A few additional cautions are worth while relative to contracts. First, the agreement should be thoroughly understood before being made. This calls for careful reading of the contract and sometimes an explanation by an unbiased party. Under almost all circumstances oral statements or agreements made prior to or at the time of execution do not change the terms of a written contract. Contracts ordinarily are not enforceable after a certain number of years, which varies depending on the provisions of the statutes of limitations in the different States. Receipts should be kept for at least the number of years that contracts are valid.

Negotiable Instruments

Checks, drafts, notes, and trade acceptances are forms of written contracts that are called negotiable instruments. They are transferred from person to person very much like money. This is not true of ordinary contracts. To be negotiable, an instrument must conform to the following requirements:

1. It must be in writing and be signed by the maker or drawer.
2. It must contain an unconditional promise or order to pay a
certain sum in money.

3. It must be payable on demand, or at a fixed or determinable
future time.

4. It must be payable to order or to bearer.

5. When the instrument is addressed to a drawee he must be

named with reasonable certainty.

An instrument to be negotiable must contain all these essentials, and if any are lacking it is nonnegotiable.

An instrument is negotiated when it is transferred from one person to another in such a manner as to make the receiver its holder. If the instrument is payable to bearer, it is negotiated by delivery. If payable to order, it is negotiated by endorsement of the holder and delivery.

Endorsements

The endorsement must be written on the instrument itself or upon a paper attached to it. There are several types of endorsement, each intended for a specific purpose. They are as follows:

John Jones

Blank endorsement.-This is the usual form of endorsement and in most States makes the instrument payable to bearer.

The holder ordinarily can obtain payment without any explanation of how he obtained the paper. The one receiving the instrument may ask for a further endorsement from the passer but this is only to add the credit of the new signer, not to give the receiver a surer right to payment from the parties already liable on the instrument.

Pay to the order of
Frank Smith
John Jones

Special endorsement. This method protects against loss or theft. The instrument can be further negotiated only by endorsement of Frank Smith. The holder of an instrument may change a blank endorsement into a special endorsement by writing the limiting clause above the signature of the person who endorsed in blank.

Without Recourse-
John Jones

Qualified endorsement.-This limits the liability of the person endorsing. A qualified endorser does not guarantee payment of the instrument. This form is often used when the endorser is acting as agent, when the buyer of the instrument is making good the default of the maker to the endorser, when the paper is sold at a speculative discount, or when the buyer receives other protection such as land mortgages or salable collateral.

Pay to First National Bank for deposit only-ment gives the holder only limited conJohn Jones trol. This introduces a "condition" and practically renders the instrument nonnegotiable. It is proper to use restrictive clauses when the receiver is to act as agent for the endorser or as trustee for a third party.

Restrictive endorsement. This endorse

Holder in Due Course

As negotiable instruments are transferred in the transaction of business, the person receiving them normally becomes a holder in due course, which may give him greater rights than the original owner of the instrument. "A holder in due course holds the instrument free from any defects of title of prior parties and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon." A person is a holder in due course if he received the instrument under the following conditions:

1. That it is complete and regular upon its face.

2. That he became the holder before it was overdue and without notice that it had been previously dishonored, if such is the fact.

3. That he took it in good faith and for value.

FARM CREDIT ADMINISTRATION

Information and Extension, Washington, D. C.

"OST business is done now through the use of credit. Everyone is familiar with the custom of buying goods on credit or on time from stores or dealers. In paying labor some corporations use script which is a form of credit to be used at the company store. Much of the paper money we use is Federal Reserve notes, which is a form of bank credit, while another part is United States notes and this is Government credit. By far the most important form, however, is bank credit in the form of deposits. This kind of credit is passed from one person to another by means of checks.

To make easy the transfer of credit and at the same time protect the people carrying on business, a number of written instruments are in general use. The script and paper money mentioned above are examples. In addition to these we have negotiable instruments including checks, drafts, notes, and trade acceptances. Bonds and mortgages are more formal contracts to pay specified obligations. As evidences of ownership of property which is used as security for credit we have financial statements, warehouse receipts, bills of lading, bills of sale, shares of stock, deeds, and abstracts of title. Other papers often associated with credit transactions are insurance policies, farm and mineral leases, assignments of income, waivers, nondisturbance and subordination agreements, releases, and satisfactions. While farmers do not make constant use of most of these forms as do other businessmen, those farmers who produce chiefly for the commercial market do make frequent use of some of them and occasional use of almost all. The safe handling of the farm business now requires a knowledge of these legal instruments. All the papers mentioned above, with the exception of financial statements and abstracts of title, are either written contracts or written transfers of interests in land or other property.

Contracts

A contract is an agreement between two or more parties to do or not to do a particular thing.

In order for an agreement to be a valid contract it usually must contain four essential elements as follows:

1. Competent parties-persons having ability to enter into contracts.

2. An offer-by one party to another-and an acceptance by the party to whom the offer is made.

3. A legal object-the contract must seek to accomplish something that is not contrary to law.

4. Consideration-money paid, goods furnished, doing or refraining from doing an act.

"Competent parties" means persons capable of carrying on business. Minors, insane, and feeble-minded people are not considered competent under the law. Men become of age at 21 years, while the age for women varies from 18 to 21, according to State laws. Contracts made by minors are voidable; that is, the minor can change his mind and refuse to be bound by the agreement either before or after he becomes of age. If he ratifies the agreement after he becomes of age, A Representative Contract for Deed.

Form 916 Rev. 7-36

CONTRACT FOR DEED

This Contract, Made this

15th

day of

November

A. D. 1937, by and between
THE FEDERAL LAND BANK OF SAINT PAUL, a body corporate, of the City of St. Paul, County of Ramsey, State of

covers the terms of sale of the farm hereinafter described.

herein called Purchaser,

WITNESSETH, That said Bank, in consideration of the payments to be made and the covenants and agreements by said
Purchaser to be performed as hereinafter contained, hereby sells and agrees to convey unto said Purchaser by special warranty
deed upon the prompt and full performance by said Purchaser of the covenants and agreements of this contract to be by said Pur-
Minnesota, to-wit:

Redwood

chaser performed, the following described premises in.
SE of section 7, township 12, range 3 west

County, State of..

_acres, subject, however, to all existing easements and rights of way.

Said Purchaser, in consideration of the covenants herein made by the Bank, agrees to purchase of the Bank the above described premises and to pay therefor to the Bank or its assigns at its banking office in St. Paul, Minnesota, the sum of Tour....... thousand

Dollars ($4,000

together with interest on the whole sum as shall remain from time to time unpaid, at the rate of 5
to be computed from January 1

per cent per annum,

19. 38, first interest payment to be due. July 1

19.38

and semi-annually thereafter, purchase price to be paid in manner and at times as follows, viz.:

Prepayment of principal may be made in any amount at any time. Such prepayments are not to reduce thereafter the periodical
numents herein contracted to be made, but are to operate to discharge the contract at an earlier date.