Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/66

 § 75.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. tracts are to be regulated, and the relations arising from them determined. The preceding statement, however, must be taken with this qualification : the fact that the ulterior end of these contracts was the formation of a corporation may give such corporation, when formed, rights, and even subject it to duties in regard to such contracts and their subject-matter. § 73. The ' persons interested in the formation of a corpora- tion may be roughly divided into two classes : (1) Two cl<lSS6S of persons Persons who actively take part in the scheme of or- ganization, and (2) persons who merely subscribe for, or agree to take, shares in the stock of the corporation to be formed. Very often, perhaps usually, the same persons who promote the scheme of organization subscribe for shares in the stock of the future corporation ; but their functions as pro- moters and as subscribers are distinguishable, and for a proper determination of the legal relations arising through the pro- motion and formation of a corporation these two classes of functions should be kept distinct. § 74. Persons acting in concert to bring about the formation of a corporation are responsible for their acts as a mat- Liability of. », .,,; , . , promoters, ter of course, and, it they have given good reason to principles, infer that the}' will be responsible for the acts of each other, then on the ground of estoppel, if on no other, they will be so responsible to any person acting on the faith of the inference which their acts have occasioned. Accordingly, if they have held themselves out as each other's principals, or as each other's partners, although no relationship of agency or partnership in fact exists between them, they will be estopped from taking advantage of the real state of affairs to the detri- ment of persons who have acted, and with reason, on a belief in the existence of such agency or partnership. §75. In fine, on the general principle that a man is to be held responsible for the natural and ordinary results of his acts, the following propositions may be laid down as govern- ing many of the rights and liabilities of the promoters of a corporation : I. A man is bound for the fulfillment of a contract entered into by him, and is, of course, personally liable thereunder when the other contracting party has no reason to suppose him to be acting merely as agent. 46