Inability

randum of association" (p. 291). Admitting that a corporation has prima facie as incident at Common Law the large powers laid down in the Sutton's Hospital case, 10 Co. Rep. 30 b, and citing the statement of the law by Lord Cranworth in Shrewsbury and Birmingham Ry. Co. v. NW. Ry. Co. (given above, p. 101) the judgment of Archibald J. (L. R. 9 Ex. pp. 292-3) proceeds to say that "the presumption of a prima facie general authority to contract "is rebutted by the "express provision that the scope and objects of the company as originally declared by its memorandum of association shall be unchangeable." The corporation may be regarded as non-existent for the purpose of contracts beyond these objects; and if so, the individual assents of all the shareholders cannot give the ideal legal body of the corporation a capacity of which the legislature has deprived it, so as to render an agreement substantially beyond the defined objects “a contract of the ideal legal body, which exists only as a corporation, and with powers and capacity which are thus admittedly exceeded."

This opinion is now confirmed by the decision of the House of Lords (W. N. 1875. 123), and although for the reasons given by Blackburn J. (L. R. 9 Ex. 271) the precise question, or precisely analogous questions under other statutes, are not likely to arise very often, there can be little doubt that this decision will have a marked influence on the treatment of this whole branch of the law.

It is not proposed to enter on any further discussion of the of corporations to particular contracts which particular corporate bodies have been make ne- held incapable of making. One class of contracts, however, is gotiable instruments, in a somewhat peculiar position in this respect, and requires a little separate consideration. We mean the contracts expressed in negotiable instruments and governed by the law merchant. It is said and truly said that as a general rule a corporation cannot bind itself by a negotiable instrument. The origin and meaning of the rule are easily misapprehended. At first sight it looks like an obvious deduction from the doctrine of limited special capacities. If a corporation can only make such contracts as it is empowered to make, then it follows of course that among other things it cannot issue bills or notes without express or implied authority to do so; but we have seen that this ground is now hardly tenable. In order to state what we believe to be the true view we must to some extent anticipate the subject of the following chapter, so far as it relates to the form of corporate contracts. The general rule is that the contracts of a corporation must be made under its common seal, and it follows that a corporation cannot prima facie be bound by negotiable instruments in the

The difficulty is partly formal.

the non

ordinary form. The only early authority which is really much to the point was argued and partly decided on this footing (a). Of late years incorporated companies have issued documents under seal purporting to be negotiable; but by the law merchant an instrument under seal cannot be negotiable, and it is the better opinion that the fact of the seal being a corporate one makes no difference; it cannot be taken as merely equivalent to signature because the party sealing is an artificial person and unable to sign (b). Putting this last question aside, however, Partly in there are very many matters about which a corporation can applicacontract without seal, and in particular in the case of a trading bility of corporation all things naturally incident to the business it carries the ordinary rules on. Why should not the agents who are authorized to contract of parton behalf of the company in the ordinary course of its business nership be competent to bind the company by their acceptances, &c., on its behalf just as a member of an ordinary trading partnership can bind the firm? There is a twofold answer to this question. First, the extensive implied authority of an ordinary partner to bind his fellows cannot be extended to the case of a numerous association, whether incorporated or not, whose members are personally unknown to each other, and it has been often decided that the managers of such associations cannot bind the individual members or the corporate body, as the case may be, by giving negotiable instruments in the name of the concern, unless the terms of their particular authority enable them to do so by express words or necessary implication (c). In the case of a

(a) Broughton v. Manchester Waterworks Co. 3 B. & Ald. 1. The chief point was on the statutes giving the Bank of England exclusive rights of issuing notes, &c., within certain limits, as to which see Lindley, 1. 191, note. In Murray v. E. India Co. 5 B. & Ald. 204, the statutory authority to issue bills was not disputed; a difficulty was raised as to the proper remedy, but disposed of in the course of argument (p. 210.) Other cases at first sight like these relate to the authority of particular agents to bind a corporate or unincorporated-association irrespective of the theory of corporate liabilities. See the next note but one.

(b) Crouch v. Crédit Foncier, L. R. 8 Q. B. 374.

(c) Astounincorporated joint stock companies Neale v. Turton, 4 Bing. 149, Dickinson v. Valpy, 10 B. & C. 128, Bramah v. Roberts, 3 Bing. N. C. 963, Bult v. Morrel, 12 A. & E. 745, Brown v. Byers, 16 M. & W. 252. As to incorporated companies: Steele v. Harmer, 14 M. & W. 831 (in Ex. Ch. 4 Ex. 1, not on this point), Thompson v. Universal Salvage Co. 1 Ex. 694, Re Peruvian Rys. Co. 2 Ch. 617; cp. Ex pte City Bank, 3 Ch. 758, per Selwyn, L. J. The two last cases go rather far in the direction of implying such a power from general words.

