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or an agreement by a bookkeeper to disclose the financial condition of his employer's business,' * are against public policy and not enforceable.

A principal who furnishes his agent money for investment is entitled to follow not only the property bought, but its proceeds, if sold, so long as they can be traced and identified.'

Injunction will lie to restrain a school board from executing a contract with one of its own members to furnish supplies after the board has passed a resolution to purchase from said member; and it is not necessary to wait until the contract is executed.' Injunction will lie to restrain a public officer from entering into a contract with himself individually to furnish supplies to a pubiic institution.'

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43. Charter and Statute Limitations.-Contracts of corporations are limited to the powers given by their charters. The act creating the body politic, the articles of incorporation, and the charter given by the state should therefore be consulted and carefully studied. A corporation is a creature of the law. It has no powers except those expressly granted or that are necessary to the exercise and enjoyment of those expressly granted.' The acts and undertakings must not exceed the powers and privileges granted by the charter, for such acts will be ultra vires and without effect. It is not vested with all the capacities of a natural person or of an ordinary partnership, but with such only as its charter confers. If it exceeds its charter powers not only may the government take away its charter, but those who have subscribed to its stock may avoid any contract made by the corporation in clear excess of its powers. A corporation is confined in its operations to projects expressly enumerated in its charter or that are strictly necessary to their performance.

A contract ultra vires the charter of a corporation is void. It cannot be made valid by any subsequent act of the corporation; that which it cannot make or do it cannot ratify.' The state or sovereign power alone can ratify a contract entered into by a public corporation which is ultra vires, and make it valid and binding. The value of work done for a municipal corporation not pursuant to the charter cannot be recovered."



Davenport v. Hulne, 32 N. Y. Supp. Corp. Cas. 549. 803

6 Sault Ste. Mar c v. Van Deusan, 40 · Harding v. Field (Sup.), 37 N. Y. Supp. Mich. 429. 399.

* Board of Commissioners 0. The L. M. 3 Alexander v Johnson (Ind. Sup.), 41 & B. R. Co., 7 Amer. Corp Cas. 26. N. E. Rep. 811.

* Brown v. Mayor, 63 N. Y. 239 • Board of Tipp Co. v. R:uilroad Co., 7 Wallace o. Mayor of S. J., 29 Cal. 181; Amer. Corp. Cas. 26; Davis v. Od Colony see also Zottman v San Francisco and 20 R. Co., 7 Amer. Corp. Cas. 549.

Cal. 497, 20 Cal. 96, and 1 Dill. Mun. 5 Davis 0. Old Colony R Co., 7 Amer. Corp., & 372 (1873 ed.).

* See Sec. 85, infra.

The contractor, therefore, should not only satisfy himself that the officers or agents acting are the proper persons to enter into the contract on behalf of the corporation, but he must also take notice of the lawful limits of the company's capacity, that the contract is within the scope of the authority conferred by the act of its incorporation, and that the powers granted to it have not been surpassed.' He is bound at his peril to take notice of the lawful limits of its capacity,' especially where all acts of incorporation are, or are deemed to be, public acts; for every corporation organized under general law is required to file in the office of the secretary of state a certificate showing the purpose for which the corporation is constituted."

Some cases of interest to engineers will illustrate the import of this law. A water company in England had been duly incorporated for the supply of a certain district with water from certain sources within the district, and to do all other acts necessary to supply water to the inhabitants according to the true intent of the act. In consequence of the increase in population, the supply within the district became insufficient both in quantity and quality. The water company employed a consulting engineer to make surveys and plans, and to report on the feasibility of obtaining a sufficient supply from a certain stream of water beyond the company's district, the same plans and report to be used by the company in its application to parliament for powers to enlarge its works and to embrace this stream of water in its district. When the engineer brought suit for the value of his services the water company resisted payment on the ground that the act of employing the engineer for the work dono was beyond its powers. It was held by the majority of the court that the contract made for the plans and report essential to its application to parliament were not necessarily illegal nor the contract void, but a strong dissenting opinion was delivered by the minority of the court. The case is given to show how strictly the courts may define the powers of corporations. Probably the disposition of the courts can best be shown by giving the last few lines of the learned justice's dissenting opinion: “And when I consider the mischief that has been done by directors, under the temptations offered by interested parties and other considerations, adding to the schemes in which parties have contributed their capital, I own, hard as it may be in a particular case, I am sorry that a lesson should not be read that those who deal with directors must see that they have authority to bind their companies, or must trust the directors personally, a consideration which will make both parties more cautious in their speculations with other people's property.”.

Likewise it has been held that a railroad company has no power to employ 'Evans on Agency, pp. 26, 211. 312: CI. 147; and spe Vi'lage of Kent v. Cut Davis o Old Colony Ř. CO, 7 Amer. Corp. Glass (0., 10 Ohio Cir. Ct. Rp. 629. Cas. 549; Liitler o. Jayne, 124 III. 123. 3 Davis v. Old Colony R. Co., 7 Amer.

