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.
A corporation may make valid contracts in a business, collateral to that for which it was incorporated, if such business is a reasonably proper method for carrying on the principal business. A corporation may bind itself by an offer of reward ;1 or by a contract which extends over a period of time beyond the charter of the contracting corporation,2 and it may make a deposit of securities in order to obtain permission to do business in another state, as required by the laws of such state.3 It may give a bonus in stock, to induce buyers to take bonds, and a dissenting stockholder cannot have the value of the stock bonus deducted from bonds,4 or may pay reasonable commission to brokers for placing shares.5 Thus a mining corporation, with power to build or subscribe to the stock of a railroad necessary to facilitate the transportation of its produce to market, may join with a railroad company in a mortgage to obtain money for the purpose of enlarging the facilities of the railroad to transport the coal;6 a gas company may buy the right to use steam heater, radiating mantel and gas consuming appliances, if propre for the gas business ;7 and a railroad company, authorized to erect all convenient buildings for the accommodation and use of its passengers, may lease a summer hotel and covenant to insure it,8 or may operate steam-boats as part of its line of transportation.9 A corporation may make a bona fide contract for future purchase of material necessary to its business,10 though it cannot deal in futures regularly, unless specially authorized;11 nor can a manufacturing corporation buy in order to sell at a profit.12 Thus a corporation formed to manufacture and sell ready-made clothing has no implied power to buy ready-made clothing to resell it at a profit.13 The right of a mining or manufacturing corporation to operate a store for its employees is thus open to question,14 though a manufacturing company may undoubtedly sell its own goods at a retail store,15 and a corporation formed to do "a general brewing and malting business, and manufacture and sell soda water," may lease a "saloon," as it could not be said as a matter of law that a saloon was not a place for the sale of soda water.16 The mere fact, however, that a branch of business is profitable or advantageous to a corporation does not make it one of the implied powers of a corporation. "The exercise of a power that might be beneficial to the principal business is not necessarily incident to it."17 A land company cannot operate a street car line, and a street car company cannot buy land and sell it in lots.18 It has been held that a corporation formed for the purpose of manufacturing and selling electricity cannot engage in the business of selling electrical appliances.19 The power to increase the capital stock is not implied.20 A corporation cannot change its principal office without amending its fundamental law and articles of association.21 There is, it must be admitted, some lack of harmony in the cases discussed in this section.
3 Breay v. Nurses' Association, (1897), 2 Ch. 272; 66 L. J. Ch. N. S. 587.
4 Covington, etc., Co. v. Magruder, 63 0. S. 455; 59 N. E. 216.
5 Heinze v. Dock Co., 109 Wis. 99; 85 N. W. 145.
6 Continental Fire Association v. Masonic Temple Co., 26 Tex. Civ. App. 139; 62 S. W. 930.
7 Bangor Boom Co. v. Whiting, 29 Me. 123.
8 Northwestern, etc., Co. v. O'Brien, 75 Minn. 335; 77 N. W. 989.
9 Peck-Williamson, etc., Co. v. Board, etc., 6 Okla. 279; 50 Pac. 236.
10 Safety, etc., Co. v. Mayor, etc., of Baltimore, 74 Fed. 363; 20 C. C. A. 453.
11 Hartnett v. Plumbers', etc., Association, 169 Mass. 229; 38 L. R. A. 194; 47 N. E. 1002.
12 Louis Bletz & Co. v. Bank (Ky.), 55 S. W. 697.
1 Norwood, etc., Co. v. Andrews, 71 Miss. 641; 16 So. 262.
2 Union Pacific Ry. Co. v. Ry. Co., 163 U. S. 564.
3 Lewis v. American, etc., Association, 98 Wis. 203; 39 L. R. A. 559; 73 N. W. 793.
4 Dickerman v. Trust Co., 176 U. S. 181.
5 Metropolitan, etc., Association v. Scrimgeour (1895), 2 Q. B. 604.
6 Central Trust Co. v. Columbus, etc., Co., 87 Fed. 815; citing Attorney-General v. Ry. Co., L. R. 5 App. Cas. 473; Green Bay, etc., R. R. Co. v. Union, etc., Steamboat Co., 107 U. S. 98; Zabriskie v. R. R. Co., 23 How. (U. S.) 381; Vandall v. Dock Co., 40 Cal. 83; Hill v. Nisbet, 100 Ind. 341; Whetstone v. University, 13 Kan. 320.
7 Malone v. Lancaster, etc., Co., 182 Pa. St. 309; 37 Atl. 932; citing Brown v. Winnisimmet Co., 11 All. (Mass.) 326; Lyndeborough Glass Co. v. Glass Co., 1ll Mass. 315.
8 Jacksonville, etc., Co. v. Hooper, 160 U. S. 514.
9 Green Bay, etc., Co. v. R. R. Union, etc., Steamboat Co., 107 U. S. 98.
10 Sampson v. Cotton Mills, 82 Fed. 833.
11 Jemison v. Bank, 122 N. Y. 135; 19 Am. St. Rep. 482; 9 L. R. A. 708; 25 N. E. 264.
12 Day v. Buggy Co., 57 Mich. 146; 58 Am. Rep. 352; 23 N. W. 628.
13 Nicollet National Bank v.
Frisk-Turner Co., 71 Minn. 413; 70 Am. St. Rep. 334; 74 N. W. 160.
14 That it can, see Searight v. Payne, 6 Lea (Tenn.) 283. That it cannot, see Chewaela Lime Works v. Dismukes, etc., 87 Ala. 344; 4 L. R. A. 100; 6 So. 122.
15 Dauchy v. Brown, 24 Vt. 197.
16 Brewer, etc., Co. v. Boddie, 181 111. 622; 55 N. E. 49; affirming, 80 111. App. 353.
17 Nicollet National Bank v. Frisk-Turner Co., 71 Minn. 413, 418; 70 Am. St. Rep. 334; 74 N. W. 160; quoted in Burke v. Mead, 159 Ind. 252; 64 N. E. 880. "It cannot be held that every act in furtherance of the interests of a corporation is inter vires. Many acts can be suggested which, though beneficial to the business of a corporation, are too remote from its general purposes to be denied reasonably within its implied powers. What is and what is not too remote must be determined according to the facts of each case." Best Brewing Co. v. Klassen, 185 111. 37, 40; 76 Am. St. Rep. 26; 50 L. R. A. 765; 57 N. E. 20.
18 Northside Ry. Co. v. Worth-ington, 88 Tex. 562; 53 Am. St. Rep. 778; 30 S. W. 1055.
19 Burke v. Mead, 159 Ind. 252; 64 N. E. 880.
20 Cooke v. Marshall, 191 Pa. St. 315; 43 Atl. 314.
21 Bastian v. Modern Woodmen, 166 111. 595; 46 N. E. 1090; reversing, 68 111. App. 378.