not afterwards dispute acts done by him within the scope of such agency; (7) but, where an advance has been made on the personal responsibility of the agents of the company, a subsequent adoption of their acts, by the directors, will not make the company liable. (m)1

124. Contracts in violation of the provisions of the articles of association.-Parties dealing with the directors of a joint-stock company are bound to take notice that they are dealing with parties having a limited authority; and they are bound by the limitation of authority contained in the registered articles of association, (2) unless the company at large, or the general body of the shareholders, have sanctioned acts and transactions by the directors in excess of the powers conferred upon them. If a company has no power to do a particular thing, that power can not be added to the company by the agreement of the shareholders; but, if a company has power to do a thing, and there be only requisite a particular formality, such as the consent of a general meeting, in order to warrant the exercise of the power, then acquiescence may be inferred from delay, and a knowledge of the transaction imputed to every shareholder; (o) and an agreement originally ultra vires can not be impeached after the lapse of considerable time. () Where the deed of settlement of a fire insurance company

() Wilson v. West Hartlepool Harbor and Ry. Co., 34 Beav. 187; 2 De G. J. & S. 475.

(m) Scott v. Lord Ebury, L. R., 2 C. P. 255; 36 L. J., C. P. 161.

(n) Balfour v. Ernest, 5 C. B., N. S. 624; 28 L. J., C. P. 170. Shrewsbury (Earl) v. North Staffordshire Ry. Co.

L. R., I Eq. 593: 35 L. J., Ch. 596.

(0) British Provident Life & Fire Ins. Soc., in re, 32 L. J., Ch. 326. But see Brotherhood, in re, ex parte Agriculturist's Insurance Co., 31 Beav. 365. (p) Smallcombe's case, L. R., 3 Eg 769.

'See note 2, p. 100.

directed that, in every policy issued by the directors, the funds of the company should alone be made answerable for claims under such policy, and policies were issued by the authority of the directors not confining the liability to the funds of the company, and not complying with the provisions of the deed of settlement in other respects, it was held that the policies were not binding upon the company. (q) But it does not follow that a deed under the seal of the company, bona fide entered into, is absolutely void if any formality which is prescribed by the articles of association has been omitted. To hold this to be the case would have the effect of vesting in these companies "an unlimited power of repudiation;" and this would be an unlimited power to defraud. (r) There may be a breach of duty on the part of the directors, in neglecting to comply with certain formalities, in respect of which they are responsible to the shareholders; but it does not follow that the contract is void as against the company. (s)1

Where a harbor company was empowered by act of parliament to raise money by mortgage, and it was provided that the mortgages should be entered in the books of the company by their clerks, who were to indorse on such mortgages a memorandum of such entry, and it was also provided that, until the entries and indorsements were made, the mortgages should "not be valid or effectual," and money was borrowed by the company on mortgage, and the mortgage was

(q) Hambro' v. Hull & Lond. Fire Ins. Co., 3 H. & N. 789; 28 L. J., Ex. 62.

(r) Ld. Campbell, Prince of Wales Ins. Co. v. Harding, Ell. Bl. & Ell. 216; 27 L. J., Q. B. 307.

(s) Agar v. Athenæum Life Ass. So., 3 C. B., N. S. 756. Totterdell v. Fareham Blue Brick and Tile Co., 35 L. J. C. P. 278. In re Bonelli's Telegraph Co., L. R., 12 Eq. 246; 40 L. J., Ch. 567.

'State v. Conklin, 34 Wis. 21.

entered in the company's books, but no memorandum of such entry was indorsed on the mortgage by the clerk, pursuant to the requirements of the act of parliament, it was nevertheless held that the company could not set up their non-compliance with the act in order to defeat the claim of their mortgagee; for it was obvious that the legislature never intended to put it in the power of the company to defeat their own securities by their own default, and so commit a gross fraud. (t)

The power of giving a bill of sale as a security for debts is incident to a trading company, although it is not expressly conferred by the articles of association. (u)

Parties who have contracted with the directors of a registered joint-stock trading company, in matters relating to the copartnership business, are not bound, when seeking to enforce their contracts against the company, to show that the directors were authorized by the articles of association to enter into them. Prima facie the directors have the necessary authority; and the burden of proving that the directors were restrained by the regulations of the company from making the particular contract sought to be enforced, and from binding the company thereby, lies upon the defendants. If managers, secretaries, or directors, are appointed to carry on the business of a trading company, parties dealing with the company are not bound to inquire whether their agents or officers are properly appointed or not. If they exercise the duties of their office notoriously, and order goods which are received and used by the company in the ordinary course of its business, the company is responsible for payment thereof. (x) But, if the contract sued upon has no

(t) Jorten v. S. E. R Co., 6 De G. M. & G. 270; 24 L. J., Ch. 343. Prince of Wales Ass. Co. v. Harding, Ell. Bl. & Ell. 183.

