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 (u). Putting this Partly in last question aside, however, there are very many matters applicaabout which a corporation can contract without seal, and bility of in particular in the case of a trading corporation all things ordinary naturally incident to the business it carries on. Why partner the non the rules of should not the agents who are authorized to contract on ship behalf of the company in the ordinary course of its business agency. be competent to bind the company by their acceptance or indorsement 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 applied 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 (x). In the case of a corporation this authority must be sought 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. (u) Crouch v. Crédit Foncier, L. R. 8 Q. B. 374. (x) As to unincorporated joint stock companies: Neale v. Turton, P. 4 Bing. 149, Dickinson v. Valpy, 10 And partly in the character of the exchange. in its constitution as set forth in its special Act, articles of association, or the like. Secondly, the power of even a trading corporation to contract without seal is limited to peculiar things incidental to the usual conduct of its business. But as was pointed out by a judge who was certainly not discontract of posed to take a narrow view of corporate powers, a negotiable instrument is not merely evidence of a contract, but 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” (y). The result 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 " (≈)—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 (≈). 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., (y) Per Erle, C.J., Bateman v. Mid Wales Ry. Co., L. R. 1 C. P. 499, 509. Railway companies are expressly forbidden to issue negotiable or assignable instruments without statutory authority, on pain of forfeiting the nominal amount of the security: 7 & 8 Vict. c. 85, s. 19. () Per Montague Smith, J., L. R. 1 C. P. 512; Ex parte City Bank, 3 Ch. 758. it is therefore desirable to insert express and clear provisions on this head. decisions. In the United States the Supreme Court has decided American that local authorities having the usual powers of administration and local taxation have not any implied power to issue negotiable securities which will be indisputable in the hands of a bonâ fide holder for value (a), and has been equally divided on the question whether municipal corporations have such power (b). It seems however that in American Courts a power to borrow money is held to carry with it as an incident the power of issuing negotiable securities (c). and part to corpo The common law doctrine of estoppel (d), and the kindred Estoppel equitable doctrine of part performance (e), apply to corpora- performtions as well as to natural persons. Even when the cor- ance apply porate seal has been improperly affixed to a document by rations. a person who has 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 (ƒ). 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, or made it incapable of undertaking. (a) Police Jury v. Britton, 15 Wallace, 566, 572. (b) The Mayor v. Ray, 19 Wallace, 466. (c) Police Jury v. Britton, 15 Wallace, 566, and Mr. Wald's note here in American ed. (d) Webb v. Herne Bay Commissioners, L. R. 5 Q. B. 642. (e) Wilson v. West Hartlepool Ry. Co. 2 D. J. S. 475, 493, per Turner, L.J.; Crook v. Corporation of Seuford, 6 Ch. 551; Melbourne Banking Corporation v. Brougham, 4 App. corporation is " capable of being (f) Bank of Ireland v. Evans' Contrast of ancient and modern conceptions of contracts as giving rights of action. CHAPTER III. FORM OF CONTRACT. ACCORDING to the modern conception of contract, all agreements which satisfy certain conditions of a general kind are valid contracts and may be sued upon, in the absence of any special legislation forbidding particular contracts to be made or denying validity to them unless made with particular forms (a). 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. 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 when the general theory of the law started from a different or even opposite point to our Ancient own. The fundamental assumption of ancient law (when (a) Cp. s. 10 of the Indian Contract Act: "All agreements are contracts [i. e. enforceable by law, 8. 2, sub-s. h.] if they are made by the free consent of parties compe tent to contract, for a lawful con sideration 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.) formal contracts it has got so far as to recognize contract at all) is that the law revalidity of a contract depends, not upon the substance of gards only the transaction, but upon its fulfilling certain conditions of contracts. form, and being established by one or other of certain strictly specified modes of proof. When we come to that subject in a later part of this chapter, the reader will find that the law relating to the form of corporate contracts is still going through a process of struggling development not altogether unlike that which took place in earlier times with regard to the contracts of natural persons. Both in Informal the Roman law as presented to us in the Digest and actionable Institutes, and in the English law of the thirteenth, and only as exceptions even down to the latter part of the fifteenth century, this in Roman primitive doctrine that formal contracts alone give rise to and old actions is at the base of the whole learning of contracts. law. Considerable classes of informal contracts are excepted on various grounds which are practically reducible to "convenience amounting almost to necessity" (a phrase which we here introduce by anticipation from the modern learning as to the informal contracts of corporations). But the exceptions are not as yet connected by any recognized general principle. In the English system, so far as one can now judge, they are decidedly narrower in statement and less important in practice than in the Roman. In England we find this theory expressed by Bracton in almost purely Roman language (b), which is substantially repeated in Fleta. How far the theory was directly borrowed, or how far it already existed as a genuine parallel development of English legal ideas with which the authorities of the civil law were found in great measure to coincide, may perhaps be doubtful (c). At any rate the correspondence is so close that some statement of the (b) In Britton the substantial correspondence remains, but the details are much more modified to suit the real facts of English practice, e. g. the verbal Stipulation all but disappears. (Cap. De Dette, 1. (c) See Güterbock, Henr. de English |