If corporate officers, on behalf of their corporation, enter into a contract which they have no authority to make, yet if, under the circumstances, by the operation of any rule of law,[1] the contract binds the corporation to the other contracting party, the officers will not be personally liable to him, for he has suffered no damage from the fact that in reality the con- tract was unauthorized. If, however, officers make an unau- thorized contract on behalf of their corporation, allowing the other contracting party acting as a reasonable man to infer that they have the requisite authority, and in consequence of their lack of authority, the other party is unable to hold the corpo- ration on the contract, what is their liability to him ? Here distinctions must be drawn. The officers may have no author- ity to contract either (1) because their superior officers or the corporation has not authorized them to make the contract, or (2) because the corporation itself has no power to make such a contract, or (3) both of these reasons may unite.
when the contract is ultra vires § 754. In the first supposed case, the officers would be liable, either on the ground of fraud, or implied warranty' of the requisite authority.[2] In the third supposed case there would usually be present suffi- cient fraud or misrepresentation of fact on their part to ren- der them liable. In the second case, where the corporate offi- cers may have conceived themselves authorized to make the contract, but the contract is ultra vires the corporation, as a rule the officers acting in good faith would not be personally liable ; because the powers of a corporation are matters of
- ↑ See §§ 193, 75.
- ↑ Where two directors wrote to a bank saying that they had author- ized the manager of the company to overdraw on the company's ac- count, the directors themselves hav- ing no authority to overdraw, it was held that they impliedly warranted that the manager had authority, and were personally liable. Cherry v. Colonial Bank, 38 L. J. P. C. 49; S. C, L. R. 3 P. C. 24. See Jefts t». York, 4 Cush. 371; S. C, 10 Cush. 392; Weare v. Oove, 44 N. H. 196. Directors are personally liable when they make a contract on behalf of the corporation before sufficient stock has been subscribed to authorize the corporation (under a statute) to begin business. Trust Co. v. Floyd, 47 O. St. 526.
any contract not in writing, in the name of or in behalf of any corporation, of the value of one hundred dollars or less, shall be liable as surety for such corporation upon such contract ; and may be sued either with the corporation or separately for a breach thereof." Battle's Rev. Stat, of N. C, p. 266, § 24.
