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.
Where performance does not pass anything of value to the corporation, performance by the adversary party does not impose any liability on the corporation. This is the case where the corporation has issued accommodation paper,1 or has ultra vires acted as surety.2 Thus a brewing company was allowed to plead ultra vires to an appeal bond on which it had become surety to enable the appellee to continue in the saloon business and to buy beer of the company;3 and a railroad could thus defend against its guaranty of the expenses of a festival.4
5 Macon, etc., Co. v. R. R. Co., 63 Ga. 103.
6 Boyd v. Carbon-Black Co., 182 Pa. St. 206; 37 Atl. 937. "While public policy demands that the courts should declare such contracts by corporations unlawful, and that they will make no decree which prolongs their life in fact for a single day, every principle of equity commands that the corporation receiving a benefit from such contract shall account for what it has received from him who has fully performed." Boyd v. Carbon-Black Co., 182 Pa. St. 206, 211. 37 Atl. 937.
7 Pittsburgh, etc., Co. v. Bridge Co., 131 U. S. 371; McCormick v. Bank, 165 U. S. 538; California, etc., Bank v. Kennedy, 167 U. S. 362; Nashua, etc., R. R. Co. v. R. R. Co., 164 Mass. 222; 49 Am. St. Rep. 454; 41 N. E. 268; Greenville, etc., Planter's, etc., Co., 70 Miss. 669; 35 Am. St. Rep. 68; 13 So. 879.
1 Northside Ry. Co. v. Worthing-ton, 88 Tex. 562; 53 Am. St. Rep. 778; 30 N. W. 1055; see also to the same effect M. V. Monarch Co. v. Bank, 105 Ky. 430; 88 Am. St. Rep. 310; 49 S. W. 317; see Sec. 1071.
2 See Sec. 1072; see to the same effect First National Bank v. Winchester, 119 Ala. 168; 72 Am. St. Rep. 904; 24 So. 351.
3 Best Brewing Co. v. Klassen, 185 111. 37; 76 Am. St. Rep. 26; 50 L. R. A. 765; 57 N. E. 20.
4 Davis v. R. R., 131 Mass. 258; 41 Am. Rep. 221. Contra, a street railroad was not allowed to plead ultra vires to a subscription to a fair, in order to increase traffic. State Board v. R. R. Co., 47 Ind. 407; 17 Am. Rep. 702.
Where a building association bought land and assumed a mortgage ; and subsequently repudiated the transaction and tendered a deed to the grantor, it was held that, as the contract to assume the debt was ultra vires, and the holder of the debt and mortgage had parted with nothing in reliance on such assuming the debt, he could not enforce the debt against the corporation.5 If a corporation by an ultra vires contract buys stock in another corporation, it cannot be compelled to pay a stock liability.6 This doctrine may properly be extended to cases where the corporation has no choice in receiving or retaining benefits. Thus where work was done under a contract, with an unauthorized (and possibly ultra vires) change made by the authority of the superintendent of the company, the contractor could not recover extra compensation for the change.7