CHAP. VIII.] CORPORATION AND STATE. [§ 498. Effect of reserva- tion of the right to alter and repeal on the con- tract be- tween the corpora- tors. § 498. But the charter of a corporation, or the enabling statute and articles of association filed in pursuance thereof, embody the terms of a contract between the ^" corporators. This contract, however, is subject to the reserved power in the state to alter or repeal it : for it is a contract which is not only sanctioned by, but embodied in laws which the state has re- served the right to alter and repeal. Consequently, the legal relations among the corporators, in so far as they are occasioned solely by this contract, may be changed at the will of the state, without thereby impairing the obliga- tion of the contract or depriving any one of '.' vested rights." The obligation of a contract consists in the rules of law which manifest themselves in legal relations between the parties to it ; x and, in this instance, one of these very rules would be that the state might change or repeal any of the rules of law constituting this obligation ; might change, that is, any of these legal relations. It is accordingly implied in the agreement of the corporators among themselves, that in so far as their legal relations are occasioned solely by their contract embodied in the constitution of the corporation, they may be altered at the will of the state. The obligation of this contract, then, consists either in the rules of law manifesting themselves in legal relations upon the execution of the con- tions and partly by the municipal authorities. Subsequently the con- stitution and laws of California were changed so as to take away from water companies organized under the old constitution and laws the power to appoint members of the boards of commissioners, and to give the municipal authorities the sole power to fix the rates for water. It was held that these changes violated no provision of the Federal consti- tution, and that to vest such sole authority in the municipal author- ities was within the legislative power. Spring Valley Water Works v. Schottler, 110 U. S. 347. ll 'The laws which exist at the time and place of the making of a contract, and where it is to be per- formed, enter into it and form part of it. This embraces alike those which affect its validity, construc- tion, discharge, and enforcement. . . . . The obligation of a con- tract is the law which binds the parties to it to perform their agree- ment." Walker v. Whitehead. 16 Wall. 314, 317, 318. See Von Hoff- man v. City of Quincy, 4 Wall. 550; Louisiana v. New Orleans, 102 U. S. 20G. Compare Connecticut Mutual Life Ins. Co. v. Cushman, 108 U. S. 51 ; Smith v. Eastwood Wire Co., 58 N. J. Eq. 331. 507
