Contracts by Companies. member can sue the Company, and the Company can sue a member, neither of which can be done in an ordinary partnership, because the parties would, in fact, be suing themselves. A partner has equal powers with the other partners, can interfere equally in the business, incur debts to bind the rest, and receive moneys and effects which he can only be made to account for by a very costly and tedious process. But, in an incorporated Company, the member has no right to interfere except in the manner prescribed by the Articles of Association; he constitutes the directors his agents for the purposes of the business, and is bound by their acts within the limit of his liability. He can transfer his shares without the consent of the other members of the Company, which in an ordinary partnership cannot be done, the shares go by transmission to his representatives, there is no survivorship, nor is death a dissolution of the partnership. Contracts by Companies. The general rule of law is, that a corporation. cannot contract except under its common seal. But the manifest inconvenience of such a requirement in a trading corporation has induced the legislature to relax the strictness of the law in this respect, and to give to companies incorporated under the act powers to contract by other means. But as the general law is only relaxed to the extent thus enacted, and it is therefore necessary to be very careful to keep within the limits of the power thus conferred, we extract the section. verbatim: 48 If any Company under this act carries on business when. the number of its members is less than seven for a Contracts by Companies. period of six months after the number has been so reduced, every person who is a member of such company during the time that it so carries on business after such period of six months, and is cognizant of the fact that it is so carrying on business with fewer than seven members, shall be severally liable for the payment of the whole debts of the Company contracted during such time, and may be sued for the same, without the joinder in the action or suit of any other member. If these provisions are not strictly observed, or if any contract should come to be regulated by the general law and not by the statute, it should be remembered that the Company could not sue on any such contract if not under seal, unless it be within the above exceptions to the general rule that a corporation can contract only by seal. Bills of exchange and promissory notes by the Company may be made, accepted, or indorsed in the name of the Company, or by or on behalf or on account of the Company, by any person acting under the express or implied authority of the Company: (sect. 47.) A bill of exchange drawn on a completely registered Company by its corporate name was accepted by two of the directors in this form: "Accepted, J. B. and E. M., directors of the corporate Company appointed to accept this bill." It was sealed with the corporate seal, which had the corporate name upon it, and countersigned by the secretary. It was held to be duly expressed to be accepted on behalf of the Company within sect. 45: (Halford v. Cameron's Coalbrook Iron Company, 17 L. T. Rep. 25; 20 L. J. 160, Q. B.) Directors were empowered by a deed of settlement to issue a promissory note or accept a bill of exchange for the balance that might remain due Contracts by Companies. on certain purchase money not exceeding 10004., but not to contract any other debt beyond 1007. The meaning of this authority was held to be, that the directors might contract the debt to that amount, and then give security for it, with lawful interest, by several notes or bills instead of by a single note or bill: (Thompson v. The Wesleyan Newspaper Association, 8 C. B. 849.). The following, signed by two directors, and having the seal of the Company, was held to be a note binding on the Company: "Three months after date, we, two of the directors of the B. Society, by and on behalf of the said society, do hereby promise to pay to C., or order, the sum of 677. 10s. 6d., value received." There was no counter signature by the secretary: (Aggs v. Nicholson, I H. & N. 165; 28 L. T. Rep. 66.) A promissory note in this form, "Three months after date, we jointly promise to pay B., or order, 6007. for value received in stock on account of the C. Company," was signed by three of the directors. It was held to be made in the name of the Company (Lindus v. Melrose, 27 L. J. 326.) A bill of exchange was addressed to a Company, as drawers, in their name, omitting "limited," and B., being authorised, accepted it in his own name, adding, "secretary to the said Company." He was held to be personally liable: (Balfour v. Ernest, 32 L. T. Rep. 295.) Where the general purport of the deed was that the directors should carry on the business with the capital of the Company, a general clause in it stated that "the affairs and business of the Company shall be under the sole and entire control of the directors, of whom there shall not be Contracts by Companies. less than five, nor more than nine, and three of them shall form meetings of the directors, and shall for all purposes be competent to act." It was held that this did not give them authority to borrow money on mortgage for the purposes of the Company: (Burmister v. Morris, 17 L. T. Rep. 232.) A Company, established for the manufacture of glass, was empowered by the deed to appoint a manager of the works and factories "to superintend and transact, under the control of the Board of Directors, the manufacturing business of the Company," and the Board was authorized to delegate to him "such and so many of the powers hereby given to them as would enable him to carry on the said works and manufacturing business in an efficient manner." The Company was held to be liable for goods supplied to it on the order of such manager for the purposes of their manufacture, although there was no express delegation of authority; and it was also held to be liable for goods supplied on the orders of unauthorised persons, as the chairman, deputy chairman, and secretary, the goods being with the knowledge of the directors received on the premises, and used by them for the purposes of the trade: (Smith v. The Hull Glass Company, 11 C. B. 897.) Directors are generally prohibited from being interested in any contract with the Company, unless the same be reported to the next general meeting and approved. A report read at a general meeting and adopted, wherein a resolution was contained respecting an advance of money to the Company by directors, was held to be a sufficient submission to the shareholders of the terms of the Contracts by Companies. advance; but it was also doubted whether a loan of money was such a contract as was contemplated by the prohibition: Murray's Case, 5 De Gex, Mac. & G. 746; and in Stears v. The South Essex Gaslight and Coke Company, 3 L. T. Rep. (N.S.) 472, which was an action for work done for the Company, a plea that plaintiff was a director at the time of the contract made and executed was held to be valid. The requirement that an incorporated Company shall contract under its common seal, does not extend to all contracts, however trifling, but only to such as are of sufficient importance to put into writing. It may buy and sell, and otherwise deal by parol in the ordinary course of business for purposes necessary to carry on the trade. But in The London Dock Company v. Sinnott, 8 G. & B. 347, an agreement to execute a contract under seal, for surveying the docks for a year, was held not to be of such a nature as to be sufficient by parol without the seal of the Company. And a departure from the formalities required by the settlement (or Articles of Association) does not affect the validity of a contract under its common seal: (Agar v. The Athenæum Assurance Company, 3 C. B. 725.) A bribe to the directors was held in Maxwell v. Port Tennant Patent Steam Fuel and Coal Company, 24 Beav. 495, to invalidate a contract made with a Company. The plaintiff had agreed to sell a colliery for 8000l. in paid up shares, but by a private arrangement 2500l. of these were to be given as a bonus to the directors, and which was not communicated to the shareholders before their approval of the contracts. The court refused specific performance. |