purposes of the company, and used by them at their works, it CH. IX. s. 3. was held that it was not necessary for the plaintiff to prove, even that the persons who gave the orders were authorised by the directors so to do; or that the contract was made pursuant to the company's deed of settlement and bye-laws (n).

Where, however, a contract, entered into on behalf of a registered company, is ultra vires, because it is entirely beyond the scope of the memorandum of association, such contract cannot be ratified (0).

Contracts with Joint Stock Companies.

But where, though borrowing by the company was ultra vires, Subrogation. the liabilities of the company have not been increased owing to the money so borrowed having been employed in paying off bona fide creditors, then such lender to the company is entitled to be subrogated to the right of creditors so paid off, and recover back so much of his advance as has been thus expended by the company (p).

Sect. 153 of the Companies Act, 1862-avoiding all disposi- Effect of winding-up tions of property between the commencement of the winding-up on contracts. and the order, unless the Court otherwise orders-does not apply to contracts which, unless malâ fide, stand good, but if the contract remains executory at the date of the winding-up order, the other party can only prove as a creditor, as the Court has no jurisdiction to order the contract to be carried out (q).

A winding-up order or the appointment of a manager has the Of service. effect of discharging the servants of the company and giving them an action of wrongful dismissal in lieu of notice, and then they have claim to preferential payment under the Preferential Payments in Bankruptcy Act, 1888, 51 & 52 Vict. c. 62; but if they elect to accept an offer by the liquidator or manager to keep them on, and this service lasts for the time to which they were entitled to notice, they can recover no damages (1).

The effect of a voluntary winding-up, which, by sect. 130 of the Voluntary windings-up. Act of 1862, commences from the time of the passing of a resolution authorising it, is that by sects. 131, 133 (s), the company ceases to carry on business, except in so far as may be necessary for the beneficial winding-up thereof.

It was held by Pollock, B., that this section is merely as between the company, the shareholders, and the officers, and

(n) Smith v. Hull Glass Co. (1852), 11 C. B. 897, Ex. Ch.

(0) Ashbury Carriage Co. v. Riche (1875), L. R., 7 H. L. 653.

(p) Blackburn Building Society v. Cunliffe, Brooks & Co. (1882), 22 Ch. D. 61; Wenlock (Baroness) v. River Dee Co. (1887), 19 Q. B. D. 155, C. A.

(1) Ex parte Guillemin (1884), 28 Ch. D. 634; Ex parte Pearson (1868),

L. R., 3 Ch. 443.

(r) McDowall's Case (1886), 32 Ch. D. 366; Reid v. Explosives Co. (1887), 19 Q. B. D. 264, C. A.

(8) See observations of Chitty, J., in Ex parte Guillemin (1884), 28 Ch. D. 634, as to the difference between a voluntary winding-up and compulsory windingup under sects. 133 and 153 respectively.

Contracts with Joint Stock Companies.

CH. IX. s. 3. does not apply to persons contracting with the company, and was not a prohibition which made the contract of the company illegal as between the company and the other party (t); and the Court of Appeal, without approving or dissenting from this ruling, decided that, even assuming the section amounted to a prohibition, unless the contract was required for the beneficial winding-up of the company, yet as the facts might be consistent with the contract being legal or illegal, and the law presuming against illegality, it was for a defendant to prove that such a contract was not required for the beneficial winding-up of the company, and therefore prohibited and illegal (u).

Liquidator's power to contract.

And by sect. 133 the powers of the directors cease on the appointment of liquidators, and so a bill of exchange then accepted by a director does not bind the company, and the holder cannot prove in the winding-up (x).

The liquidator has no power to enter into any fresh contracts (y); but he may by sect. 95 of the Companies Act, 1862, with the sanction of the Court, carry on the business of the company, so far as may be necessary for the beneficial windingup, and may sell and contract to sell the property of the company and accept bills of exchange; and by sect. 160 may, with the sanction of the Court, compromise claims.

But the liquidator cannot enter into any contract, however beneficial, for the purpose of reconstructing the company; it must be for the purpose of winding it up (z).

Mode of .creation.

Ecclesiastical .corporations.

SECT. 4.—Corporations Generally.

(a) Creations and Kinds of Corporations.

Corporations may be divided into sole and aggregate; ecclesiastical and civil or lay; municipal and trading.

The powers of a corporation are to a great extent prescribed by its charter, or Act of Parliament creating or regulating it, reference to which must be made in order to test the legality of any act of the corporation and whether it is ultra vires. Ecclesiastical corporations, sole and aggregate, are limited in their power of leasing and otherwise by the Ecclesiastical

(t) Bateman v. Ball (1887), 56 L. J., Q. B. 291.

