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.
An attempted contract made on behalf of a corporation to be formed subsequently, by a promoter thereof, may be treated as at least equivalent to a continuing offer, and if not revoked by the adversary party, and accepted by the corporation when it is formed, it becomes a valid contract.1 So the corporation's
2 Park v. Woodmen of America, 181 111. 214; 54 N. E. 932.
3 San Joaquin, etc., Co. v. West, 94 Cal. 399; 29 Pac. 785.
4 Tift v. Bank, 141 Pa. St. 550; 21 Atl. 660; Weatherford, etc., Co. v. Granger, 86 Tex. 350; 40 Am. St. Rep. 837; 24 S. W. 795.
5 Plaquemines, etc., Co. v. Buck, 52 N. J. Eq. 219; 27 Atl. 1094; Ireland v. Reduction Co., 20 R. I. 190; 38 L. R. A. 299; 38 Atl. 116. A deed to the "incorporators" does not vest the legal title in the corporation. McCandless v. Acid Co., 112 Ga. 291; 37 S. E. 419.
6 Dayton, etc., Co. v. Coy, 13 O. S. 84. Contra, a contract of subscription to stock may be enforced by the corporation even if not in compliance with the statute. Marysville, etc., Co. v. Johnson, 93 Cal. 538; 27 Am. St. Rep. 215; 29 Pac. 126.
7 Ireland v. Milling, etc., Co., 20 R. I. 190; 38 L. R. A. 299; 38 Atl. 116.
8 Providence Albertype Co. v. Kent & Stanley Co., 19 R. I. 561; 35 Atl. 152.
9 Bank v. Orgill, - Miss. - ; 34 So. 325.
1 Bridgeport, etc., Co. v. Meader, 72 Fed. 115; 18 C. C. A. 451; affirming, 69 Fed. 225; 15 C. C. A. 694; Old Colony Trust Co. v. Dubuque, etc., Co., 89 Fed. 794; Davis v. Dexter, etc., Co., 52 Kan. 693; taking an assignment of a contract for the purchase of certain realty, and issuing stock to those who have contributed money for the purchase of such realty is an acceptance of the contract.2 A corporation which is formed to carry on the business of a partnership and which does carry on such business is presumed to adopt its contracts.3 Thus if the partnership had guaranteed certain titles as part of its business of loaning money as agent, the corporation formed to carry on such business cannot make any charge for services in perfecting such title.4 If a firm incorporates and all the assets of the firm are turned over to such corporation, the latter becomes liable for the debts of the former.5 Acceptance may be made by conduct as well as by words. Receiving benefits under such a contract with knowledge of its terms is an acceptance of the offer thus made, if it is possible for the corporation to choose between receiving and returning such benefits,6 such as using a machine bought before incorporation and making a part payment thereon,7 or accepting and using the proceeds of a loan,8 or receiving and using material, labor, and taking possession of a building rented for the corporation,9 or taking possession of mining claims leased to it.10 Where property bought in this way is received a mortgage given thereon in the name of the corporation is valid in equity.11 So a corporation which has received the benefit of a mortgage cannot avoid it on the ground that it was executed before one half of the capital stock had been paid in, contrary to the requirements of the statute.12 If the promoters, who made the contract for the corporation, become stockholders, directors, and officers, the corporation is charged with their knowledge.13 Thus a president of a corporation,14 or a president and general manager may ratify a contract made by himself for the corporation before it was organized.15 A transaction of this sort is, properly speaking, a new contract, made by acceptance of an outstanding offer.16 Thus delivery of a subscription to a promoter is in effect delivery to the corporation when subsequently formed.17 Accordingly since this is in effect an offer until accepted by the corporation, the adversary party may withdraw such offer at any time before the corporation accepts it.18 Some courts, however, speak of this as a ratification of the contract.19 Authorities differ as to whether a corporation can be charged with expenses necessary to its very existence, such as attorney fees for incorporating, irrespective of its own agreement to pay therefor after incorporation.20 Even if the services necessary to the formation of the corporation are rendered by a promoter,21 and even if be becomes an officer and director,22 be can recover for special services outside of bis line of duty as such director. A note given by a corporation for services rendered in procuring its incorporation is enforceable as on sufficient consideration.23 In some jurisdictions it is held that a corporation cannot even adopt such contract or accept such offer.24 The Massachusetts cases are not properly in point. Pennsylvania, etc., Co. v. Hapgood,25 was a suit by the corporation against parties who had broken a contract with promoters of the corporation; which suit failed because there was "no allegation of acceptance" on the part of the corporation. Abbott v. Hapgood26 was a suit on the same contract by promoters. The observation as to the power of the corporation to adopt was pure dictum.
