result was upheld on the ground of the shareholder's acquiescence. There is nothing to throw any light on the question whether in the case of a trading company formed under the Companies Act, 1862, there is any class of acts which not even the unanimous assent of shareholders can ratify: it was not necessary to consider the existence of such a distinction, nor was it brought to the attention of the Court. Note that the difficulty as to inferences of fact was much less than in the cases before the House of Lords, as the Court had to say, not whether there had been acquiescence, but whether there was evidence from which a jury might reasonably have found acquiescence (see pp. 61, 62) (a). Doctrine of public policy. v. Hawkes. In E. C. Ry. Co. v. Hawkes, 5 H. L. C. 331, Lord Cranworth, who Public as we have seen was a decided upholder of the prima facie unlimited Policy. E. C. Ry. capacity of corporations, after citing Colman v. E. C. Ry. Co., Salomons v. Laing, Bagshaw v. E. Union Ry. Co. (see above, pp. 655, 656), expressed himself as follows:-"It must be now considered as a well settled doctrine that a company incorporated by Act of Parliament for a special purpose cannot devote any part of its funds to objects unauthorized by the terms of its incorporation, however desirable such an application may appear to be." In this case the disputed contract was held good, and the distinction was pointed out between an act which is forbidden or illegal in itself, e. g., obstructing a navigable river by building a bridge across it, as in Mayor of Norwich v. Norfolk Ry. Co., 4 E. & B. 397, and an act which is merely unauthorized as between directors and shareholders. A pretty full account of this case is given in the judg- Taylor v. Chichesment of Blackburn, J. in Taylor v. Chichester & Midhurst Ry. Co., L. R. 2 Ex. 356, 386-9; and the effect of the doctrine of public policy in imposing restrictions on corporate action which are beyond and independent of the rights of individual shareholders, and which therefore their assent is powerless to remove, is explained in a subsequent passage of the same judgment, which points out that in incorporating a company the legislature has two distinct purposes, the convenience of the shareholders and the benefit of the public. Every shareholder has rights against the corporation analogous to those of partners between themselves, and may object to unauthorized acts being done. These individual rights however may be waived. But if the legislature actually forbids the company to enter upon certain transactions, then no assent will make (a) See further on the subject of ratification by companies, Lindley 1. 258-263. ter, &c. Co. Ashbury Act. such transactions binding. Whether such a prohibition exists depends in each case on the construction of the statute (pp. 378-9). How far the Court should be guided in the construction of such Ry. Carstatutes by the consideration of the general policy of such legislation riage Co. v. Riche. is a question on which there has been much difference of opinion. Policy of We have already referred shortly to Ashbury Ry. Carriage Co. v. Companies Riche. In this case the distinct question arose (for the first time it is believed), whether the Companies Act of 1862 does or does not forbid a company formed under it to bind itself by contract to an undertaking beyond the purposes specified in the memorandum of association. The 12th section of the Act says that a company shall not alter its memorandum of association except in certain particulars as to capital and shares (a); the Exchequer Chamber was equally divided as to the effect of this. Blackburn, Brett and Grove, JJ. were of opinion that it did not amount to making companies incapable of binding themselves to anything beyond the scope of the memorandum; Archibald, Keating and Quain, JJ. held that it did. They thought it to be "the policy as well as the true construction" of the Act "to ignore (so to speak) the existence of the corporation and the power of the shareholders, even when unanimous, to contract or act in its name for any purpose substantially beyond or in excess of its objects as defined by the memorandum 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. N. W. Ry. Co. (given above, p. 659), 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 was confirmed by the unanimous decision of the (a) Extended by the Act of 1867, ss. 9, sqq., 21, but only to other matters of the like sort. House of Lords, L. R. 7 H. L. 653, which proceeds not so much on any one section as on the intention of the Act appearing from its various provisions taken as a whole. The existence and competence of the company are limited by the memorandum of association, which is "as it were the area beyond which the action of the company cannot go" (Lord Cairns, at p. 671). This being the fundamental instrument, a provision in the articles of association which has the effect of applying the capital of the company to a purpose not within the scope of the memorandum is invalid (Guinness V. Land Corporation of Ireland, C. A. 22 Ch. D. 349). Precisely analogous questions are not likely to arise very often, but the decision lays down with sufficient clearness the lines that must henceforth be followed in the treatment of the law. As to when the Attorney-General is entitled to interfere, see A.