National Bank v. Hall - 101 U.S. 43 (1879)
U.S. Supreme Court
National Bank v. Hall, 101 U.S. 43 (1879)
National Bank v. Hall
101 U.S. 43
A., B., & Co., a firm engaged in selling livestock on commission, authorized a bank to cash drafts drawn on the firm by C., their agent, who forwarded livestock to them. Some controversy arising, A., B., & Co. wrote to the bank as follows:
"JAN. 15, 1876"
"Hereafter we will pay drafts only on actual consignments. We cannot advance"
money a week in advance of shipment. The stock must be in transit so as to meet dr'ft same day or the day after presented to us. This letter will cancel all previous arrangement of letters of credit in reference to C.
The cashier of the bank replied as follows : -
"JAN. 17, 1876"
"Your favor of the 15th received. I note what you say. We have never knowingly advanced any money to C. on stock to come in. Have always supposed it was in transit. After this, we shall require ship'g bill."
There was no further communication on this subject between the parties. Two clerks of A., B., & Co. who were aware of this correspondence became partners without the knowledge of the bank, and the business was thereafter carried on in the same name. C. continued to draw on the firm as before, and the bank, without requiring bills of lading, to cash the drafts, all of which were accepted and paid by the firm. The bank acted in good faith. C. absconded with the proceeds of two drafts, and the firm brought this action against the bank to recover the amount. Held:
1. That the letters constitute no contract, and the bank is not responsible to the firm for cashing the drafts without bills of lading attached.
2. That if, however, a contract did arise from the cashier's unanswered letter of Jan. 17, 1878, it was with the then existing firm, and ceased on the subsequent change thereof by the admission of new members, without the knowledge or the consent of the bank.