Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/82

 §87.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V ment with the other contracting party, the corporation must be held to have assumed the liabilities which would have attached to allow them to ratify acts done prior to their incorporation, as that might amount to the same thing ? In other words, is it not ultra vires the corporation to adopt acts done prior to its organization, even though they he such acts as the corporation since its organization could legally perform ? A reasonable view of this question should be taken. Undoubt- edly a corporation cannot legally act as such before its organization, and, therefore, cannot legally adopt a long series of acts of the same nature as those which it was organized to per- form. It cannot begin its corporate action and take up its corporate busi- ness as from a time long anterior to its organization. But, properly speaking, only such acts can be re- garded as acts of promoters which have for their final object the forma- tion of a corporation. It does not come within the functions of pro- moters to carry on a business, but only to form a corporation to carry one on. It would be absurd to hold acts, extending through years, done in a business similar to that to be carried on by the corporation when formed, to have been done on behalf of a future corporation. At the same time it would be a strained, not to say absurd, doctrine to hold it ultra vires a corporation to adopt those acts of its promoters done on its behalf, which it could itself le- gally perform since its organization, and which were proper and reasona- ble acts for its promoters to do in or- der to bring about the formation of a company and start it on its corpo- rate career. The proper test to ap- ply to such cases is not: — would the contract in question have been within the powers of the corporation had it 62 been organized when the contract was made ? but, is it within the pow- ers of the corporation to make the same contract now, supposing it had not been made then ? or, can the company legally carry out that very contract ? As Lord Chancellor Cran- worth says, in Preston v. Liverpool and Manchester R. Co., 5 H. L. C. 605: " It can only be that contracts which the railway company might lawfully have entered into after the company had been formed shall be binding, if they were entered into by those who might be considered as agents for the company before the company came into corporate exist- ence." To illustrate: Suppose cer- tain persons, with a view of forming an insurance company, and wishing to find out for certain how much business such a company would get from the beginning, go about making contracts of insurance on behalf of the future company, the insurance to begin at a point of time anterior to the formation of the company ; the company is afterwards organ- ized. These were contracts which the company could legally have made had it been organized at the time; yet it seems doubtful whether the company could assume those con- tracts so as to render itself liable for losses which occurred before it was organized. If the promoters had contracted that the company should insure, the insurance to begin with the formation of the company, in that case the company could have adopted and ratified the contracts; for, after its organization, it could legally have made those very con- tracts. Compare Gent v. Insurance Co., 107 111. 652. Again, suppose promoters agree that the corporators