(u) Hire Purchase Furnishing Co. v. Richens (1887), 20 Q. B. D. 387, C. A.

(x) Bolognesi's case (1870), L. R., 5 Ch. 567.

(y) In re East of England Banking Co. (1868), L. R., 4 Ch. 14; per Ld. Cairns, L.C.

(2) In re Wreck Recovery and Salvage Co. (1880), 15 Ch. D. 353, C. A.

Leasing Acts of 1842, 5 & 6 Vict. c. 27; 5 & 6 Vict. c. 108; and CH. IX. s. 4. other Acts.

Charity trustees are subject to the control of the Charity Commissioners under the Charitable Trusts Acts, 1853 and 1855, and especially sect. 29 of the latter Act.

Contracts with Corporations.

Charitable corporations.

corporations.

Municipal corporations are governed by the Municipal Corpora- Municipal tions Act, 1882, 45 & 46 Vict. c. 50; and their contracts as urban authorities by sect. 174 of the Public Health Act, 1875, 38 & 39 Vict. c. 55 (p. 273, post), as applying to an "urban authority." County councils are incorporated by sect. 79 of the Local County Government Act, 1888, 51 & 52 Vict. c. 41.

councils.

councils.

Parish councils are incorporated by sect. 3 (9) of the Local Parish Government Act, 1894, 56 & 57 Vict. c. 73, by which " any act of the council may be signified by an instrument executed at a meeting of the council, and under the hands, or if an instrument under seal is required, under the hands and seals of the chairman presiding at the meeting and two other members of the council."

meetings.

In rural parishes not having a separate parish council, the Parish chairman of the parish meeting and the overseers of the parish are, by sect. 19 (6) of the Local Government Act, 1894, a body corporate any act of which "shall be executed under the hands, or if an instrument under seal is required, under the hands and seals of the said chairman and overseers."

Rural district councils are incorporated by sect. 24 (7) of the Rural district Local Government Act, 1894.

councils.

Guardians of the poor are incorporated by sect. 7 of the Union Guardians and Parish Property Act, 1835, 5 & 6 Will. 4, c. 39, and of the poor. churchwardens (as overseers) and overseers by sect. 17 of the Poor Overseers. Relief Act, 1819, 59 Geo. 3, c. 12; but in rural parishes, churchwardens by sect. 5 (2) of the Local Government Act, 1894, 56 & 57 Vict. c. 73, have ceased to be overseers, and additional overseers may be appointed to replace them.

(b) Common Law Form of Contract.

general, be

under seal.

Corporations, like individuals, have the power to contract, but Contracts by corporations their contracts must, at common law, be under their corporate must, in seal (a); but the general rule that every contract by a corporation must be under its common seal has long been broken in upon by judicial exceptions of a varying character, and in modern times. more precisely by such enactments as the Companies Clauses Consolidation Act, 1845 (see p. 266), the Commissioners Clauses Act,

(a) Mayor of Ludlow v. Charlton (1840), 6 M. & W. 815; Yarborough v. The Bank

of England (1812), 16 East, 6; 14 R. R.
272.

Contracts

with Corporations.

CH. IX. s. 4. 1847, 10 & 11 Vict. c. 16, s. 56, the Companies Act, 1867 (see p. 265), and the Public Health Acts of 1848 and 1875 (see p. 273), which enactments have very much diminished the importance of the numerous cases in which the extent of the exceptions has been discussed.

Requirement of seal.

Exception for trading corporations.

Bill of exchange.

Effect of part performance by the other party;

or adoption by

Conflicting decisions have been given as to how far the exception from the rule as to the necessity of corporations contracting under seal can be extended, and to the cases in which part performance, execution of the contract, or adoption may afford exceptions. All the cases were cited in Young v. Leamington (b), where Lord Blackburn observed that they required revised and authoritative exposition by a Court of Appeal. But the doubt is of no great practical importance, because, for trading corporations, the rule is abolished, and municipal corporations and urban authorities are governed by the Public Health Act, 1875, and Joint Stock Companies by the Companies Act or the Companies Clauses Act.

For trading corporations the exception has now become the rule, since it has been laid down by the Exchequer Chamber that the contracts of a trading corporation, if directly connected with the purposes of its incorporation, need not be under seal, whether the contracts be small or great, frequent or unfrequent, necessary or unnecessary (c).

The drawing of bills of exchange by corporations is provided for by sects. 22 and 91 of the Bills of Exchange Act, 1882, 45 & 46 Vict. c. 61; see post, ch. XVI.

It appears, that if a corporation enters into a contract not under seal, and there be such a part performance of the contract by the other contracting party as would entitle him to a decree against the corporation for specific performance, the corporation may sue or be sued on such a contract (d).

