This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
By some statutes, a corporation the stockholders of which are city officials can not contract with such city.1 A statute which forbids a public officer to have any interest in a public contract, or which forbids him to have any interest, directly or indirectly, renders invalid a contract with a corporation of which he is a stockholder,2 or an officer.3 The fact that the public officer in question has nothing to do with making the contract and does not know that it is made, does not render it valid.4
It has been held that the acquisition by the public officer of an interest in a corporation after the contract with the public corporation is made, does not render the contract invalid.5 Conversely it has been held that the sale by the public officer of his stock in the corporation after it has made a bid and before such bid has been accepted, prevents the contract from being invalid.6
13Stone v. Bevans, 88 Minn. 127, 97 Am. St. Rep. 506, 92 N. W. 520; Land, etc., Co. v. McIntyre, 100 Wis. 245, 69 Am. St. Rep. 915, 75 N. W. 964.
14Ferle v. Lansing, 189 Mich. 501, L. R. A. 1917C, 1096, 155 N. W. 591.
15Capital Gas Co. v. Young, 109 Cal. 140, 29 L. R. A. 463, 41 Pac. 869.
1California. Finch v. Ry., 87 Cal. 697, 25 Pac. 765.
Michigan. Ferle v. Lansing, 189 Mich. 501, L. R. A. 1917C, 1096, 155 N. W. 591.
Nebraska. Gas Co. v. West, 28 Neb. 852, 45 N. W. 242.
New Jersey. Foster v. Cape May, 60 N. J. L. 78, 36 Atl. 1089.
Ohio. Bellaire Goblet Co. v. Findlay, 5 Ohio C. C. 418.
Pennsylvania. Milford v. Water Co., 124 Pa. St. 610, 3 L. R. A. 122, 17 Atl. 185.
South Carolina. Duncan v. Charleston, 60 S. Car. 532, 39 S. E. 265.
2 London Electric Lighting Co. v. London , A. C. 434; Hardy v. Gainesville, 121 Ga. 327, 48 S. E. 921; Consolidated Coal Co. v. Michigan Employment Institution, 164 Mich. 233, 129 N. W. 193; Ferle v. Lansing, 189 Mich. 501, L. R. A. 1917C, 1096, 155 N. W. 591.
3 Noble v. Davison, 177 Ind. 19, 96 N. E. 325; Norbeck & Nicholson Co. v. State, 32 S. D. 189, Ann. Cas. 1916A, 229, 142 N. W. 847; Norbeck & Nicholson Co., v. State, 33 S. D. 21, 144 N. W. 658; Antigo Water Co. v. Antigo, 144 Wis. 156, 128 N. W. 888.
4Ferle v. Lansing, 189 Mich. 501, L. R. A. 1917C, 1096, 155 N. W. 591.
5 State, ex rel., v. Great Falls, 19 Mont. 518, 49 Pac. 15.
Where the legislature let the state printing to a corporation whose president was a member of the legislature it was held that such contract was valid, since it appeared that his compensation as president was a fixed salary, and not dependent on the profits earned by such corporation.7 If the original contract is made with a corporation in which the public officer is not interested, its subsequent assignment to a corporation in which such officers are interested, does not render it invalid.8