Page:Harvard Law Review Volume 32.djvu/316

280 28o HARVARD LAW REVIEW thirty subclauses enabling the company to carry on almost every con- ceivable kind of business which a company could adopt, and provided that " the objects set forth in any sub-clause shall not, except when the context expressly so requires, be in any wise limited or restricted by ref- erence to or inference from the terms of any other sub-clause, or by the name of the company. None of such sub-clauses or the objects therein specified or the powers thereby conferred shall be deemed subsidiary or auxiliary merely to the objects mentioned in the first sub-clause of this clause, but the company shall have full power to exercise all or any of the powers conferred by any part of this clause in any part of the world, and notwithstanding that the business, undertaking, property or acts proposed to be transacted, acquired, dealt with or performed do not fall within the objects of the first sub-clause of this clause." The com- pany sought to escape liability for an act done in its name by its managers on the ground that the act was ultra vires. The court held that, under such a memorandum, the act was not ultra vires. The circumstances of this case direct attention to the doctrine of ultra vires, as applied to business corporations (or companies, if the British word be used). If exceptional cases are put aside, we may say that a business cor- poration is predicated upon the association of a number of human beings who have associated to accomplish some business object or objects. In the nature of things, an unchartered association might readily have been recognized by the courts as a legal unit, and incorporation simply gives legal confirmation to the popular conception of a business unit. Statutes relating to the formation of corporations require that the in- corporators state the objects, or purposes, or powers of the corporation. The statement of the objects, or purposes, or powers results in a defini- tion of the scope of contemplated corporate activity. Then comes the question: If human beings, in the name of the corporation, do an act outside the scope of contemplated corporate activity, shall corporate significance be given to that act, or shall it be treated simply as the act of the human beings? The courts are very apt to deal with this ques- tion as though it were a question at common law, but, it is submitted, it is always a question of statutory construction. The power to create a corporation — to recognize the business unit as a legal unit — is in the legislature, and it is for the legislature to say what legal capacities this legal unit shall have. The legislature might think it wise that no act done outside the scope of contemplated corporate activity should have any corporate significance. Or the legislature might think it wise that some acts done in the name of the corporation by its managers out- side the scope of contemplated corporate activity should result in cor- porate liabilities or rights, even though the doing of such acts would be a wrong as between the corporation and the state, and also would be a wrong as between the managers of the corporation and its stockholders and creditors. The refusal to give any corporate significance to acts done outside the scope of contemplated corporate activity frequently leads to results that are, from the business point of view, shocking; and therefore courts should incline to take the other construction of the legislative intent. But it is to be recognized that, if the legislature shows the intent that no corporate significance shall be given to any acts out-