mere resolution of the directors not communicated to the opposite party and not followed by any act from which a new agreement might be implied, does not subject the corporation to the obligations of the promoters' contract or entitle the other party to proceed thereon.49 A new agreement might perhaps be inferred from a resolution of the directors adopted in the presence of the other party, 50

§ 55. Necessity of consideration.

It has been said that in order to render a corporation liable for the payment of a debt contracted by its promoters prior to its organization, there must be shown, not only a promise of the corporation to pay the debt, but the receipt and acceptance by it of that for which the debt was incurred.51 This may not always be strictly true, but the obligation of the corporation must rest upon a new agreement. That agreement must, to be enforceable, be founded upon some consideration, and the mere naked promise of the corporation to pay debts incurred by the promoters from which it has derived no benefit, creates no enforceable obligation.52

§ 56. Liability of corporation resulting from acceptance of benefit of promoter's contract.

The rule is well settled in this country that if a corporation, after it has become fully organized and capable of contracting,

49. Clarke v. Omaha & S. W. R. R. Co., 5 Neb. 314, 324, 325; In re Johannesburg Hotel Co., 1891, 1 Ch. Div. 119, 130-131; North Sidney I. & T. Co. v. Higgins, 1899 App. Cas. 263; Melhado v. Porto Alegre Ry. Co., L. R. 9 C. P. Cas. 503, 506, 507; In re Empress Engineering Co., L. R. 16 Ch. Div. 125, and see perhaps In re Dale and Plant, Ltd., 61 L. T. N. S. 206.

50. James Young & Sons, Ltd., v. Gowans, 10 Scots Law Times 85,

and see Tift v. Quaker City National Bank, note 46, supra.

51. Western Screw & Manfg. Co. v. Cousley, 72 Ill. 531, 534; Reichwald v. Commercial Hotel Co., 106 Ill. 439, 448; Chilcott v. Washington State Colonization Co., 45 Wash. 148, 153, 88 Pac. 113, 115.

52. Church v. Church Cementico Co., 75 Minn. 85, 77 N. W. 548; Richard Brown & Son Const. Co. v. Bambrick Bros. Contr. Co., 150 Mo. App. 505, 131 S. W. 134; William

with full knowledge of the facts, accepts the benefits of a contract assumed to have been made on its behalf by its promoters, it impliedly agrees to perform the obligations imposed thereby. It does not by accepting the benefits of the promoters' contract, properly speaking, either "ratify ratify" or or "adopt" the promoters' agreement, but if it accepts a conveyance of property, or the rendition of services, known by it to be made or performed in pursuance of a contract with the promoters, it impliedly agrees that in consideration of the performance by the other party of the conditions imposed by his contract with the promoters, it will on its part perform the covenants which the promoters agreed should be performed by it.53 If the corporation knowingly ac

Allen & Co. v. Somerset Hotel Co., 88 N. Y. Supp. 944.

53. Federal.-Hawkeye Gold Dredging Co. v. State Bank of Iowa Falls, 157 Fed. Rep. 253 (reversed but not as to this matter, 177 Fed. Rep. 164, 100 C. C. A. 626); Continental Trust Co. v. Toledo, etc., R. Co., 86 Fed. Rep. 929, 948; Whitney v. Wyman, 101 U. S. 392, 25 L. Ed. 1050.

California.-Jones v. Allert, 161 Cal. 234, 118 Pac. 794.

Idaho.-Mantle V. Jack Waite Mín. Co., 24 Idaho 613, 135 Pac. 854, 136 Pac. 1130.

Indiana.-Smith v. Parker, 148 Ind. 127, 133-134, 45 N. E. 770.

Iowa.-Bobzin v. Gould Balance Valve Co., 140 Iowa 744, 118 N. W. 40.

Am. & Eng. Encyc. (2nd ed.) 241, 10
Cyc. 262; and the note to Pittsburg
Mining Co. v. Spooner, 17 Am. St.
Rep. 161.

Maryland.-Maryland Apartment
House Co. v. Glenn, 108 Md. 377, 70
Atl. 216.

Massachusetts.-Penn' Match Co. v. Hapgood, 141 Mass. 145, 149, 7 N. E. 22. And see North Anson Lumber Co. v. Smith, 209 Mass. 333, 95 N. E. 838.