It has also been held, that if work done for a corporation has corporation of been adopted by them for purposes connected therewith, they

work done for them.

(b) Young v. Leamington (1883), 8 App. Cas. 517; and p. 273, infra.

(c) South of Ireland Colliery Co. v. Waddle (1869), L. R., 3 C. P. 463; 4 C. P. 617, the Exchequer Chamber adopting the decision of Bovill, C.J., in the Court below. But in this case neither the articles of association of the company, nor the Act of 1862, under which it was registered, imposed any form in the contracts of the company, for it was subsequent to this case that the Companies Act, 1867, imposing by sect. 37 certain forms, see ante, at p. 265, came into force. And so it would seem that the decision would not apply to cases

where certain forms are imposed by statute, or even, it would appear, by the articles of association; still, for trading companies and corporations not so regulated, the decision is decisive, and overrules East London Waterworks v. Bailey (1827), 4 Bing. 283.

(d) See Mayor of Kidderminster v. Hardwick (1873), L. R., 9 Ex. 13; Crook v. Corporation of Seaford (1871), L. R., 6 Ch. 551; per Lindley, J., Hunt v. Wimbledon Local Board (1878), 3 C. P. D. 208, 214; Melbourne Banking Corpora tion v. Brougham (1879), 4 App. Cas. 156, 169, P. C.; and see Scott v. Clifton School Board (1884), 14 Q. B. D. 500.

cannot, in an action to recover the price, object that no contract under seal has been proved against them (e). But there are decisions, the effect of which would seem to be, that in order to render a corporation liable in such a case, a mere adoption by them of the work done is not sufficient; but that the work done must itself be so strictly incident to the purposes of the corporation as to bring the case within the exceptions which have been established as to acts of necessity (f).

CH. IX. s. 4.

Contracts with Corporations.

Effect of
rent by, under
receipt of
invalid de-

mise,

So, although a corporation cannot, in general, make a lease of lands, except under their common seal, yet it has been held, that if a party has been let into possession of lands by a corporation, under an invalid demise, and they afterwards receive rent from him, the payment and receipt of such rent is evidence, as against the corporation, of a demise by them from year to year (g). A foreign corporation may sue in this country by their cor- Foreign corporate name (h), and if carrying on business in England, may be sued here and served with a writ at its place of business in England (i).

(c) Statutory Form of Contract.

As to the contracts of "urban authorities," the Public Health Act, 1875 (substantially re-enacting sect. 85 of the Public Health Act, 1848, 11 & 12 Vict. c. 63) provides, by sect. 173, that any local authority may enter into any contracts necessary for carrying that Act into execution, and, by sect. 174, sub-sect. 1, that every contract by an urban authority" (for what an urban authority is, see sect. 6 of the Act), "whereof the value or amount exceeds 50%, shall be in writing and sealed with the common seal of such authority;" while by sub-sect. 2 it is provided that every such contract" shall specify some pecuniary penalty to be paid in case the terms of the contract are not duly performed."

The first sub-section of this section has been decided by the House of Lords in Young v. Leamington (k) to be not merely

(e) Nicholson v. Bradfield Union (1866), L. R., 1 Q. B. 620; Clarke v. Cuckfield Union (1852), 21 L. J., Q. B. 349; Sanders v. St. Neot's Union (1846), 8 Q. B. 810; Paine v. Strand Union (1846), 8 Q. B. 326, 340; and see Haigh v. North Bierley Union (1858), E., B. & E. 873.

(f) Diggle v. London and Blackwall Rail. Co. (1850), 5 Exch. 442; Lamprell v. Guardians of Billericay Union (1849), 3 Exch. 283. And see this rule discussed, per Bramwell, L.J., Hunt v. Wimbledon Local Board (1878), 4 C. P. D. 48, C. A., at pp. 53-55.

(g) Doe d. Pennington v. Taniere 1848), 12 Q. B. 998, 1010.

C.C.

(h) National Bank of St. Charles v. De Bernales (1825), R. & M. 190.

(i) Newby v. Van Oppen (1872), L. R., 7 Q. B. 293; Haggin v. Comptoir d'Escompte (1889), 37 W. R. 703, C. A.

(k) Young v. Leamington (Mayor of) (1883), 8 App. Cas. 517; approving Hunt v. Wimbledon Local Board (1878), 4 C. P. D. 48, C. A. If, however, the work has been done, and the price paid, the mere fact that the contract was not under seal will not prevent the contracting authority from recovering the expenses as against street frontagers under sect. 150 of the Act, Bournemouth Commissioners v. Watts (1884), 14 Q. B. D. 87.

18

poration.