This section is from the book "Popular Law Library Vol8 Partnership, Private Corporations, Public Corporations", by Albert H. Putney. Also available from Amazon: Popular Law-Dictionary.
The express powers of a corporation are conferred upon it from two sources, from the general statutes governing corporation, and from the corporation charter. Such statutes and charter are the measure of the powers of a corporation, and a corporation can lawfully exercise only such powers as are therein conferred upon it.
Grants of power to a corporation are in general to be construed strictly against the corporation.
"The right of a corporation to do an act or make a contract is not always a question of law. What it may not do under some circumstances, it may do under others. It may carry on the business it is authorized to do in the usual and customary manner that business of the same nature is carried on by individuals.
'It is therefore,' says Mr. Jorawetz, 'impossible to decide abstractedly that acts of a particular description are within or without the chartered powers of a corporation. The right of a corporation to perform an act depends, in every case, upon all the surrounding circumstances, and facts can be conceived which would render almost any act justifiable.' He further observes (and it is an eminently sensible observation), that 'no rules can be framed which would be of any practicable value in determining cases of this character. . . . The application of law to an individual case must always remain a matter involving the exercise of sound, practical judgment, and business experience.' 'Great caution,' he says, 'is therefore necessary in treating a decision that a corporation has or has not authority to do a particular act as a precedent to be followed in other cases.' "
Another general principle seems properly to require a statement before we apply the law to the circumstances surrounding the transaction now to be considered. The general rule in regard to the construction of a charter is that it is to be construed strictly against the grantee; that all which is not clearly granted, either expressly or by reasonable implication, is to be held against the corporation.3
This rule does not apply, however, in cases where a corporation is seeking to repudiate a contract under which it has received benefits.
"All grants, even grants of corporate franchises, are construed strongly in favor of the government, and against the grantee. So when the State challenges the action of one of its corporate creations, it may insist on clear warrant for such action. It may say:
3 Tod vs. Kentucky Union Land Co., 57 Fed. Rep., 523.
'Point to the letter of your authority. I abide by my contract, and protect you in the rights and franchises I have given. Abide by your contract, and assume to do no act in disregard of the duties I have imposed, or beyond the authority I have conferred.' The rule of strict construction exists in such a case. But a milder rule applies when a corporation seeks to repudiate a contract into which it has formally entered. It is not seemly for a corporation, any more than for an individual, to make a contract and then break it; to abide by it so long as it is advantageous, and repudiate it when it becomes onerous. The courts may well say to such corporation: 'As you have called it a contract, we will do the same. As you have enjoyed the benefits when it was beneficial, you must bear the burden when it becomes onerous, unless it clearly appears that that which you have assumed to do is beyond your powers.' "4