CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 526. authority. But the board in no way represents persons whose interests in respect of the corporate enterprise have not yet arisen. When A., for instance, contracts with the directors, the latter represent the persons whose interests have already accrued, i. e., shareholders and existing creditors. But A., until his rights have arisen, is as to the directors an outsider, whom they in no way represent. If, in contracting with A., the directors act fraudulently, then on account of the fraud he would be allowed as between himself and those whom the directors represent, to rescind the contract; because the fraud of the agent is the fraud of the principal, and is in this case, as to A., the fraud of the corporation, and of the persons already interested in it, whom the directors represent. More- over, within the scope of their more restricted powers, other agents, as well as directors, represent the entire mass of cor- porate interests. 1 § 526. Applying this reasoning to the right of a subscriber to annul a subscription contract induced by a fraud of the agent representing the corporation in the matter, it would seem that the contract might be annulled by the subscriber acting swiftly, unless, after his subscription and before he has taken steps to annul it, some one has acted relying on it in good faith ; that is, unless some one has subscribed subsequently, seeing on the books the name of the subscriber whose subscription was induced by fraud, or some one has contracted with the corpo- ration on the credit of such fraudulently induced subscription. As to such latter persons, carrying out the course of reasoning, it would seem that the subscriber could not rescind so as to prejudice their rights in any way, for the corporate agent in his fraudulent contract with the subscriber in no way repre- sented such persons, who afterwards acted relying on the acts of the subscriber. And if the subscription was induced by fraud, nevertheless the loss should fall on the subscriber rather than on persons who acted subsequently relying on his sub- scription. For the directors, when they afterwards contract with any one, represent the subscriber, and to allow him to rescind so as to affect the rights of a subsequently contracting 1 It is not improper to regard the directors as representing creditors; see § 756. 541
