therefore may be withdrawn as soon as made if not accepted. A person
may suddenly think of something which leads him to withdraw his offer
as soon as it is out of his mouth, and in doing so is within his
rights, but if he does not, how long does his offer last? A reasonable
time. What this is depends on many things, one of the questions like
so many others in the law to which no definite answer can be given. An
offer to sell some real estate was accepted five days afterward, this
was held to be within a reasonable time. One can readily imagine cases
in which five days would not be thus regarded, or even five hours.
When does assent occur in contracts made by correspondence? The rule
is in nearly every state (Massachusetts being the chief exception)
where an offeree has received an offer by letter and has put his
acceptance in the postoffice, the minds of the parties have met and
made a contract. The post-office is the agency of the offerer both to
carry his offer and bring back the return. If the offeree should use a
different agency, the telegraph for instance, to convey his
acceptance, it would not be binding until the offerer had received and
accepted it. Of course, an offerer by letter may withdraw his offer at
any time. Suppose he should receive an acceptance by letter or
telegraph but deny it, and insist that no contract had been made. Then
the controversy would turn on the proof. If the acceptance had been by
letter, and the offeree could prove that the offeree had written and
mailed it, the offeree's proof would be complete. If the offeree sent
a telegram, then he would be obliged to prove the delivery of the
dispatch. Suppose one should mail a letter of acceptance, but before
its receipt by the offerer, should send a telegram declining the offer
which was received before the letter of acceptance? The acceptance
would stand, for as there had been a meeting of minds when the letter
was put into the postoffice, the offeree could not afterwards withdraw
his offer. A person who makes an offer cannot turn it into an
acceptance. An old uncle wrote to his nephew that he would give thirty
dollars for his horse and added, "If I hear no more about the matter,
I consider the horse is mine." The game did not work, for no man can
both make and accept an offer at the same time, and that is what the
foxy uncle tried to do.
Offers and rewards are often made through the newspapers. Thus the
owner of a carbolic smoke ball offered to pay a specified sum to any
one who suffered from influenza after using one of his smoke balls in
accordance with directions if he was not cured. A person who failed to
receive the benefit advertised recovered the reward. Two other cases
may be mentioned that illustrate the uncertainty of the law. An
excited farmer offered the following reward, "Harness stolen! Owner
offers $100 to any one who will find the thief, and another $100 to
prosecute him!" The farmer cooled off and declined to pay after the
thief was caught and the court relieved him, declaring that his
advertisement was not an offer to pay a reward, but simply an
explosion of wrath. In another case a man's house was burning, and he
offered $5,000 to any one who would bring down his wife dead or alive.
A brave fireman accomplished the feat. This offerer too cooled off and
declined to pay, but he did not escape on the ground that this was
only an explosion of affection, and was obliged to pay.
Lastly a contract dates from the time of acceptance, and is construed
or interpreted by the law of the place where it was made. If it is to
be performed in another place, then the parties must be governed by
the law of that place in performing it.
A contract having been made, next follows its execution. When a
contract is not executed, or not executed properly, the party injured
usually may recover his loss. Sometimes the contract states what the
offending or wrongful party must pay should he fail to execute it.
Many questions have arisen from such agreements. Suppose a contractor
agrees to build a home for another and to finish it within a fixed
time, and, failing to do so, shall forfeit or pay to the other $5,000
as a penalty for his failure. One would think that if he failed to
execute it the other party could demand the $5,000. But the courts
have a way of their own in looking at things. Suppose the contractor's
failure did not in fact result in any loss whatever to the other
party? The courts in such a case are very reluctant to enforce the
agreement. If there had been a loss, something like that amount, then
the courts would compel him to pay. In other words, the most general
rule is, notwithstanding such a clearly written agreement, the courts
seek to do justice between the parties. Whenever the parties do not
attempt to fix the damages themselves, should their contract not be
fulfilled, then the amount that may be recovered depends on a great
variety of circumstances. Suppose a woman should go to a store to buy
a piece of silk. She asks if the piece shown to her by the saleswoman
is all silk, who makes an affirmative reply. The buyer knows much more
about it than the saleswoman, which is often the case in buying
things, and knows it is half cotton, can the buyer recover anything?
Surely she has not been deceived. The seller may have tried to fool
her but did not, and having failed, the buyer has no legal ground for
an action. On the other hand, if the buyer was ignorant, knew nothing
about silk and had been deceived by the seller, then she would have a
clear case. This is one of the fundamentals in that large class of
cases growing out of deceit. The party seeking redress, must have been
deceived, and also injured by the deceit in order to recover. The
remedies that may be employed whenever contracting parties have
failed, or partly failed to fulfill their agreements or promises will
be considered under other heads. See _Deceit_; _Drunkenness_; _Quasi
Contract_.
