Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/276

 § 292. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. as well as by the following citation from the opinion of the same learned judge when Lord Wensleydale, in Scottish North East- ern Railway Co. v. Stewart: 1 "There can be no doubt that a corporation is fully capable of binding itself by any contract under its common seal in England, without it in Scotland, ex- cept when the statute by which it is created or regulated ex- pressly or b} r necessary implication prohibits such contract between the parties. Prima facie all its contracts are valid, and it lies on those who impeach any contract to make out that it is avoided. This is the doctrine of ultra vires, and is no doubt sound law, though the application of it to the points of each particular case has not always been satisfactory to my mind." Within its scope the following is also a satisfactory statement of the law : " If a contract made by a company incorporated by act of parliament for defined and limited objects, discloses on the face of it a covenant which, if enforced, would cause the funds to be appropriated to purposes other than those to which the act says they shall ' only ' be applied, such an agreement cannot be made the foundation of an action. In the case of railway companies it is necessary not only for the shareholders, but for the public, that this should be so." 2 § 292. In our American jurisprudence lines of distinction may be drawn between acts of corporations which are merely ultra vires, and acts which, besides be- ing ultra vires, are for some reason unlawful. The latter may be divided into three classes : First, acts immoral in themselves, as contra honos mores; secondly, acts which corporations are forbidden to do by some statutory pro- vision ; and, thirdly, acts which on grounds of public policy corporations intrusted with the performance of a public trust or duty are held prohibited from doing. Classes of ultra vires acts which are also illegal. 1 3 Macqueen, 382, 415. 2 Montague Smith, J., in Taylor v. Chichester, etc., Ry. Co., L. R. 2 Ex. 356, 370. This case will repay care- ful reading, not omitting the dissent- ing opinion of Judge Blackburn. It was reversed in the House of Lords, L. R. 4 H. L. 628. See also espe- 256 cially the later authoritative exposi- tion of the doctrine of ultra vires in Ashbury Railway Carriage, etc., Co. v. Riche, L. R. 7 H. L. 653; §296; and compare Yorkshire Railway Wagon Co. v. Maclure, 21 Ch. Div. 309.