Page:Harvard Law Review Volume 9.djvu/297

269 EXERCISE OF CORPORATE POWER. 269 declared themselves definitely in favor of maintaining existing re- strictions upon the corporate power to contract. They have, in general, refused to enforce unauthorized or prohibited contracts, even in favor of the party who has fully performed. The doctrine is entirely intelligible and consistent, and, in the main, it has been consistently applied. In a few cases, however (as has been seen), there are either dicta or actual decisions which seem to mar the symmetry of the system. If this doctrine becomes obsolete it will be the result, not of any inherent defects of structure, but because it is not in touch with the needs and requirements of the business world. In Pennsylvania,^ on the other hand, and in New York,^ New Jersey,^ Indiana,* IlUnois,^ Minnesota,^ Kansas,^ and in many other jurisdictions, the courts have manifested a tendency to give a qualified adherence to the second theory of public policy, — hesi- tating to ignore altogether the legal restrictions upon corporate power, but refusing to permit the party who has received a benefit to take advantage of the defect of power when a suit is brought to enforce the contract. The position of these courts of the second group is believed by the writer (as has been pointed out above) to be unsound upon principle, unless the theory of general capacities is adopted ; and unsound even then unless it is pushed to its legiti- mate conclusion, with the result of enforcing all corporate contracts, even when they are wholly executory, in every case where a con- tract between individuals would be enforced. In point of fact, the courts of the second group endeavor, in general, to work out the ends of justice upon the basis of a theory of estoppel. Where a corporation has received a benefit under a contract, it is said to be " estopped " from pleading the fact that the contract was unauthor- ized (or, in some cases, even that it was prohibited) as a defence to an action brought to enforce the agreement. This view seems to be open, upon principle, to certain serious objections. In most jurisdictions the courts are definitely committed to the position that those who deal with corporations are charged with notice of the limits of corporate power. In contemplation of law, when A. 1 Wright V. Pipe Line Co., loi Pa. 204. 2 Holmes, etc. Mfg. Co. v. Metal Co., 127 N, Y. 252. ^ Camden, etc. R. R. Co. v. Mays Landing R. R. Co., 48 N. J. L. 530. ^ Heims v. Flannery, 137 111. 309. ^ Sherman, etc. Town Co. v. Morris, 43 Kan. 282.
 * State Board of Agriculture, v. Citizens' R. R. Co., 47 Ind. 407.
 * Auerbach v. Mill Co., 28 Minn. 291.