-G. v. G. E. R. Co. (C. A.), 11 Ch. D. 449. NOTE E. (p. 166). Foreign Laws Prescribing Forms of Contract. The draft Civil Code of New York adopts the chief provisions of the Statute of Frauds in terms which to some extent embody the results of leading English decisions (ss. 794, 865, 1537). The Civil Code of Lower Canada, s. 1235, adopts in substance the 17th section as extended by Lord Tenterden's Act. The foundation of Lower Canadian Law is French, and the code is in a general way modelled on the Code Napoléon; but this is not the only place in which English law has had a marked influence on it. The French Code (Art. 1341-8) requires an instrument in writing when the subject matter of the contract exceeds the sum or value of 150fr. This is understood (like the 17th section of our statute as distinguished from the 4th) to be a rule of the lex contractus, not of the lex fori: see the note in Sirey & Gilbert's Codes Annotés. Also compromises must be in writing (Art. 2044). The Italian Code adds to and modifies this. The general limit of value is fixed at 500 instead of 150 lire (Art. 1341). Moreover several particular kinds of contracts have to be in writing, of which the chief are sales of immoveable property, certain contracts as to servitudes and other real rights, leases for more than nine years, grants of annuities, and compromises (Art. 1314). Both in French and in Italian law the instrument in writing (acte sous seing privé, scrittura privata) is of no avail unless signed, and that, it seems, by all parties moreover there must be actual written signature, not a mark. (Codes Annotés on Art. 1322 sqq.; Mazzoni, Diritto Civ. Ital. Bk. 3, Pt. 2, § 171.) The only resource of illiterate persons is apparently to call in a notary so as to give the instrument a yet higher degree of solemnity as an "authentic act." And unilateral contracts are subject to certain additional forms. The Prussian Landrecht (Part 1. Tit. 5, § 131) requires a writing where the value of the subject-matter exceeds fifty thalers. From the operation of all these laws, however, commercial contracts are excepted: in France by the construction put in practice upon general words saving the commercial law (a), which are held without more to show that the substantive part of the enactment does not apply to anything governed by the Commercial Codes (Codes Annotés, § 3 of note, and Cattaneo & Borda, on Art. 1341 of Fr. and Ital. Codes respectively): in Italy by an express exception in the new Commercial Code (Art. 44); and in Prussia, by the express terms of the German Commercial Code, which it is presumed override the laws of all particular German states (b). The lastnamed Code requires a solemn instrument for the formation of companies (174, 208), and a contract in writing to enable a pledgee to exercise a summary power of sale (310, 311) (c). (a) Le tout sans préjudice de ce qui est prescrit dans les lois relatives au commerce, Code Civ. 1341. (b) Art. 317. Bei Handelsgeschäften ist die Gültigkeit der Verträge durch schriftliche Abfas sung oder andere Förmlichkeiten nicht bedingt. (c) With leave of the Court obtained ex parte, or without it, if there is an express contract to that effect. NOTE F. History of Consideration. modern We may first note the difference between our Consideration and its Cause in nearest Continental analogies; a difference not always realized, and French instructive enough to be worth dwelling upon a little. We read in law. the French Code Civil, following Pothier: "L'obligation sans cause, ou sur une fausse cause, ou sur une cause illicite, ne peut avoir aucun effet " (a). Looking at this text alone, nothing would at first sight seem more natural to an English lawyer than simply to translate cause by consideration. But let him turn to a French commentary on the Code, and he finds no distinct and comprehensive definition of cause as a legal term of art, but a scholastic discussion of efficient, final, and impulsive causes (b). Going on to see what is in fact included in the cause of the French law, we find it wider than our Consideration in one way and narrower in another. On the one hand the existence of a natural [i. e. moral] obligation, or even of a real or supposed duty in point of honour only (c), may be quite enough. Nay, the deliberate intention of conferring a gratuitous benefit, where such intention exists, is a sufficient foundation for a binding unilateral promise: "Dans les contrats de bienfaisance, la libéralité que l'une des parties veut exercer envers l'autre est une cause suffisante de l'engagement qu'elle contracte envers elle." (Pothier, l.c.) (d). The meaning of sans cause seems accordingly to be confined to cases of what we should call total failure (as distinguished from mere absence) of consideration (e). On the other hand there is this limitation, that the promisee must have an interest in the subject-matter of the promise which is apparent and capable of estimation (Pothier §§ 54, 55, 60). This doctrine seems to have arisen from a doubtful extension, if not a misunderstanding, of the technical rules which governed the Roman Stipulation. Of course a contract between A. and B. cannot as a rule give a right of action to C., but the maxim Alteri stipulari nemo potest (f) is relied on by French jurisprudence as equivalent (a) Code Civ. 1131, Pothier Obl. § 42. (b) Demolombe, Cours du Code Nap. 24. 329. (c) "Désir de satisfaire aux lois de l'honneur et de la délicatesse." Sirey and Gilbert, Codes Annotés, ad loc.; Demolombe, op. cit. p. 335. (d) The same in the modern law, see extract from Rogron in Lang dell's Sel. Ca. on Cont. 169. (e) Demolombe, op. cit. p. 342. |