day-book, in which sales or purchases on credit are individually entered as they occur; a ledger, into which all these entries are engrossed in separate accounts; a journal or note book, for entering miscellaneous transactions; a cashbook, in which every payment or receipt of money is regularly entered ; a letter-book, into which the letters are copied before they are sent off; and a bill-book, for the entering of bills payable and receivable. In large concerns there are various

etc

othe books, as foreign ledger, town ledger, country ledger, The strictest care and accuracy are desirable. It is an understood rule that no book should show a blot or erasure; a leaf, also, should never on any account be torn out, whatever blotch or error it contains. The reason for this scrupulous care is, that a merchant's books should be a clear and faithful mirror of his transactions, and an evidence of his integrity. In the case of misfortune in trade, or other circumstance, the books may be subjected to a rigid judicial examination, and the appearance of an erasure or torn-out leaf may lead to conjectures of an unpleas ant nature and consequences. When an important error occurs in book-keeping, it is better to let it remain and write error below it, than to make a large erasure or to cut out the leaf.

From the books kept by a merchant, a condensed view of his affairs ought to be annually made up. This document contains an inventory or list of goods money, debts owing to the merchant, or other available property, also a contra list of all debts and other obligations due by the merchant Both being balanced, the residue, whether for or against the mer chant, is at once observable. Every man in trade, for at least his own satisfaction and government, should make up a balance-sheet of this nature annually.

Bill of Parcels.-An account or list of items of goods, with the price of each, given to their purchaser by the seller, or delivered along with the goods at the purchaser's house. Should a purchaser dispute the delivery of the goods, it is necessary to produce proof of the fact; when delivered to carriers, a receipt is usually given by subscribing a parcel book. Invoice. A bill or account of goods, which is forwarded separately, announcing the date of their dispatch and the par ticular conveyance by which they are sent. If the seller fail to forward an invoice by mail, and the goods be lost at sea while on their way, the purchaser is not answerable, for he is not supposed to know how or when the goods were sent, and therefore could not insure against their loss. The careful sending of invoices forms an important duty of a merchant's clerk,

Invoices of merchandise imported into the United States, are required by law to be made out in the weights, measures, and the currency of the country or place from which the importation is made, and to be verified before a consul or com mercial agent of the United States, if there be such officer at the place, if not then before any public officer authorized to administer oaths.

Bill of Lading.-A formal acknowledgment or receipt given by sailing masters for goods put on board their vessels. including a promise to deliver them safely as marked and addressed to their designed destination, always, however, excepting loss or injury by the act of God, the nation's enemies. fire, or the dangers or accidents of the sea. The certificates generally in use in the United States except only the dan gers of the sea, and are made out in triplicate, the master retains one bill, the shipper one and the third is forwarded to the consignee. The receipt of a railroad freight agent, or captain of a canal or steamboat, is equivalent to a bill of lading as between the original parties, but in the hands of an

assignee there is a distinction. The bill of lading is assignable, and the assignee is entitled to the goods, subject however to the shipper's right.

Lloyd's. Lloyd is not the designation of any individual or of any company: it is a name used in reference to a set of subscription rooms or coffee-house, in London Formerly the place of resort was in the Royal Exchange, but since the destruction of that building by fire, the place of meeting is in the neighborhood of that locality. One of the rooms at Lloyd's is devoted to subscribers who follow the profession of marine insurers, technically called underwriters, from their writing under, or subscribing to, certain obligations in deeds presented for their acceptance When a person wishes to insure a ship, or goods in a ship, against damage or loss at sea, he offers the risk to these underwriters, and they are at liberty to accept it for a specified premium. The policy or deed expressive of the insurance is usually signed by more than one underwriter, so as to divide the risk Lloyd's is not only a center point in the metropolis for all sea insurance business, but is the place to which every species of intelligence respecting shipping is forwarded from all parts of the world; and this information is exhibited publicly in one of the rooms. for the inspection of all The intelligence is for the most part sent by appointed agents, one part of whose duty consists in investigating the cause of damage to vessels, and taking charge of wrecked property for behoof of the underwriters, whoever they may be. The lists made up and exhibited at Lloyd's furnish authentic information for the use of merchants and shippers of goods all over the united kingdom,

Dutch Auction -In common auction, the highest bidder by competition is the purchaser but according to the process of sale called Dutch auction, there is different mode of determining the successful bidder According to this plan the article is put up at a certain nominal price, which is gradually lowered and the first who speaks and offers the sum mentioned by the auctioneer is at once knocked down as the purchaser. This is the fairest mode of auctioneering it prevents competition, and the article brings its exact value-that which it is worth in the estimation of those present

Insolvency Bankruptcy-When a person is not in circumstances to pay his debts in full, he is insolvent, which is nearly equivalent to being bankrupt the term bankrupt, however, is more commonly applied to one who is legally announced as being insolvent The term bankrupt is derived from bancus a bench, and ruptus broken, in allusion to the benches formerly used by the money-dealers in Italy, which were broken in case of their failure to pay their debts. The law prescribes a certain form of procedure in the case of commercial insolvency, which has the effect of deliberately investigating the cause of the misfortune, and relieving the bankrupt from all obligations, on yielding up his entire property. A bankrupt in the United States who has received a discharge or certificate from a competent authority, being released from all pecuniary claims. may again enter business for his own behoof without any fear of molestation; but a debtor who has merely taken the benefit of the Insolvent Act in England, oi process of cesso bonorum in Scotland, though immediately relieved from prison and left at liberty to pursue any line of

industry, the property he may accumulate is at all times liable to seizure by his former creditors.