=Corporations.=--There are many kinds of corporations. Those most
generally known are business corporations; and though many of them are
very large, legally they are private corporations. A railroad
corporation, though performing a public service, nevertheless is a
private corporation.
Public corporations are formed for governing the people and are often
called municipal corporations. They are created or chartered by the
legislatures of the states wherein they exist. Formerly, all private
corporations in this country were granted charters by the legislative
power, and many corporations are doing business by virtue of the
authority thus granted to them. More recently general statutes have
been enacted whereby individuals may form such corporations without
the aid of a legislature. Authority has been conferred on the courts,
secretary of state, or other official to grant to individuals, who may
apply for them, charters on complying with the requirements of these
statutes. There are other kinds of corporations, religious, charitable
and the like; only one other need be mentioned, to which the term
quasi has been applied. These resemble corporations in some ways, and
this is the reason for calling them quasi corporations. A county or
school district is such a corporation. The supervisors of a county, or
the trustees of a school district, can make contracts, own and manage
real estate for their respective bodies, sue and be sued like the
officers of other corporations.
By the general comity existing between the states corporations created
in one state are permitted to carry on any lawful business in another,
and to acquire, hold and transfer property there like individuals.
FORMATION OF CORPORATIONS.
Formerly charters were granted to corporations for a long term of
years, or forever. The policy of the law has changed in this regard,
and the duration of their existence is limited to a comparatively
short period. The life of a national bank is only for twenty years; at
the end of that period the charter is renewed, and the charters of the
older national banks have been renewed several times. Perpetual
charters are infrequently granted, and some of the older ones have
been limited by legislative or judicial action. A private corporation
had perpetual authority to build and maintain a bridge across the
Susquehanna River at Harrisburg, nor could any other company build one
within the distance of ten miles above or below. Notwithstanding this
clear and exclusive grant, another company was formed which attempted
to build a bridge within a mile of the other. The old company tried to
prevent by law the new company from building the bridge. The court
said that "perpetual" did not mean literally perpetual, but a long
time, that the old company had enjoyed its exclusive grant a long
time, long enough, and that the new company was justified in its
undertaking.
A corporation has no heirs like an individual; it continues through
succession, one sells his interest or stock to another, and thus it
lives to the end of its charter unless it fails or, through some other
event, comes to an end. Suppose a stockholder buys all the stock of
the other members, does the corporation still exist? It does for a
limited time. How long? No court has answered this question. It
depends on the particular case. The courts also say, that he can sell
his stock to other individuals and thus practically revive a dying
corporation. A stockholder who had bought all the stock of a
corporation claimed that he should be taxed as a corporation, which
was at a lower or favored rate than that paid by individuals. The
court said the game would not work, that for the purposes of taxation
the concern must be regarded as an individual. So the stockholder knew
more after that decision than he did before.
CAPITAL.
Every private corporation has a capital composed usually of money,
which is advanced or paid by its members or shareholders. Among the
reasons for forming corporations two may be stated. It is a way for
collecting money from many sources needful for an enterprise; the many
contributors are like the small streams that unite and create a great
reservoir. The other reason is, the contributors are free from the
liabilities that attach to every member of a partnership for its
entire indebtedness. A stockholder may indeed, if his corporation does
not succeed, lose a part or all of the capital he has contributed, but
no more or only a fixed amount, as will be hereafter explained.
Almost anyone can subscribe for stock, with a few limitations. A minor
cannot subscribe for stock, nor can his guardian act for him.
Doubtless they do subscribe in some cases; the practical difficulties
will be shown in another connection. A married woman cannot always
subscribe, unless by virtue of a statute. What usually happens when
she wishes to subscribe is to act through a friend, who, after the
corporation is fully formed, transfers the stock to her. There is no
legal stone in the way of such a course.
Sometimes fictitious subscriptions are made to induce others to
subscribe for stock. Whenever the fraud is found out an innocent
subscriber can do one of three things. If he has paid for his stock,
he can bring an action to recover it; if he has not paid, he can
refuse to do so, and set up the fraud as a defense. He can do another
thing, accept the stock and sue for the damage he has sustained by the
deceit that has been practiced on him. The discovery of a fictitious
subscriber among the number, after all have subscribed, where his
action in subscribing did not affect their action, will not justify
them in not fulfilling their obligation to pay for their shares.
