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.
If one party to an ultra vires contract has performed it in part, the executory part of such contract may nevertheless be avoided.1 An ultra vires lease made by one railroad to another, on which rent had been paid for several years, can be repudiated as to the executory part thereof.2 An ultra vires lease had been made, and installments paid for years. Suit was brought for an overdue installment of rent, the defendant still retaining the property. No recovery was allowed on the lease.3 If the corporation has partially performed the contract and it remains entirely executory on the other side, some authorities hold that no action can be maintained on the contract, but only to recover back what has been parted with under it.4 If a contract is partially performed by the adversary party, the corporation is liable to the extent at least of benefits received. Here again there is a conflict of opinion; some authorities holding that although the contract may be repudiated by the corporation as to the part not performed, the corporation is liable on the contract as to that part which is performed.5 Thus where a corporation formed a partnership with a stockholder, and he performed the contract, the corporation must account to him for the proceeds of the partneship received by it.6 Other authorities hold that in such case the liability is on quantum meruit for the benefits received, and not on the contract.7
11 Richmond Guano Co. v. Oil Mill & Ginnery, 119 Fed. 709.
12 "If the agreement was ultra vires and the association entered into it knowing it could not perform its part thereof, and thereby induced plaintiff to part with its money in the purchase of stock, then it was a tort, and the defendant would be liable therefor." Williamson v. Association, 54 S. C. 582, 596; 71 Am. St. Rep. 822; 32 S. E. 765; Miller v. Insurance Co., 92 Tenn. 167; 20 L. R. A. 765; 21 S. W. 39.
1 Pennsylvania, etc., Co. v. R. R.
Co., 118 U. S. 290; Thomas v. R. R., 101 U. S. 71; McNulta v. Bank, 164 111. 427; 56 Am. St. Rep. 203; 45 N. E. 954; Mallory v. Oil Works, 86 Tenn. 598; 8 S. W. 396.
2 Oregon, etc., Ry. v. Oregonian, etc., Ry., 130 U. S. 1.
3 Central, etc., Co. v. Car Co., 139 U. S. 24.