(u) Shears v. Jacobs, L. R., I C. P.

513.

(x) Smith v. Hull Glass Co., 8 C. B 676; 19 L. C. P. 155; 11 C. B. 897

relation to the business carried on by the company, and is not within the scope of any implied authority given for the purpose of managing and conducting the business thereof, the plaintiff is bound to prove affirmatively that the directors who profess to bind the company by the contract were duly authorized to do so. This may be done by showing that any particular course of dealing has been sanctioned by the directors and acquiesced in by the shareholders, or that the unusual contract has been sanctioned by a board meeting at which the requisite number of directors was present. (y) Persons employed by the directors of a company to supply goods, or to render any services for the purposes and requirements of the company, can not be expected nicely to investigate the objects for which they are employed, and to resort, in every case, to the deed of settlement for the purpose of ascertaining whether those objects are or are not in accordance with its provisions and with the trusts reposed in the directors. (2) But, whenever a party dealing with a joint-stock company knowingly combines with the directors to do any act ultra vires to the prejudice of the shareholders, then the shareholders may very fairly deny their liability. (a) 1

1

21 L. J., C. P. 110 Lllard v. Bourne, 15 C. B. 472, Levy v. Metrop; Cab. Co., 23 Law T. R., C. P. 67.

(y) Ridley v. Plym. Grind. &c., 2 Exch. 716; 17 L. J., Ex. 252.

(z) Green v. Nixon, 3 Jur. N. S. 994; 27 L. J., Ch. 819.

(a) Prince of Wales Ins. Co. v Harding, Ell. Bl. & Ell. 217; 27 L. J., Q. B. 307.

'See McSpedon v. Mayor, &c. of N. Y. 7 Bosw. 601; 20 How. Pr. 395; Hood v. New York, &c. R. R. Co. 22 Conn. 502; Whitman, &c. Co. v. Baker, 3 Nev. 386; Farmers' &c. Bank v. Detroit, &c. R. R. Co. 17 Wis. 372; Bissel v. Michigan, &c. R. R. Co. 22 N. Y. 285; Whitney v. Reay, 24 Ark. 26; De Voss v. City of Richmond, 18 Gratt. 338; Jones v. Same, Id. 517; Trenton Ins. Co. v. McKelway, 1 Beasley, 133; Attorney-General v. Hushon, 18 N. J. Eq. (3 C. E. Green 410); Fisk v. Chicago, &c. R. R. Co. 4 Abb. Pr. (N. S.) 378

125. Liability of shareholders.-Every company, limited under the act, whether limited by shares or by guarantee (s. 41), must keep its name painted or affixed in a conspicuous position, and in letters easily legible, on the outside of its office or place of business, and must have its name in legible characters on its seal, and on all its notices, advertisements, and official publications, and in all its bills, notes, indorsements, checks, orders, bills of parcels, invoices, receipts, and letters of credit. All officers of the company, and persons acting on its behalf, disobeying the statute, are subjected (s. 42) to various personal liabilities in respect of their contracts and proceedings in the matter. (b) If the company carries on business for a period of six months, after the number of the members has been reduced to seven, every person who is a member, during that period, is liable (s. 48) for the whole debts of the company then contracted.'

126. Effect of the winding-up order.-Bona fide dispositions of property of a company, in the ordinary course of its trade, made after the presenting of a petition for winding-up, and completed before the winding-up order, will, in the exercise of the discretion given to the court by the Companies act, s. 153, be confirmed. Where, however, such dispositions are incomplete, and rest in contract at the time of the winding-up order, the court has no discretionary power to order the contract to be fulfilled; and the person with whom it was entered into, though he has paid

(4) Penrose. Martyn, 28 L. J., Q. B. 28; Ell. Bl. & Ell. 499.

In the United States the liability of stockholders is gen. erally regulated by statutes of the different states. See these laws collated and referred to post, part ii. book ii. chapter vii section