Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/84

 § 90.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. is doubtful. It may be hard for the party contracting with the promoter to have no remedy against the corporation ; but he should have known that the promoter could not bind the future company, and it would work great injustice and hardship if the company were to be held liable on contracts made by its pro- moters which the charter or articles of association did not mention, and which persons taking shares in the stock of the company had no means of discovering. 1 § 89. In determining the liability of a corporation in regard to any contract made by its promoters on its behalf, the essen- tial points to consider will be these : Was the contract one that the corporation as actually organized could legally have made after its incorporation ; and, if so, has the corporation since its incorporation ratified the contract expressly, or impliedly by voluntarily accepting the benefit of the same in such a manner as to estop it from denying that it has ratified the contract? 2 § 90. The following propositions are submitted as an attempt to embody the law on the subject, supposing the contract made by the promoters to be one which the corporation after its in- corporation could competently have made : I. As long as the contract remains executory on both sides, the party who contracted with the promoter cannot enforce the contract against the corporation, unless the corporation has ratified the same; and the corporation cannot enforce the con- tract against the other contracting party without carrying out all the engagements entered into with the other contracting party at the time of making the contract. 3 II. When a contract made by a promoter on behalf of a future corporation has been ratified and performed by the latter, Chester R. Co., 5 H. L. C. 605 ; Cale- donian, etc., R. Co. o. Helensburgh, 2 Macqueen, 391; Leominster Canal Co. v. Shrewsbury, etc., R. Co., 3 K. & J. (354; Shrewsbury v. North Staf- fordshire R. Co., L. R. 1 Eq. 593. Still, the particular agreement in Ed- wards v. Grand Junction R. Co. would have satisfied the test of contracts ratifiable by the corporation in note 2 to p. 57; and see Williams v. St. George's Harbor Co., 2 DeG. and J. 64 547. But the contract never was rat ified, and therein lies the difficulty with the decision. 1 See Caledonian, etc., R. Co. t>. Helensburgh, 2 Macqueen, 391, 405- 407. - Despatch Line v. Bellamy Mfg. Co., 12 N. H. 205; see Fister v. La Rue, 15 Barb. 323; Railway Co. v. Granger, 86 Tex. 350. » Burrows v. Smith, 10 N. Y. 550.