There is no special limit to the time during which the bank can hold security on goods properly assigned to it. For example, an assignment from a grain customer, dated August, would be effective in the following year provided the actual grain was still on hand in the following August.
The question of season is one which involves some difficulty in the case of accounts of tanners and other manufacturers, whose business goes on unbroken from year to year, so that it is hard to say where their season begins or ends. But there can be no risk in making the promise apply to the recognized term for bank credits - that is, one year following the date of the promise only.
In the case of advances which are not retired in full within the year, it is advisable to act on the theory that a general promise would not be applicable to advances made after the expiration of the particular season of the customer's business to which it refers. The general promise, however, undertakes to give security by way of assignment from time to time "while any advances made under this credit remain unpaid," and under this clause a bank would be entitled to continue taking assignments for loans carried over the end of the season until such time as they are entirely cleaned up. Renewals of notes representing advances carried over the end of the season should not be merged with notes representing new advances, and the former should be liquidated first. It is not necessary, however, to take separate assignments for the renewals, if any, of advances carried over.
While assignments of new goods may be taken for advances carried over the end of the season, and while the same form of assignment may be used for new and old advances, the proceeds of advances on a new season's account should not be used to liquidate any portion of the advances carried over from the previous season. This requirement can best be observed by opening new accounts in both the liability and deposit ledgers for the new season's business, and keeping the old season's business entirely separate.
When the old liability account is fully liquidated the old deposit account may, of course, be closed.
It should be borne in mind that the object aimed at in conducting separate accounts is to make sure that not a single dollar of indebtedness which existed before the new promise was taken is paid out of the proceeds of the advances charged to the new liability account.