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.
The original rule for determining the powers of a corporation was that the charter must be construed strictly against the corporation,1 and this is still repeated by some courts.2 It is still in force when the grant construed is a gift of franchises or exclusive privileges,3 or of exemption from taxation,4 or other gift in derogation of sovereign authority; but it has little application to the construction of corporate powers when the rights and liabilities of those dealing with the corporation are concerned. After the Supreme Court of the United States held, in the Dartmouth College case,5 that the charter of a corporation might be a contract between the state and the corporation, and accordingly, under the clause of the Federal Constitution prohibiting a state from impairing the obligation of contracts, it would be beyond the power of the state to revoke corporate powers once granted, the state courts were more than ever disposed to adhere to the old rule. But when by express reservation in state constitutions corporate powers remain under state control the tendency is toward a more reasonable construction of grants of corporate authority.6 In determining the scope of corporate power in making contracts two rules have been advanced, which in their abstract form are not perfectly consistent. The first is that corporate power includes only such as is expressly granted by the corporate charter, together with those powers which are necessary to carry the express powers into execution.7 The second rule is that corporate power includes express powers and such incidental powers as are proper and
2 Danville v. Water Co., 178 111. 299; 69 Am. St. Rep. 304; 53 N. E. 118; McLeod v. Medical College, _ Neb. - ; 96 N. W. 265.
3 Oregon, etc., Co. v. Ry. Co., 130 U. S. 1; People v. Gas Trust Co., 130 111. 268; 17 Am. St. Rep. 319; 8 L. R. A. 497; 22 N. E. 798; Indiana Bond Co. v. Ogle, 22 Ind. App. 593; 72 Am. St. Rep. 326; 54 N. E. 407.
4 Shoun v. Armstrong (Tenn. Ch. App.), 59 S. W. 790.
5 Badger Paper Co. v. Rose, 95 Wis. 145; 37 L. R. A. 162; 70 N. W. 302.
6 state v. Ins. Co., 49 O. S. 440; 34 Am. St. Rep. 573; 16 L. R. A. 611: 31 N. E. 658.
1 Pcirine v. Canal Co., 9 How.
(U. S.) 172; Bartram v. Turnpike Co., 25 Cal. 283; St. Louis, etc., Co. v. Haller, 82 111. 208; Lincoln, etc., Co. v. Lincoln, 61 Neb. 109; 84 N. W. 802; Mayor of Jersey City v. Morris Canal, etc., Co., 12 N. J. Eq. 547; Morris Canal, etc., Co. v. R. R., 16 N. J. Eq. 419; Bank v. Swayne, 8 Ohio 257; 32 Am. Dec. 707; Bonham v. Taylor, 10 Ohio 108; Straus v. Insurance Co., 5 O. S. 59; State v. Cincinnati, etc., Co., 18 O. S. 262; Dugan v. Bridge Co., 27 Pa. St. 303; 67 Am. Dec. 464; Commonwealth v. R. R. Co., 27 Pa. St. 339; 67 Am. Dec. 471; Talmadge v. Transportation, 3 Head. (Tenn.) 337.
2 Oregon, etc., Co. v. Oregonian Ry., 130 U. S. 1; Louisville, etc., Ry.
Co. v. Kentucky, 161 U. S. 677; Pearsall v. Ry., 1C1 U. S. 646; reversing 73 Fed. 933; American, etc., Co. v. R. R., 157 111. 641; 42 N. E. 153; Illinois Health University v. People, 166 111. 171; 46 N. E. 737.
3 Covington, etc., Co. v. Sandford, 164 U. S. 578; Stein v. Water Supply Co., 141 U. S. 67; Indianapolis, etc., R. R. Co. v. R. R. Co., 127 Ind. 369; 8 L. R. A. 539; 24 N. E. 1054; 26 N. E. 893; State v. Hamiltons. 47 0. S. 52; 23 N. E. 935; State v. Cincinnati, etc., Co., 18 O. S. 262.
4 Chesapeake, etc., Ry. Co. v. Miller, 114 U. S. 176.
5 Dartmouth College v. Woodward, 4 Wheat. (U. S.) 518.
6 National Bank v. Insurance Co., 41 0. S. 1.
7 Minturn v. Larue, 23 How. (U. S.) 435; Charles River Bridge v. Warren Bridge, 11 Pet. 420;.Van-dall v. Dock Co., 40 Cal. 83; People ex rel. Moloney v. Pullman's, etc., Co., 175 111. 125: 51 N. E. 664: Chicago, etc., Co. v. Coke Co.. 121 111. 530; 2 Am. St. Rep. 124; 13 N. E. 169; People ex rel. Peabody v. Trust Co., 130 III. 268; 17 Am. St. Rep. 319; 8 L. R. A. 497; 22 N. E. 798; National, etc., Association v. Bank. 181 111. 35; 72 Am. St. Rep. 245; 54 N. E. 619; Franklin National Bank v. Whitehead, 149 Ind. 560; 63 Am. St. Rep. 302; convenient for executing the express powers given by the charter;8 or as otherwise expressed it has within the limits of its general grant of power all the powers that an individual would have in executing such general power.9 In practical application there is little difference between these two rules, as the term "necessary" in the first rule is usually treated as equivalent to "suitable" or "appropriate." "An incidental power is one that is directly and immediately appropriate to the execution of the specific power granted, and not one that has a slight or remote relation to it."10