Canada, like England, has two kinds of corporations, those created by letters patent or executive grant which are given the general capacity possessed by corporations created by royal charter, and those created with the limited capacity of statutory corporations. Some Provincial Companies Acts have been amended to extend to all corporations "the general capacity which the common law ordinarily attached to corporations created by charter." The effect of this grant of general capacity seems to be still more or less unsettled." Under the general capacity doctrine could a corporation incorporated say for the purpose of carrying on the sole business of mining lawfully carry on the business of butchering also? The general capacity doctrine does not mean that the directors may divert the capital of the corporation to unauthorized purposes or that shareholders have no control over the nature of the business which the directors may carry on. Even if we accept or enact the general capacity doctrine, there is still the question of agency as in the case of an individual or partnership. If contracts or conveyances are attempted outside the scope of the agency of the directors, actual or apparent, they may be enjoined. The general capacity doctrine means that the law may attribute to the corporation such rights and liabilities as its agents may be deemed authorized to acquire or incur in its behalf as in the case of an individual or partnership principal. It may sound radical and revolutionary to propose that the objects clause of the articles should operate with no more effect than by-laws. But is not that exactly what the learned draftsmen are driving at in removing the doctrine of special capacity? The Ohio Act drafted by a committee of the Ohio Bar Association with the advice of Professor Stevens and much expert assistance, and recently adopted, seems to carry out this idea explicitly. It follows the Uniform Act but in Section eight adds these two clauses:

"The articles of incorporation shall constitute an agreement by the directors and officers with the corporation that they will confine the acts of the corporation to those acts which are authorized by the statements of purposes and within such limitations and restrictions as may be imposed by the articles.

"No limitations on the exercise of the authority of the corporation shall be asserted in any action between the corporation and any person, except by or on behalf of the corporation against a director or officer or a person having actual knowledge of such limitation."

"Edwards v. Blackmore, 42 Ont. L. Rep. 105, 42 Dom. L. Rep. 280 (1918); Thomson, The Doctrine of Ultra Vires (1920) 40 CAN. L. T. 993; Thomson, Joint Stock Companies (1922) 42 Can. L. T. 143, 245, 302–361; Garrett, (1922) 42 CAN. L. T. 433, 466, 478; 7 PROC. CAN. BAR. Ass'n. 382 (1922); 7 ibid. 176 (1925); Gurd, (1924) 2 CAN. BAR REV. 485, 488.

The theory underlying this modernized Ohio corporation act is simply that the corporation is the result of an agreement among the parties who organized it and are conducting it, subject to proper supervision in the interests of the public. Limitations of authority contained in the articles are binding upon the directors and the officers of the corporation and persons dealing with the corporation with knowledge thereof. The statement of "purposes" in the articles is binding to this extent. But the objects and powers clauses are merely directions by the shareholders to their agents intended to govern them in conducting the corporation's business. Those limitations cannot be asserted to invalidate transactions with the corporation except where the rules of agency permit." The burden of proof would no doubt be on the corporation to prove that anyone contracting with it was aware of the limitations. A contract might doubtless be ratified by the corporation though both the corporate agent and the third party knew when it was made that the transaction would be ultra vires. The third party could withdraw prior to ratification.

The distinction sometimes drawn between acts or contracts in abuse or excess of granted powers and acts in reference to a subject lying entirely beyond the range of objects of the corporation has been criticized. In either case the contract is authorized or not authorized by the charter. In either the contract is equally within any supposed common law or statutory prohibition against all unauthorized corporate action. There may, however, well be apparent authority or estoppel in one case where there would not be in the other. A corporation should be bound by the acts of its agents though unauthorized and in excess of the corporate purposes as against a party who was entitled to assume that the agents acted within the authority conferred upon them."

If the third party trusting to the ostensible authority of corporate officers, held out by the corporation to the public as worthy of credit and confidence, contracts or changes his position in reliance upon this appearance, the corporation should be estopped to plead its own want of "power" or the lack of authority of the officer to bind it. The proposition amounts to this:-That a person dealing with a corporate officer may ordinarily rely on the implied representation

"See Report of the Committee of the Ohio Bar Ass'n., Dec. 28, 1926, at 5, 30. "See discussion as to by-laws in Putnam v. Ensign Oil Co., 272 Pa. 301, 307, 116 Atl. 285, 287 (1922).

82 MORAWETZ, CORPORATIONS (2nd ed. 1886) §§ 704, 706; 3 Fletcher, CorPORATIONS (1917) §§ 1598-1600.

'Monument Nat. Bank v. Globe Works, 101 Mass. 57, 3 Am. Rep. 322, (1869) 3 FLETCHER, CORPORATIONS (1917) §§ 1591–1597.

that an officer accredited by the directors is acting within the scope of the corporate business, unless there is good reason to suppose otherwise. This is particularly the case if the contract pertains to the usual and ordinary business carried on by that corporation, and such a contract might not under all circumstances be beyond the authority conferred by the articles. But if the transaction is manifestly beyond the scope of the business of the corporation the party dealing with the officer acts at his peril.10

In the world's business, business men cannot be expected to read and construe the charters of corporations before each contract is made. The charter is practically a matter of private record like the by-laws or articles of partnership. "If the law does expect and require all who deal with the corporation to be familiar with and understand the charter, the requirement is unreasonable and the expectation is doomed to disappointment. The exigencies of ordinary business alone will often prevent a search of corporate records. Indeed, in many cases the search could not be made if desired."'"

