AGREEMENTS. AGREEMENT with agent for intended COMPANY for sale of BUSINESS of Form 1. This is an example of the form of agreement commonly adopted in Plan 1, supra, p. 1. day of as Parties. AN AGREEMENT made the between A., of (hereinafter called the vendor) of the one part, and B., of trustee for and on behalf of the company hereinafter mentioned, of the other part. WHEREAS the vendor has for some time past carried on Recitals. business as a mechanical engineer upon the leasehold hereditaments hereinafter described: AND WHEREAS a company is about to be formed under the Companies Acts, 1862 to 1883, having for its objects among other things the acquisition and working of the said business: AND WHEREAS the memorandum and articles of association of the company have, with the privity of the vendor, been already prepared (a): AND WHEREAS the nominal capital of the company is to be 80,0007., divided into 10,000 shares of 87. each: AND WHEREAS by the said articles of association it is provided that the directors of the company shall, immediately after the incorporation thereof, adopt, on behalf of the company, and carry into effect an agreement therein referred to, being these presents: NOW IT IS HEREBY AGREED as follows: : (a) Sometimes the memorandum and articles have not been prepared when the agreement is executed, and in such case the third and fifth recitals should be omitted. sale. 1. The vendor shall sell, and the company shall purchase: First, the Agreement for leasehold hereditaments described in the schedule hereto, for the unexpired residue of a term of ninety-nine years therein granted by the Parcel indenture of lease specified in the same schedule, subject to the rent reserved by the said indenture of lease, and the covenants and conditions therein contained, and on the lessees' part to be observed and performed. Secondly, the steam-hammers, cranes, steam-engines, lathes, and all other the plant, machinery, tools, stock-in-trade, chattels, and effects, in or about the said premises firstly described. Thirdly, the good-will of the said business, and all book and other debts due to the vendor in connection with the said business, and the full benefit of all Form 1. securities for such debts, and of all contracts, engagements, rights, and privileges, to which the vendor is entitled in relation to the said business. Consideration, cash, and shares. Vendor's title to leaseholds. Completion of purchase. Allotment of shares. When vendor to execute assurances, &c. 2. The consideration for the said sale shall be the sum of 20,0007., which shall be paid and satisfied as follows; namely, as to the sum of 4,000l. in cash, and as to the residue by the allotment to the vendor, or his nominee (b) or nominees, of 1,500 fully paid up (c) shares in the company of 81. each, to be numbered (d) inclusive. (b) As to the validity of this, see infra, p. 11. to (c) As to the necessity for filing this agreement with the Registrar of Joint Stock Companies, see infra, p. 10. (d) As to giving the numbers, see infra, p. 11. 3. The title of the vendor to the said leasehold hereditaments shall commence with the said indenture of lease, [and the company shall not call for the production of, or investigate or make any objection or requisition in respect of the title of the lessors, or the right to grant the lease, and the production of a receipt for the last payment of rent which shall have accrued due under the said indenture of lease previously to the completion of the purchase shall be accepted by the company as conclusive evidence that all the covenants and conditions in the lease have been performed and observed up to the completion of the purchase, or that all breaches thereof, if any, have been waived (e)]. (e) Stringent conditions as to title and evidence of title are rarely inserted in agreements for sale to newly formed companies and in general the words in brackets may be omitted in reliance on the V. & P. Act, 1874, s. 2, and the Conv. Act, 1881, s. 3. It is, however, conceived that those enactments do not prevent a purchaser from raising an objection discovered aliunde. See Waddell v. Wolfe, L. R. 9 Q. B. 515. Occasionally a clause as follows is inserted: If the company shall insist on any objection or requisition as to title, conveyance or otherwise which the vendor shall be unable or on the ground of expense, delay or otherwise shall be unwilling to comply with, the vendor may, notwithstanding any previous negotiation or litigation by notice in writing rescind this agreement without giving rise to any claim for expense or otherwise." 4. The purchase shall be completed on the the offices of Messrs. day of next, at the vendor's solicitor, when the company shall pay the said sum of 4,000l., cash, to the vendor, or as he shall direct (f). (f) If the company is a public one, in which the capital has to be sought by the issue to the public of a prospectus, some months will be allowed for completion. But if it is the conversion of a private business into a company without appeal to the public there need be no delay. However, in any event sufficient time must be allowed to get the agreement filed pursuant to s. 25 of the Act of 1867. See infra, p. 10. 5. The company shall also, on or before the said day of 6. Upon such payment and allotment as aforesaid being made the vendor shall, at the expense of the company, execute and do all such assurances and things as may reasonably be required for vesting in the Form 1. company the said premises agreed to be hereby sold, and giving to it the full benefit of this agreement. 