Michigan.-Esper v. Miller, 131 Mich. 334, 91 N. W. 613, and cases cited.

Minnesota.-Selover v. Isle Harbor Land Co., 91 Minn. 451, 98 N. W. 344, 100 Minn. 253, 111 N. W. 155.

Mississippi.-Mulvihill

V. Vicks

burg Ry. Power & Manfg. Co., 88 Miss. 689, 704-705, 40 So. 647, 649650, citing Whitney v. Wyman, 101 U. S. 392, 25 L. Ed. 1050, 1 Beach on Private Corporations, § 198, 2 Clarke & Marshall on Private Corporations, 306.

Missouri.-Pitts v. Steele Merc.

cepts the benefit of an engagement entered into by its promoters prior to its organization, the courts will not permit it to deny that it at the same time agreed to assume the corresponding burdens.54

A similar rule seems in England to be enforced in chancery, but the question is, in that country, not free from confusion.55

A few cases in this country which might, on a hasty reading, seem to conflict with this rule should perhaps be mentioned.

In Central Park Fire Ins. Co. v. Callaghan,56 it was claimed as a defense to an action to foreclose a mortgage, that the promoter had as a condition to the making of the loan by the plaintiff corporation then in process of formation, exacted from the defendant a subscription to its shares. The court said that the contract of the promoter, made before the company was organized, could not bind the company after its organization unless it in the usual way adopted and ratified his conduct, and that any improper condition imposed by the promoter would not invalidate the transaction. There were here two entirely separate transactions each of which standing alone was entirely proper. There does not seem to have been any evidence that the corporation had notice of the connection between the two.

In Miser Gold Mining Co. v. Moody,57 the defendants had, pursuant to an agreement with the promoters, conveyed certain mining property to the plaintiff corporation. The deed was subsequently returned to the defendants for the purpose of making a correction in the certificate of acknowledgment. The defendants mutilated the deed and refused to execute a new one. The corporation sued to compel the execution of a new deed, and the defendant pleaded that the promoters had failed to finance the corporation in accordance with their agreement. The court held that the breach of the agreement as to the financing of the corporation was brought about by the defendants' failure to return the deed, and added that the agreement of the promoters was not binding upon the corporation. Assuming that the agreement claimed by the plaintiff was properly proved, the rights of the

Colonial Produce Co., Ltd., 1906, 2 Ch. Div. 435; Clinton's Claim, 1908, 2 Ch. Div. 515.

In connection with these cases, should be read the discussion of Lord Cottenham's now abandoned

rule (§ 58, post), which is probably
the cause of the confusion in the
English cases.

56. 41 Barb. (N. Y.) 448.
57. 37 Colo. 310, 86 Pac. 335.

parties depended upon the intention in regard to the sequence of events. If the defendants were to execute a deed and the promoters were thereupon to finance the company in an agreed manner, the failure of the promoters to perform could not affect the rights of the corporation. If, on the other hand, the promoters agreed to organize a corporation and to finance it in a manner agreed upon by the parties, and the defendants were thereupon to convey their property to the corporation and receive its shares in payment, they certainly could not be compelled to make a conveyance to a corporation which did not correspond to that described in the agreement.

In Hecla Consolidated Gold Mining Co. v. O'Neill,58 certain mining property was conveyed to a trustee, to be by him conveyed to a corporation when organized. After the corporation had been organized the trustee refused to make a conveyance, claiming that the former owners of the property, who were the promoters of the corporation, had failed to pay him the moneys agreed upon as remuneration for his services as trustee. The court held that the trustee was bound to make the conveyance, saying that the agreement for compensation was a personal one on the part of the promoters and that, even if they had assumed to bind the corporation, it was doubtful that their promise could be enforced against it. It is suggested that if the promise was that the compensation should be paid by the corporation, the corporation accepting a conveyance with full knowledge of the facts might well have become bound to pay in accordance with the promoters' promise. Whether the trustee would have been permitted to withhold a conveyance until his compensation was paid is a different question, depending upon the particular terms of his agreement.

§ 57. Enforcement at law or in equity.

There seems, at times, to have been some doubt as to whether 58. 47 N. Y. St. Rep. 211, 19 Supp.