• Kenting v. Kausils City, 84 Mo. 415; Corp. Cas 549. Turney o. Bridgeport, 55 Conn. 412: Tren: * Bateman v. Mayor, etc., 3 H. & N. 323. ton Loco. Wks. v. United States, 12 Ct. of


a mining-engineer to examine and make a report on mines of which the road is the outlet, and that the railroad company is not liable to him for his services, even though its business is benefited as a direct result thereof.' It would, without doubt, have been otherwise if the railroad company's charter permitted it to operate mines or engage in mining.

Another case arose under a contract by a corporation organized for the the purpose of "purchasing, taking, holding, possessing, selling, improving, and leasing real estate and buildings, manufacture, lease, sale, use of building-stone, lumber, and other building materials," by which the company agreed to pay for services in organizing stock companies to locate and engage in business upon its land. The contract was declared ultra vires and void. If the contract had been performed, and the corporation had received the benefit, it would have been estopped from availing itself of such a defense.*

A contract by a railroad company to aid in the construction of the road of another corporation in another state is illegal, though it also provides for the construction of a branch to its own road."

A subscription for stock, in a company which employs and uses certain articles, by a corporation chartered to manufacture and deal in the same articles has been held beyond its powers. The construction of a levee has been held without the corporate powers of a village,' as has the reconstruction and repair of a building which had been partly removed for the extension of a street.

44. Other Restrictions to Which Corporate Bodies are Subject-Cost Must be Within the Appropriation or Limit of Indebtedness.-The contractor must ascertain if there be a charter or constitutional limit to the city's or com pany's indebtedness, for when that limit is reached it cannot create a new debt. The contract should not create a debt in excess of the fund appropriated for the purposes of the contract, for the amount that it exceeds the appropriation cannot be recovered. The contract is void as to the amount that the indebtedness incurred by the contract exceeds the limit fixed by law."


1 Georg v. Nevada Cent. R. Co. (Nev.), 38 Pac. Rep. 441; and see Lewis v. Colgan (Cal.), 44 Pac. Ren 1081.

4 Schurr . N Y. & B Sub. Invest. Co. (Com. Pl.). 18 N. Y. Supp. 454; 16 N. Y. Supp. 210, affirmed.

3 Bostwick e. Chapman. 60 Conn. 551; and see Cunningham . Massena Sp. R. Co. (Sup), 63 Hun (N. Y.) 439, 18 N. Y. Supp. 600.

Knowles v. Sandercock (Cal.), 40 Pac. Rep. 1047.

Newport Batesville & B Ry. Co. (Ark.). 24 S. W. Rep. 427.

Sceery . Springfield, 112 Ma s 512 [1873]; see Prairie Lodge v. Smith, 58 Miss. 301 App. of City of Erie, 91 Pa. St. 398 [1879]; Soule v. Seattle (Wash.), 33 Pac.

Rep. 384; Perkinson v. St. Louis, Mo. 4 App. 322 [1877]; State v. Atlantic City (N. J.), 9 Atl. Rep 759 [1887].

8 Turmey v. Bridgeport (Conn.), 12 Atl. Rep. 520; Dhrew . Altoona (Pa.), 15 Atl. Rep. 636.

9 Atlantic City W. W Co. Reed (N. J.), 15 Atl. Rep. 10; Culburtson v. Fulton (Ill.), 18 N. E. Rep 781.

10 Culburtson v. Fulton (Ill.), 18 N. E. Rep. 781 Turmey v. Bridgeport (Coun.), 12 A11, Rep. 520: Kingsley Brocklyn, 78 N. Y. 200 [1879]; Boston Elec. Lt. Co. v. Cambridge (Mass.), 39 N. E. Rep. 787; Lamar Water Company . City of Lamar (Mo.), 26 S. W. Rep. 1025: Georgetown W Co. Central T. H. Co. (Ky.), 34 S. W. Rep. 435.


When a city charter provides that all contracts shall be countersigned by the comptroller, mayor, and clerk, and that the comptroller shall have made an indorsement thereon showing sufficient funds are in the city treasury, or that provision has been made to pay the liability that may arise under such contract, it is essential to the validity of the contract that it have such sig. natures and indorsement.' The execution of a contract by a municipal corporation gives rise to no implied warranty that it has power to make assessments with which to pay for work and materials under the contract, and when a statute authorizing the assessment was adjudged unconstitutional the contractor was unable to collect what was due him.' The city will not, however, be relieved from liability for negligently delaying to raise funds by assessment when it has contracted to pay the contractor out of such a fund.' It seems that a contract for the performance of work or the furnishing of supplies need not be referred to the city treasurer for his certificate that there is sufficient unappropriated money in its treasury to meet its requirements. The contractor is supposed to know the powers of the officers with whom he is dealing, and the courts hold that there is no excuse for his not knowing the limit of indebtedness fized by the charter or legislative act, and the amount of the appropriation. Such ignorance will not avail in an action for the contract price.'