The issuing of a share certificate is not an essential condition of
ownership. It is merely evidence of it, like the deed of a piece of
real estate. All the shareholders of a corporation are the owners
whether any certificates are issued to them or not. Of course a
stockholder desires to have his certificate for obvious reasons.
Whenever the capital stock of a company is increased, each shareholder
has a right to his proportionate number of the new shares on
fulfilling the terms on which they are issued before they can be
offered to the public. Occasionally a clique seeks to get control of a
corporation by the issue of new stock and taking it among themselves.
They can be defeated for the courts carefully guard the rights of all
stockholders to take their shares of new stock before it can be
offered to, and taken by others.
Of late years private corporations have been issuing a kind of stock,
called preferred, that must be explained. Formerly such stock was more
like a loan of money to a company, and was issued primarily as the
most feasible way of getting a fresh supply of money capital. The
lenders or takers of the stock received a fixed per cent. on their
money, which was paid before the common shareholders received
anything. His preference or dividend was not guaranteed, but the
probability of regular payment was so strong in most cases that his
shares usually possessed a real value. Preferred shareholders are not
liable for the debts of their corporations, and the right to vote at
any meeting of the shareholders is sometimes given to them, though not
always. The tendency of the day is to confer this right on them.
Whether, when the amount of the preferred stock is increased, the
preferred shareholders are entitled to subscribe for their
proportionate amount, like common shareholders, is an open question.
The authority of agents or commissioners to receive subscriptions is
strictly regarded. They cannot refuse to receive a subscription made
by a competent person, nor release a subscriber, nor vary the terms of
subscription to anyone.
A subscription for shares is a contract in writing and cannot be
proved by oral evidence unless the original subscription paper has
been lost. As the contract is an open one, any subscriber must inform
himself of the legal consequences of subscribing, and cannot therefore
refuse to execute it on the ground of ignorance or misunderstanding.
Suppose an agent who was soliciting subscriptions, in reply to
questions concerning the laws relating to the proposed company, should
give incorrect answers to a subscriber, these would furnish no ground
for refusing to pay, as he has promised to do, for he could have found
out what the laws were without inquiring of the agent. This may seem a
hard rule, yet it has a wide application. In one sense it is true that
every person can find out the law for himself, the books are open, the
statutes especially may be easily found, but how many know enough to
find the laws in which they are interested?
Of course if a person has been deceived by an agent, if a fraud has
been practised on him, he can avoid his contract. Thus a person who,
unable to read a subscription paper, was induced to subscribe through
misrepresentation of its contents, was not bound by it. If he wishes
to act, he must lose no time after discovering the fraud that has been
practiced on him. He cannot say, "I will abide by a company if
successful, and will leave it if it fails." He must therefore decide
at once either to continue his membership or withdraw.
A company cannot purchase its own shares unless by charter or statute
such action is clearly authorized. For, to do this is to reduce its
assets or fund for paying its indebtedness, which the law will not
permit to be done. If a company has no debts, a reduction in its
capital made in an open manner in accordance with law, is legal. The
tendency of the times everywhere is to increase the capitals of
private corporations; reductions though are sometimes made to lessen
especially the burden of taxation.
A corporation has no lien on its stock for the indebtedness of the
owner unless conferred by charter or statute. Once such a lien could
be established by usage or by-law under authority given to a
corporation to regulate the transfer of its stock. The national
banking law prohibits the creation of such liens, and the strong
current of the law runs in this direction. But a bank can retain a
dividend that has been declared to reduce the indebtedness of the
owner to the bank for his stock.
LIABILITY OF SHAREHOLDERS.
The liability of the shareholders of a corporation is very unlike that
of members of a partnership. It was the liability of each partner for
all the debts of a concern that kept many persons from forming that
relation. The shareholders of many corporations are liable only for
the amount they have contributed and paid, or have agreed to pay.
National bank shareholders are liable for another sum, equal to the
par value of their stock, provided as much may be needed to pay its
debts should the bank fail. Thus if a shareholder owned ten shares,
having a par value of $100 a share, he might be required to pay,
should the bank fail, $1,000 more provided as much was needed to pay
its debts. In a few states shareholders are required to pay twice the
amount of the par value of the stock if as much may be needed to pay
its indebtedness.