7. If from any cause whatever the purchase shall not be completed As to interest if completion on the day of next, the company shall pay interest on the delayed. said sum of 4,0007. at the rate of 10 per cent. per annum, from that day until the purchase shall be completed. to carry on similar busi 8. The vendor (g) shall not at any time hereafter, either solely or Vendor not jointly, with, or as manager or agent for any other person or persons, or company, directly or indirectly, carry on, or be engaged, or concerned, ness. or interested in the business of a mechanical engineer, nor permit or suffer his name to be used or employed in carrying on or in connection with the said business, within 100 miles of the said leasehold premises, save so far as the vendor shall as a member of the company be interested, or as an officer or servant or agent of the company be employed, in the said business agreed to be hereby sold: [And in case the vendor shall Liquidated commit any breach of the foregoing stipulation, he shall pay to the damages. company [immediately on every such breach] the sum of liquidated damages in respect thereof.] -1., as (g) "The rule established by the modern decisions is in effect as follows:An agreement not to carry on a particular trade or business is a valid contract if it satisfies the following conditions:-1. It must be founded on a valuable consideration. 2. It must not be unlimited as to space. 3. And the restriction must not go beyond what in the judgment of the court is reasonably necessary for the protection of the other party, regard being had to the nature of the trade or business." Pollock on Contracts, p. 313. 9. The possession of the said premises shall be retained by the Possession prior to vendor up to the said shall, at his own expense and for his own benefit, carry on the said Profits. business in the same manner as heretofore. All outgoings in respect of Outgoings. the said leasehold premises shall be discharged by the vendor up to the said next, and as from that day the outgoings in respect thereof shall be discharged and the possession taken by the company. Such outgoings shall if necessary be apportioned between the vendor and the company. day of next, and in the meantime he completion. day of ing contracts. 10. The company shall undertake and perform the several contracts Company to and engagements the benefit whereof is hereby agreed to be sold, and perform pendshall indemnify the vendor, his heirs, executors, and administrators, and his and their estates and effects, from and against all actions, proceedings, costs, and expenses, claims, and demands, in respect thereof. 11. All books of account and other documents relating to the said As to books of business shall be handed over to the company on the completion of the account. purchase. 12. Upon () the adoption of this agreement by the company, the Discharge of said B. shall be discharged from all liability in respect thereof. (h) As to this clause, see supra, p. 3, et seq. B. from Form 1. Rescission of shares not taken. Rescission in default of adoption. No compensa- Issue of paidup shares. Parties. As to stating number of shares. 13. Unless before the shares in 1. day of next, at least the company's capital shall have been taken up [and a deposit of per share paid thereon], either of the parties hereto may, by notice in writing to the other, rescind this agreement. And after adopting this agreement the company shall stand in the place of the said B. for the purposes of this clause. In the case of a public company the above is commonly inserted so that if the shares are not satisfactorily taken up before the time for completion either party may abandon the sale. the 14. If this agreement shall not be adopted by the company before day of next, either of the parties hereto may, by notice in writing to the other, rescind the same. [See supra, p. 3]. 15. The rescission of this agreement, under Clauses 13 or 14, shall not give rise to any claim for compensation, expenses, or otherwise. 16. The company shall cause this agreement to be filed with the Registrar of Joint-Stock Companies before any of the said shares are allotted. As to special clause where vendor a promoter, see infra, p. 20. AS WITNESS the hands of the parties hereto, the day and year first above written. THE SCHEDULE ABOVE REFERRED TO. [This will contain particulars of the leasehold premises.] As to the Issue of Paid-up Shares. In Companies frequently agree to issue paid-up or partly paid-up shares, in consideration of property or rights sold, or services rendered to the company. such cases s. 25 of the Act of 1867 must be borne in mind. It is in these terms: 66 Every share in any company shall be deemed to have been issued, and to be held, subject to the payment of the whole amount thereof in cash, unless the same shall have been otherwise determined by a contract duly made in writing and filed with the Registrar of Joint Stock Companies at or before the issue of such shares." Accordingly, whenever it is arranged that a company is to issue fully paid-up or partly paid-up shares for a consideration other than cash, e.g., in consideration of property or rights sold or services rendered to the company, the contract (a) must be put in writing, and (b) must be filed before the shares are issued. The following points may be noticed in reference to this section: (1.) As to the parties to the contract.