I

agency.

in the

corporation this authority must be sought in its constitution as set forth in its special Act, articles of association, or the like. And partly Secondly, the power of even a trading corporation to contract without seal is limited to things incidental to the usual conduct character of its business. But, as was pointed out by a judge who was of the con- certainly not disposed to take a narrow view of corporate powers, exchange, a negotiable instrument is not merely evidence of a contract, but

peculiar

tract of

American decisions.

creates a new contract and a distinct cause of action, and "it would be altogether contrary to the principles of the law which regulates such instruments that they should be valid or not according as the consideration between the original parties was good or bad;" and it would be most inconvenient if one had in the case of a corporation to inquire "whether the consideration in respect of which the acceptance is given is sufficiently connected with the purposes for which the acceptors are incorporated" (a).

The result (though not expressed in identical terms by the several members of the Court in Bateman v. Mid Wales Ry. Co. (a) seems to be that a corporation cannot be bound by negotiable instruments except in one of the following cases :—

1. When the negotiation of bills and notes is itself one of the purposes for which the corporation exists-" within the very scope and object of their incorporation" (b)-as with the Bank of England and the East India Company, and (it is presumed) financial companies generally, and perhaps even all companies whose business wholly or chiefly consists in buying and selling (V).

2. When the instrument is accepted or made by an agent for the corporation whom its constitution empowers to accept bills, &c., on its behalf either by express words or by necessary implication.

The extent of these exceptions cannot be said to be very precisely defined, and in framing articles of association, &c., it is therefore desirable to insert express and clear provisions on this head.

In America the Supreme Court has lately decided that local authorities having the usual powers of administration and local

(a) Per Erle, C. J., Bateman v. Mid Wales Ry. Co., L. R. 1 C. P. 499, 509,

(b) Per Montague Smith, J., L. R. 1 C. P. 512; Ex parte City Bank, 3 Ch. 758.

taxation have not any implied power to issue negotiable securities which will be indisputable in the hands of a bona fide holder for value (a), and also (but not without dissent) that municipal corporations have no such power; "they are not trading corporations and ought not to become such" (b). It seems however that in American courts a power to borrow money is held to confer without more the power of issuing negotiable, securities ().

to cor

The common law doctrine of estoppel (c), and the kindred Estoppel and part equitable doctrine of part performance (d), apply to corporations performas well as to natural persons. Even when the corporate seal ance apply has been improperly affixed to a document by a person who has porations. the custody of the seal for other purposes, the corporation may be bound by conduct on the part of its governing body which amounts to an estoppel or ratification, but it will not be bound by anything less (e). The principles applied in such cases are in truth independent of contract, and therefore no difficulty arises from the want of a contract under the corporate seal, or non-compliance with statutory forms. But it is conceived that no sort of estoppel, part performance, or ratification, can bind a corporation to a transaction which the legislature has in substance forbidden it to undertake.

(a) Police Jury v. Britton, 15 Wallace 566, 572.

(b) The Mayor v. Ray, 19 Wallace 469.

(c) Webb v. Herne Bay Commissioners, L. R. 5 Q. B. 642.

(d) Wilson v. West Hartlepool Ry. Co. 2 D. J. S. 475, 493, per Turner, L. J.; Crook v. Corporation of Seaford, 6 Ch. 551.

(e) Bank of Ireland v. Evans' Charities, 5 H. L. C. 389.

116

ancient and modern

tions of

CHAPTER III.

FORM OF CONTRACT.

Contrast of ACCORDING to the modern conception of contract, all agreements which satisfy certain conditions of a general kind are concep- valid contracts and may be sued upon, in the absence of any contracts special legislation forbidding particular contracts to be made or denying validity to them unless made with particular forms. This theory finds a concise and complete expression in s. 10 of the Indian Contract Act:

as giving rights of action.

"All agreements are contracts [i.e., enforceable by law, s. 2, sub.-s. h.] if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void" (then follows a clause saving all formalities required in particular cases by the law of British India). So thoroughly has this conception. established itself in recent times that, having made the presence of a consideration one of the general conditions of a valid contract, we are now accustomed to bring contracts under seal within the terms of the condition by saying that where a contract is under seal the consideration is presumed. Historically speaking, this is a transparent fiction. The doctrine of Consideration in its present general form is of comparatively modern origin even if we look to the history of English law alone. If we roughly put it halfway between ourselves and Bracton we shall probably be allowing it as much antiquity as it can fairly claim. The ancient reason why a deed could be sued upon lay not in a consideration in our present sense of the word being presumed from the solemnity of the transaction, but in the solemnity itself. The forms of sealing and delivery come down to us from a time