35 Pac. 776; Red Wing Hotel Co. v. Friedrich, 26 Minn. 112; I N. W. 827; Pitts v. Mercantile Co., 75 Mo. 221; Seymour v. Cemetery Association, 144 N. Y. 333; 26 L. P. A. 859; 39 N. E. 365; Oakes v. Water Co., 143 N. Y. 430; 26 L. R. A. 544; 38 N. E. 461; Rathbun v. Snow, 123 N. Y. 343; 10 L. R. A. 355; 25 N. E. 379; Schreyer v. Mills Co., 29 Or. 1; 43 Pac. 719.
2 Esper v. Miller, 131 Mich. 334; 91 N. W. 613.
3 North American, etc., Co. v. Mortgage Co., 83 Fed. 796; 28 C. C. A. 88.
4 North American, etc., Co. v.
Mortgage Co., 83 Fed. 796; 28 C.
C. A. 88.
5 Andres v. Morgan, 62 0. S. 236; 78 Am. St. Rep. 710; 56 N. E. 875.
6 Huron, etc., Co. v. Kittleson, 4 S. D. 520; 57 N. W. 233.
7 Bridgeport, etc., Co. v. Meader, 72 Fed. 115; 18 C. C. A. 451; affirming, 69 Fed. 225; 15 C. C. A. 694.
8 Schreyer v. Mills Co., 29 Or. 1; 43 Pac. 719.
9 Kaeppler v. Creamery Co., 12 S.
D. 483; 81 N. W. 907.
10 Wall v. Smelting Co., 20 Utah 474; 59 Pac. 399.
11 Bridgeport, etc., Co. v. Meader, 72 Fed. 115; 18 C. C. A. 451.
12 Wood v. Water Works Co., 44 Fed. 14G; 12 L. R. A. 168.
13 Rogers v. Land Co., 134 N. Y. 197; 32 N. E. 27; Kaeppler v. Creamery Co., 12 S. D. 483; 81 N. W. 907.
14 Kaeppler v. Creamery Co., 12 S. D. 483; 81 N. W. 907.
15 Oakes v. Water Co., 143 N. Y. 430; 26 L. R. A. 544; 38 N. E. 461. Contra, the directors cannot accept such a contract so as to bind the corporation. Tift v. Bank, 141 Pa. St. 550; 21 Atl. 660.
16 Reichwald v. Hotel, 106 111. 439; McArthur v. Printing Co., 48 Minn. 319; 31 Am. St. Rep. 653; 51 N. W. 216; Richardson v. Graham, 45 W. Va. 134; 30 S. E. 92; Pratt v. Match Co., 89 Wis. 406; 62 X. W. 84.
17 Minneapolis Threshing Machine Co. v. Davis, 40 Minn. 110; 12 Am. St. Rep. 701; 3 L. R. A. 796; 41 N. W. 1026.
18 Consolidated Water-Power Co. v. Nash, 109 Wis. 490; 85 N. W. 485.
19 Davis v. Montgomery, etc., Co. (Ala.), 8 So. 496; Stanton v. New York, etc., Co., 59 Conn. 272; 21 Am. St. Rep. 110; 22 Atl. 300; Bruner v. Brown, 139 Ind. 600; 38 N. E. 318; Oakes v. Cattaraugus, etc., Co., 143 N. Y. 430; 26 L. R. A. 544; 38 N. E. 461; Seymour v. Cemetery, 144 N. Y. 333; 26 L. R. A. 859; 39 N. E. 365; Pittsburg, etc., Co. v. Quintrell, 91 Tenn. 693; 20 S. W. 248.
20 That it is liable. Freeman Implement Co. v. Osborn, 14 Colo. App. 488; 60 Pac. 730; Farmers' Bank v. Smith, 105 Ky. 816; 88 Am. St.