A conflict arises to some extent between the interests of the stockholders and of third persons who deal with the corporation. In some foreign systems of law it is provided that limitations of power cannot be set up against third persons acting in good faith. It is difficult to find a solution which reconciles the complete security of the stockholders with that of third persons, without requiring of them an impracticable examination into the probable interpretation of the charter powers.12

The main field of conflict as to ultra vires transactions, as Professor Stevens shows, 13 is concerned with the rights and liabilities arising out of ultra vires contracts which are wholly or partly executory. The so-called "estoppel" to plead ultra vires by the retention of benefits of performance may best be explained as a species of adoption or ratification of the contract. Under the apparent agency doctrine even an executory ultra vires contract may be enforceable (as it is now in certain cases of estoppel) if within the apparent scope of the

10Sturdevant v. Farmers & Merchants Bank, 69 Neb. 220, 95 N. W. 819 (1903) J. L. Parks, Ultra Vires Transactions (1922) Mo. BAR BULL., Law Series 25, p. 21. In Bissell v. Michigan Southern Railway Co., 22 N. Y. 258, (1860) Comstock C. J. says, "A traveler from New York to Mississippi can hardly be required to furnish himself with the charters of all the railroads on his route, or to study a treatise on the law of corporations."

12 Demogue, The Impossibility of Effecting Contractual Incompetence (1922) 31 YALE L. J. 626, 629; SCHUSTER, PRINCIPLES GERMAN CIVIL LAW (1907) 88 52, 58. The doctrine of ultra vires has no application in the case of any German trading corporation. No transaction entered into by one of the primary agents of a trading corporation is invalid on the ground that it is outside of the scope of the corporation's usual business or the objects for which it was created. 13Stevens. op. cit., supra note 2, at 297, 308.

authority of the directors. An executed conveyance or transfer on the other hand might be subject to attack, except as protected by ratification and estoppel, if entirely unauthorized or unsupported by apparent authority.

The directors are something more than ordinary agents. It is through them that the corporation lives, wills, acts and has its being. Stockholders, like bondholders, are more in the position of lenders and investors than of principals and proprietors. They submit their capital and business to the direction and control of the proper officers of the company. The law may therefore more easily infer ratification from silent acquiescence than in the case of an individual principal and impose a duty upon stockholders to inquire as to the conduct of directors and officers, and to restrain such conduct if improper or unauthorized because outside the scope of the specified corporate business.14

The Vermont statute, the only one on ultra vires beside the new Ohio act, goes to the extent of declaring that any act done in behalf of a corporation, authorized or ratified by the directors, shall be regarded as the act of the corporation and the corporation shall be liable therefor, even if such act was not necessary or proper to accomplish its purposes to the same extent as if the act had been necessary or proper. That is, the corporation will be bound if the act is within the apparent scope of the authority conferred upon them. No doubt the same force would be given the articles as to the by-laws, and third persons who join with delinquent officers in violating known limitations could not enforce their agreements.16

14Warren, Executory Ultra Vires Transactions (1911) 24 HARV. L. Rev. 534–537; Stevens, op. cit., supra note 2, at 297, 331, 333.

15Vt. Laws 1915, No. 141, § 15; Vt. Gen. Laws (1917) §§ 4919, 4923. 16Compare Stevens, op. cit., supra note 2, at 297, 333 note 124.

The Handicap of Poverty in Litigation

GEORGE S. VAN SCHAICK*

In law as in medicine the poor and destitute often get gratuitous service of a quality far beyond the reach of those of little means. Only recently one of the leaders of the American Bar, at the instance of an interested clergyman, without fee of any sort, took the case of a poor Chinaman to the Supreme Court of the United States and obtained a reversal of a judgment of conviction of first degree murder because the constitutional rights of this alien had been outrageously violated.1

Lawyers in active practice usually can point to numerous cases where they have helped deserving poor people without remuneration. The aggregate of such cases handled is undoubtedly large. But what of the cases of injustice both civil and criminal which are never brought to light?

There has been a general awakening to the seriousness of the problem in recent years. The guaranty of the equal protection of the laws given by the Fourteenth Amendment is of little use unless the ways and means of getting into court are provided. The writ of habeas corpus is a gruesome joke to the man behind the bars without counsel to prepare his petition. The right to an injunction or attachment avails a man little if he has not the means to provide the undertaking required by statute. The well established rules of torts and contracts and damages mean nothing to a non-resident plaintiff who cannot provide security for costs as a condition precedent to the continuance of his lawsuit.

It is not alone the destitute with no means to procure counsel who find the way to justice difficult. Self-respecting citizens who are accustomed to pay their way and who ask charity of no one find that in litigation their well-to-do adversary has an advantage of no small consequence. No lawyer who has practiced in the courts fails to appreciate the advantage in a litigation which means give in the engaging of counsel, the securing of expert witnesses, the locating and attendance of absent witnesses, the making of maps, the taking of pictures and the general preparation for trial.

Nor is it alone in the trial of causes where the disparity exists.

*Of the Rochester (N. Y.) Bar.

Ziang Sung Wan v. United States, 266 U. S. 1, 45 Sup. Ct. 1 (1924) in which John W. Davis, without fee, argued the case for the appellant at the request of Rev. Peter J. O'Callahan.