Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/235

 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 251. § 251. It is impossible to state any general rule by which, in every instance, or even in most instances, may be de- „ J,. .- % • Formah- termined whether a provision of this character is ties, imper- imperative or directory. It is clear, however, that if rectory. the provision is contained in some instrument, of f ion s s ump ~ which the person dealing with the corporate agent has no knowledge, and with knowledge of which he is in no way affected, the provision will not affect his rights ; 1 and so if the formality prescribed is one that, under the circumstances, the person dealing with the corporate representative is justified in assuming to have been performed, his rights will not be affected by its non-performance. 2 Just as a person dealing with 5, corporate agent is entitled to assume, in regard to the sub- stance of the transaction, that the agent is not acting wrong- fully, 8 so such a person is entitled to assume that the corporate agent is acting regularly, and that the antecedent formalities and the regulations relating to the internal management of the affairs of the corporation have been complied with. The law on this subject has been lucidly stated in a recent case in the New Jersey Court of Errors and Appeals, 4 as fol- lows : " Persons taking securities of this character 5 are charge- able with knowledge of the power to make them as conferred by the charter. If the power granted by the charter is subject to a condition relating either to the form in which the security shall be made in order to be valid, or to some preliminary pro- ceeding extraneous to the acts of the corporation or its officers, securities issued not in the prescribed form, or without the pre- liminary proceedings had, are subject to defences in consequence thereof, even in the hands of bona fide holders. Thus, where the statute required such bonds to be certified across their face, and to be registered, and declared that no bonds should be valid unless so registered, bonds issued without such registry tions must contract, a contract made in any other mode will not be bind- ing upon tbe corporation or the party contracting with it, unless the stat- ute, as it sometimes does, provides to the contrary." Angell and Ames on Corp., §253. 1 See § 198. 2 See § 203. 3 See § 204. 4 Hackensack Water Co. v. De Kay, 36 N. J. Eq. 548, 562. 5 Negotiable securities issued by a corporation. 215