A commission of bankruptcy in Scotland is entitled a sequestration, meaning that the property of the bankrupt is officially sequestrated, or taken possession of, for behoof of creditors.

Customs.-The revenue duties levied on imported goods, usually called customs duties. The place appointed by the government at ports of entry where vessels and merchandise are entered and duties upon imported goods are collected, and where vessels obtain their clearance and other papers, is called a custom-house; the collectors, appraisers, surveyors, naval officers and their deputies, examiners, clerks at the head of divisions, inspectors, gaugers and weighers, but not subordinate clerks, are called custom-house officers, and are sworn to faithful service; the persons who act for merchants in the business of entering and clearing goods and vessels, and in the transactions of general business, are known officially as custom-house brokers. A custom-house entry is a statement made in writing to the collector of the district, by the owners or consignees of the merchandise on board any ship or vessel, which they desire to land. While the taxes or duties laid on articles produced and consumed at home, are generally qualified by the adjective "excise," and are best known in the United States as "internal revenue" taxes-the tax imposed upon retailers of liquors, wines, and beer, in the form of a license to conduct such business, emanates in many of the large cities from an appointive body known as a Board of Exciseduties is the official name in the United States for the taxes levied or imposed by the government on foreign goods imported into the country; also money paid to the government on exporting goods. The former is called import duty, the latter export duty. Foreign goods are said to be bonded, when the payment of the duties is secured by a bond, or when warehoused in a government store, and under the control of the collector of the port until entered for consumption and the duties are paid. Bonded warehouses are buildings in which imported merchandise is stored until the importer makes entry for withdrawal for consumption and pays the duties, or until he withdraws the merchandise for re-exportation to a foreign country without paying the duties. These stores are owned and conducted by private individuals, and their occupation is termed "the storage business." Such stores are required to be first-class fire-proof buildings, and to used for no other business, and they must be approved by the Secretary of the Treasury before receiving any merchandise. A government officer is placed in charge of every store, at the expense of the owner, and the business is conducted under voluminous provisions and requirements established by the government. The officer of the customs detailed to take charge of a bonded warehouse, and under whose supervision bonded goods are received and delivered from the store, is called a bonded store-keeper. Goods, wares, and merchandise imported into the United States, subject to the payment of ad valorem duties, are required by law to be appraised at their "actual market value," at the time and place of export. As it is frequently very difficult to establish an actual market value in a foreign port, many goods being made only and expressly for foreign markets, and not sold nor offered for sale at the place

of their manufacture or shipment, serious litigations often arise between the merchant and the government. This difficulty has led to the recognition by the commercial world of the distinctions, cash value, market value, and intrinsic value, although the laws name but one-the "actual market value."

Tonnage Duty is a duty imposed for the purpose of revenue, and is levied upon all vessels engaged in foreign commerce, and also, except in certain cases specially exempted by law, on all vessels engaged in domestic trade. These duties are required to be paid by vessels before clearance papers will be granted, or on their arrival before permits will be given to discharge their cargoes. Tonnage is the gauge of a ship's dimensions, nominally understood to be the number of tons burden that a ship will carry. The rates of duty fixed by law on each article of merchandise imported from foreign coun tries, form the tariff, the details of which differ with every country.

Debenture. This is a formal certificate given by the collector of a port of entry to an importer, for drawback of duties on imported merchandise, the duties on which, when the merchandise is exported, are to be refunded. Debentured goods, are merchandise upon which the drawback has been paid.

Bill of Health.-In order to prevent a spread of contagious diseases, stringent laws are enforced throughout the United States, through the medium of a National Board of Health and State and City Boards. A bill of health is a certificate from the mayor of a city, a board of health, consul, collector of the port, or other authority constituted for the purpose, as to contagious diseases in the port of departure, and to the state of health of a ship's crew and passengers at the time of her leaving. A strict quarantine is established in the lower bay of New York, at which all in-coming vessels are compelled to report. If any contagious disease prevails, the vessel is detained and fumigated until all danger is past.

Bill of Entry, a written account or inventory of goods entered at the custom house, whether imported or intended for exportation.

Bill of Sale, a writing given by the seller of goods or merchandise to the purchaser, by which the seller conveys away the rig. and interest he has in the goods therein named. In the United States it may be given without a seal, but the laws of Great Britain require it to be under seal.

Bill of Sight, in England, an order obtained by the consignee of goods, of the quantity and quality of which he is ignorant, to enter them by bill of sight.

Trade and Commerce.-These words are nearly synony mous, but in their use thus connected the word “trade" conveys the idea of home or domestic traffic, and the word "commerce the idea of more extensive traffic, foreign, varied, and whole. sale.

Bill of Exchange.-The common bill of exchange is an order drawn on a person or banking-house, requesting him or it to pay money to some person, or to the order of a person named therein. The person who draws the bill or draft is called the drawer; the one on whom the demand is made is called the drawee; and the person to whom the money is directed to be paid is called the payee. The indorser writes his name on the

back of the bill; he to whom the bill is transferred by such indorsement is the indorsee; and whoever is entitled to receive the payment is the holder.

(Vide Forms of Commercial Papers.)

Promissory Note.-This is a promise or engagement in writing to pay a specified sum at a time therein limited, or on demand. or at sight, to a person therein named, or his order or assigns, or to the bearer. If the note is given with a specified rate of interest, it is a negotiable note, and may be bought and sold without difficulty.