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.
Some jurisdictions treat the case in which the contract of employment is made between the corporation and its officer as governed by special principles, since the officer for some purposes represents the corporation and has knowledge of its affairs; and on dissolution of the corporation for insolvency, at least, such contract is discharged without any right to recover damages,1 even though damages would be allowed in other cases; especially if such officer knew of the condition of the corporation, and if the corporation is insolvent so that an award of damages to the officer is at the expense of the creditors.2 It has, accordingly, been held that dissolution discharges the entire contract between the officer and the corporation, including a covenant on his part not to compete with the corporation.3
8 Bolles v. Crescent Drag, etc, Co., 53 N. J. Eq. 614, 32 Atl. 1061.
9 Arlington Hotel Co. v. Rector, 124 Ark 90, 186 S. W. 622.
I0 In re Mullings Clothing Co., 238 Fed. 58, L. R. A. 1918A, 539.
11 In re Mullings Clothing Co., 238 Fed. 58, 151 C. C. A. 134, L. R. A. 1918, 539.
12 See eh. LXXXIV.
I3 First State Bank v. Bank, 43 Okla. 342. 142 Pa*. 1183.
1 United States. In re Dr. Voorhees Awning Hood Co., 187 Fed. 611.
Arkansas. Union Compress Co. v. Douglass, 60 Ark. 591, 31 S. W. 455.
Massachusetts. Commonwealth v. Eagle Fire Ins. Co., 96 Mass. (14 All.) 344.
New York. Simonson v. New York City Ins. Co., 141 N. Y. 12, 35 N. E. 969.
North Carolina. Lenoir v. Denville Improvement Co., 126 N. Car. 922 L. L. R. A. 146, 36. S. E. 185. Tennessee. Williamson County Ranking & Trust Co. v. Roberts-Buford Dry Goods Co., 118 Tenn. 340. 9 L. R. A. (N.S.) 644, 101 S. W. 421.
See also, People v. Globe Mutual Life lns Co., 91 N. Y. 174.