Page:Harvard Law Review Volume 9.djvu/284

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HARVARD LAW REVIEW.
256

2s6 HARVARD LAW REVIEW. principle of moral evolution. Again, it seems to be reasonably- certain that those courts which to-day adhere to " the modern doctrine " have always recognized it in substantially its present form : in other words, it is not modern. Finally, it is submitted that much of importance is lost through a failure to recognize with distinctness the operation in this field of two opposing judicial con- ceptions of public policy. The more or less consistent following of one or the other of these has determined the attitude of all courts which have attempted the solution of problems of Corporate Power. It may not be unprofitable to examine these points in their order. The " ancient doctrine " is thus stated by the learned author : — "A contract of a corporation which is either unauthorized by or in violation of its charter or governing statute, or which is entirely outside the scope of the powers of its creation, is void, in the sense of being no contract at all because of the want of the power of the corporation to enter into it ; that such a contract will not be enforced by any species of action in a court of justice ; that, being void ab initio^ it cannot be made good hy ratification; nor by any succession oi renewals ; and that no performance on either side can give validity to it, so as to enable a party to the fund [to found?] any right of action upon it. The doctrine of the courts was, that, unless a corporation was empowered by its charter or governing statute to make a given contract, it was prohibited by the prin- ciples of the common law ; that when a court of justice was appealed to for its enforcement, it stood upon the footing of any other prohibited illegal or immoral contract, and, as such, was subject to the operation of the principle, that a court of justice would not aid either party to en- force it, or to get back what he had lost under it, but would leave both parties in the predicament where, by their illegal act, they had placed themselves. " Assuming for the moment that this is the correct statement of an historical legal doctrine relating to unauthorized and prohibited contracts, it is important to note the misleading implication that, at the common law, the parties to all "prohibited illegal or immoral " contracts are helpless in respect of recovering what has been lost, and that the law, in such cases, will " leave both parties in the predicament where, by there illegal act, they have placed themselves." ^ Now the invalidity of an unauthorized cor- porate contract arises, not from the subject matter, but from the incapacity of one of the contracting parties. It is said to be

  • Pages 378, 37.;.