Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/260

 § 279.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. § 279. If one examines with care the cases which are regarded Examina- as au thority for this rule that sounds so just — if the tdonofcer- other contracting party has performed, and by his performance benefited the property of the corpora- tion, the latter cannot plead ultra vires — it will appear that the recovery of the other party often does not rest on the fact that he has performed, nor on the fact that his performance has benefited the corporate property : though undoubtedly he would not have had his cause of action had he not performed ; and that corporate interests were benefited may very likely have been a material point in establishing his case. It is submitted, that in these cases the plaintiff's recovery rests on the circum- stance that all the persons who would have been entitled to object to the contract allowed the plaintiff to go on and per- form under the reasonable assumption on his part of general acquiescence in the contract. To be sure, shareholders are not generally supposed to be continually exercising an active super- vision over the affairs of the corporation. But they have a right to inspect its books, and, if they choose, may keep them- selves acquainted with what is being done by the corporate management. At any rate, unless they keep a watch over the course of the corporate affairs, they will not be entitled on the plea of their own ignorance to come forward at their pleasure and cause the repudiation of corporate obligations. Sharehold- ers wishing to prevent illegal or ultra vires acts, or to absolve the corporation from responsibility for them, must be vigilant and swift. 1 such application. Therefore, through acquiescence after they know, or, if they had heeu at all observant of corporate affairs, would have known of the contracts, they would be es- topped from objecting. And so per- haps might creditors estop them- selves. The preceding argument leads to this unavoidable conclusion : the mere facts that the other contracting party has executed his side of the ultra vires contract, and that the cor- porate property has thereby been benefited, do not affect the rights of 240 persons who have done nothing from which assent to the contract can in any way be inferred. This reason- ing accords, as fully as the proposi- tion controverted disaccords, with a most universal principle of law : a person cannot by his own act acquire aright against another ; the other must in some way have bound him- self. 1 Thompson v. Lambert, 44 Iowa, 239. " A court of equity may refuse to interfere with a corporation at the instance of a stockholder, in respect to an unauthorized contract which