PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 288. § 287. The discussion has so far ignored the question of the illegality of ultra vires contracts, proceeding rather on the assumption that a contract is not illegal in T ^ t m ^ any proper sense of that term merely because made ultra vires by or on behalf of a corporation not authorized to make it. 1 An invalid contract is one which does not bring the parties to it within the operation of the contemplated rules of law, and so fails to occasion the desired legal relations. An illegal contract is an invalid contract which is such because some rule of law forbids it to be made. Invalid contracts, which are not illegal, can usually be validated ; but illegal contracts cannot ordinarily be validated. If A. orders a set of tools of B. at a price exceeding fifty dollars, and no money is paid down and no note or memorandum in writing made, the contract will be invalid under the Statute of Frauds; but will be capable of subsequent validation on complying with the terms of that stat- ute. On the other hand, if the tools happen to be counterfeiters' dies, the contract is illegal and incapable of subsequent vali- dation, because of the law against possessing or manufacturing such instruments. Again, if a contract is made on behalf of A. by B., who has no authority to represent him, the contract will not bring A. within the operation of rules of law which will manifest themselves in liabilities on his part ; that is to say, the contract will uot bind him, and in that respect will be invalid ; but no one would call such a contract illegal. § 288. We have seen that corporate funds are set apart for certain purposes from which no one has authority to divert them 131 Mass. 258, 260; Central Trans- portation Co. v. Pullman's Palace Car Co., 139 U. S. 24, 60; Zabriskie v. Cleveland, etc., R. R. Co., 23 How. 381, 398; Haynes p. Covington, 21 Miss. 408; City Fire Ins. Co. v. Car- rugi, 41 Ga. 660, 673; Screven Hose Co. v. Philpot, 53 Ga. 625. A corpo- ration authorized to loan for one year on bond and mortgage may fore- close a mortgage given to secure a note for a debt running two years. Germantown Farmers' Mut. Ins. Co. v. Dhein, 43 Wis. 420. 1 " The words ultra vires and ille- gality represent totally different and distinct ideas." Comstock, C. J., in Bissell v. Mich. S. and N. I. Railroad Cos., 22 N. Y. 258, 269. " There is a manifest distinction between cases arising under contracts which are contrary to public policy or )iiala in seor mala prohibita, and those which are claimed to be ultra vires alone." Woodruff v. Erie Railway Co., 93 X. Y. 609, 618. Opin. of Ct. per Ru- ger, C. J. See § 264, note. 251