-If the company is in existence it should be made a party thereto, or the contract should be made by some person purporting to act on behalf of the company. But it is not clear that this is essential, and it would seem that any contract in writing duly filed which is acted on by the company would be sufficient. At any rate an agreement made between a vendor and some person purporting to act as trustee or agent for an intended company is sufficient if duly filed. Hartley's case, 10 Ch. 159. (2.) As to the aggregate number of shares being stated.-It has not been settled whether the contract must state how many shares are to be issued under it as paid-up. Before the Act of 1867 there was no need in a contract for the issue of paid-up shares to state the number, e.g., a company could, it is conceived, agree to purchase property at a valuation, to be paid in fully paid-up shares, Form 1. or to purchase goods when wanted from A. in consideration of paid-up shares ; and it may be contended that s. 25 was not intended to interfere with such contracts, but merely to require them to be in writing and filed. On the other hand it may be said that the object of the Legislature was to protect the public -to enable a person about to deal with a company to ascertain its positionand accordingly that the Act ought so to be construed as best to effectuate that intention. Now, if the filed contract need not show the number of shares to be issued under it, a person examining the returns at the registration office may not be able to obtain any insight into the company's position, e.g., he may see that 1000 shares have been issued, and that there is a contract under which they may have been issued. Until the point has been settled it seems advisable that the contract filed should state the number of shares, and accordingly, where the main contract does not state the same a supplemental contract should be filed before the shares are issued. shares. (3.) As to the denoting numbers of the shares.-The contract apparently need As to denoting not specify the denoting numbers of the shares to be issued. A doubt on this numbers of point was expressed by Mellish, L. J., in Pritchard's case, 8 Ch. 956; but in the Buenos Ayres Co., W. N. 1875, p. 59, the Master of the Rolls said, "he could see no foundation for the doubt." While, however, it would not seem necessary, it is very commonly expedient to preserve evidence in the Registrar's office as to the numbers of the shares issued as paid-up. Accordingly, it is well to give the numbers of the shares in the contract when possible, or at any rate before they are actually issued to file a supplemental agreement giving the numbers. (4.) As to issuing to nominees.-Where by a contract duly filed provision is Issue to made for the issue of paid-up or partly paid-up shares to A., such shares may be issued to A. or to his nominees, and the allottees will be protected by such contract. Carling's case, 1 C. Div. 124. nominees of vendor. essential. (5.) As to consideration.-Is the word "contract" in s. 25 used in its technical Whether sense, i.e., must there be a consideration for the company's promise to issue the consideration shares? The same question arose as to the word "agreement" in s. 4 of the Statute of Frauds, and in Wain v. Walters, 4 East, 10, Lord Eldon said that, "the question is whether that word [agreement] is to be understood in the loose, incorrect sense in which it may sometimes be used, as synonymous to promise or undertaking, or in its more proper and correct sense as signifying a mutual contract on consideration between two or more parties? The latter appears to me to be the legal construction of the word, to which we are bound to give effect:" &c. It would not seem unreasonable to hold that the word contract was used in s. 25 in its technical sense, and this view has been taken in some cases. Thus, in Crickmer's case, James, L. J., said that the contract "must be a contract which shows what shares are to be issued fully paid-up, and for what consideration they are to be issued." And in Anderson's case, 7 C. Div. 113, Thesiger, L. J., said in reference to s. 25: "I do not wish it to be supposed that I in any way dissent from the view which was expressed by Mr. Higgins, that under the term 'contract,' used in that s. 25, the document would not come within those terms, where there really was no consideration at all. I think it may very fairly be said-at all events I do not dissent from that viewthat under the word contract' is intended a contract binding in law, which of course imports a consideration, although we may not be able to go into the question of what was the value of the consideration." If this be the meaning of the word "contract," it would seem that where a company agrees, without any consideration, to issue paid-up shares to A., and the agreement is put in writing and duly filed, A. will be liable to pay the whole amount of the shares in cash, because no "contract has been filed. On the other hand, in Anderson's case, ubi supra, Jessel, M. R., appears to have thought that a document might be a contract within the meaning of s. 25, though made without any consideration. See also what was said in In re The Gold Company, 11 C. Div. 701; but it was not necessary to decide the point in either of these cases. Where |