45. Appropriation Must Not be Exceeded. The same law holds when the amount of an appropriation for a specific job is limited; the cost of the work, including extras, must not exceed the amount of the appropriation. If it does, the city or town is not liable for the excess over and above the appropriation.'* So when money was appropriated by a town to build and furnish a town hall, and a contract was awarded for the erection of a hall at a cost equal to the full amount of the appropriation, it was held that the committee exceeded its authority, and that the contractor could not recover a part of the appropriation set aside to furnish the hall, nor for the extra work he had done; and this decision was made in the face of the fact that a number of the citizens had agreed to guarantee the furnishing of the hall if the committee would expend for the building the entire sum appropriated.' A contract for twenty years, or for an indefinite period, cannot be sustained as a

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City of Superio“ v Morton. 63 Fed. Rep. 357; Holines v. Avondale, 11 Ohio Cir. Ct. R 430

• Barber Asphalt Paving Co. v. Harrisburg. 62 Fei. Rep. 565: $e niso Connelly 6. Siin Franrisco (C:11.), 33 Pic. Rep. 1109.

· Little o. Portland (Oreg ), 37 Par. Ren, 911; and see Soule o. Seatile (Wasb.), 33 Pac. Rep. 384.

* Limar Water Co. v. Lamir (Mo.), 26 S. W. Rep. 1025.

59 N W. Rep. 513 : Crampton v. Varna R. Co., L. R. 7 Ch. 568: Keating v. Kansas City, 84 Mo 415 : Perkins in v. St. Louis, 4 Mo. App 322 (18771: Turmey v. Bridgeport (Conn.), 12 Atl. Rep. 520.

6 Turmer 0. Bridgeport (Comp.), 12 Ail. Rep. 520 (1888]: Nelson v. Mayor, 63 N. Y 53.5 (1876); see also Galveston v. Devlin (Ter.). 19 S. W. Rep. 2395; Kings.ey v. Brooklyn, 78 N. Y. 200 (1879).


5 Guita Percha Co. 0. Ogalalla (Neb.),

· Town of Westminster o. Willard (Vt.), 26 Atl. Rep. 932.

* See Sec. 44, supra,


contract for ten years, but is entirely void when the city is authorized to con. tract for a period not exceeding ten years.

If the public records fully disclose all the facts of the case, and the con. tractor was in no way misled or deceived by the records of the town board, then the town is not liable on the contract or for the reasonable value of the structure when public officers without the requisite power do contract on behalf of the town, even though the structure is accepted after its completion and used by the public generally.' Acceptance of the work will not affect a ratification of the contract,' nor will any subsequent act on the part of the town or city prevent it from denying the validity of such contract.'

If the contract price is within the amount of the appropriation it is valid, even though it reserves authority to make such changes of detail as may be necessary, and though it authorizes the engineer to determine the price of extra work required.' A charter that authorizes a certain annual expendi. ture, over and above certain repairs, for the building of new bridges, in whole or in part, does not prevent the letting of a single contract for a bridge whose total cost shall exceed the annual appropriation. The fact that there is no

' money on hand with which to pay for the work does not render the contract invalid where a road and bridge tax has been levied for the current year, though not collected.' If the law requires that provision shall be made for payments under such contracts the necessary funds must be provided beforehand. The indebtedness of a city cannot be increased beyond the limit ixed, by contracting for an electric-light plant to be leased by it; such an executory contract is forbidden.'

46. The Legislature or Congress May Ratify the Contract.-If the power to contract has been derived from the legislature a contract for a sum that exceeds the sum appropriated may be recognized, sanctioned, and made valid by a subsequent act of the legislature, and the contractor may then maintain his action upon the contract against the city. The contract can be ratified only by making an appropriation expressly for its performance." The act of the voters of a town subsequently voting an additional sum for the completion of a structure will not ratify an invalid contract."

A contract invalid for want of legislative authority may be made valid by


Manhattan T. Co. o. Dayton (C. C. A.), 59 Fed. Ren, 327.

? Salt Creek o. Bridge Co. (Kan.), 33 Pac Rp. 303.

Newport o. Batesville & B. Ry. Co. (Ark.), 24 S. W. Rep. 427.

* State etc., 0. Murphy (Mo.), 31 S. W. Rep. 784.

Kingsley o. Brooklyn, 78 N. Y. 200 (18791

556; and see Cincinnati v. Cincinnati, 11 Ohio Cir. Ct. Rep. 309.

& Kubls v. Laredo (Tex.), 27 S. W. Rep. 791.

'Soilman o. Pirkersburg (W.Va.) 14 S. E. Rep. 279.

10 Nelson o. Mayor, 63 N. Y. 535 (1876); see also New Orleans v. New Orleans W. W. Co , 12 Sup. Ct. Rep. 142

• Howardo. Oshkosh 33 Wis. 309[1873).

'Sullivan o Conmissioners, 114 Ill. 962; Smilie o. Fresno Co. (Cal.), 44 Pac. Rep.

11 Gutta Percha Co. v. Ogalalla (Nob.), 59 N. W. Rep. 513 ; Shipman v. State, 43 Wis. 377.

12 King v. Mahaska Co. (Iowa), 39 N. W. Rep. 636 (1888).


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