264 HARVARD LAW REVIEW upon making any imrticular form of contract. If a banking corpo- ration were forbidden to do an insurance business, but neverthe- less issued a policy, it would be perfectly reasonable for the courts to permit the assured to recover against the company upon the ground that the prohibition did not involve the invalidity of the contract as a penalty,^ but that the prohibition was merely a con- dition subsequent in the grant of franchises by the sovereign, for a breach of which the sovereign might resume them if desired. It is well known that the doctrine of general capacities is the doc- trine of the English courts ; but those courts have treated the designation of a field of activity in the charter as a statutory pro- hibition against engaging in any other field of activity, and they have steadfastly refused to enforce all prohibited contracts. In other words, they have maintained the legal theory in its integrity, but they have deemed that the doctrine of general capacities must be held in check by some vigorous rule of contrary tendency, lest corporations should become all powerful. Of the English courts, therefore, it may be said that their adherence to the doc- trine of general capacities is no indication of sympathy with the second view of public policy under discussion. With them this theory of corporate power is the result of a conviction that it best accords with the common law theory of the effect of incorpora- tion.2 It follows that, while the result of the English decisions could, on principle, be reached equally well on the doctrine of special capacities, yet the American decisions which proceed upon the policy now under discussion can be justified, on principle, only on the doctrine of general capacities, coupled with the view that a prohibition, express or implied, is a collateral condition or penalty to be enforced by the State. The American courts, nevertheless, are constantly asserting the doctrine of special capacities in much the same language as that used by Judge Thompson, while at the same time they are enforcing between the parties contracts which are not merely unauthorized, but actually prohibited. In other words, they sacrifice legal theory in the interest of their chosen policy. ^ The Supreme Court of the United States in a well known case, National Bank v. Matthews, 98 U. S. 621 (1878), took this view of the provision in the National Banking Act forbidding banks to lend money on real estate security. See also the language of Mr. Justice Field in National Bank v Whitney, 103 U. S. 99 (1880). ' See for a discussion of this point the Appendix on " Limits of Corporate Power" in Pollock on Contracts.