If a corporation fail, one or more persons are usually appointed by a
court to settle its affairs, who are called receivers. Several years
are sometimes required to settle the affairs of a corporation. First
an inventory is made of its property, names of the debtors and
creditors, and the amounts due from and to them, and as soon as its
property can be converted into cash, dividends are declared and paid
to the creditors; and this work is continued until there has been a
disposition of all the property, and the amount received therefrom
less the expense of the receivership, has been paid to the creditors.
When the shareholders are required to pay more, as above explained, on
the failure of their corporation, they are notified by the receiver
how much and when they must pay. This requirement is based on an order
from the court that appointed him, which, in turn, is based on
information which he has furnished to the court of the amount that may
be needed to pay the debts of the corporation. Several assessments may
be ordered, but they never exceed in the aggregate more than the
amount of liability fixed by law, the amount or twice the amount of
the par value of the stock subscribed. Should shareholders decline to
pay these assessments as ordered, the receiver sues them and obtains
judgments, the proceeds of which are paid to the creditors.
MEETINGS.
The power of a corporation vests or rests in its members. The charter
and statutes provide that they shall meet, organize, elect officers,
and adopt by-laws for the more detailed governing of the corporation.
One of the most general principles pertaining to them is, the majority
shall rule. This however may be modified by charter or statute. There
are a few ancient charters which provide that, notwithstanding the
quantity of stock a shareholder may own, he is entitled to only one
vote. The writer knows of a case in which a shareholder bought nearly
all the stock of a corporation and went to the annual meeting
supposing that he could and would do as he pleased. On learning the
unwelcome truth that he had only one vote like the others he quickly
put on his hat and walked out.
The statutes usually prescribe how notice of the joint meeting shall
be given. They are not mandatory, but directory, hence if all the
persons in a corporation should come together without any notice or
call whatever, and accept the charter, and do any other thing needful
to form the corporation, their action would be valid. Where the
regulations of a corporation definitely fix the place, the day, and
hour of the annual meeting at which the directors are to be elected,
no further notice of the meeting to the stockholders is needed unless
required by its charter or by-laws.
A case may arise in which other persons than those designated by
statute may call a meeting. Suppose a statute prescribes that the
persons named in the certificate of incorporation, or any three of
them, may call a meeting of the shareholders, and before giving notice
all of them had died? Then the meeting could be called by others.
Again, authority to create a corporation may fail through long delay
in calling a meeting and organizing. Should the notices for the first
meeting not be given as the law requires, it is nevertheless valid if
the shareholders have notice and join in waiving the mailing of the
required notices. Likewise a subscriber waives his notice of the first
meeting when he afterwards offers to pay for his shares.
If the by-laws require that an annual meeting shall be held at a
particular time, and those whose duty it is to call it, forget to do
so, it may be held afterwards, and the officers elected and other
business transacted would be as valid as if the meeting had been held
at the proper time.
Should the officer who ought to call a meeting refuse to do so he may
be compelled by law to call it. This proceeding is called a mandamus,
and is issued at the instance or request of the shareholders.
"Besides annual meetings, corporations hold many stated or regular
meetings at monthly or other times. Thus if a meeting of proprietors
must be called by twelve of them, a call signed by eleven is
defective. If a statute requires a committee of a society to sign the
call, it cannot be signed by the clerk, nor by him for them. If the
trustees of a corporation must issue the call, this cannot be done by
the president. If exclusive authority to issue the call is vested in
the directors, it cannot be exercised by the president and secretary.
If the articles of association provide that meetings of shareholders
may be called by the board of directors, or by any three shareholders,
the president and cashier cannot issue a valid call. But if a board
consists of three members and there is a vacancy, the other two may
act and give the notice."
A well understood distinction exists between the calling of regular
and special meetings. Regular meetings are held in the way set forth
in the charter and by-laws of a corporation; special meetings are
called at irregular times on proper authority. A notice for a special
meeting must state the object of it, and no other business can be
transacted. On the other hand unless the regular meeting is of great
importance no mention need be made of its object in the notice.
An authorized meeting may be adjourned from time to time without
giving further notice, for it is only a continuation of the original
meeting. Says an eminent judge: whether a meeting is continued without
interruption for many days, or is adjourned from day to day, or from
time to time, many days intervening, it is evident that it must be
considered the same meeting.
A meeting may be legally held though one of its members is incapable,
physically or mentally, from receiving notice. "The law cannot look
into the capacity of the stockholders to transact business, but can
only regard the capacity of the aggregate body when duly assembled."
On the death of a stockholder, the purchaser, if the stock has been
sold, should have it transferred, or give distinct notice to the
company how notices of its meetings should be sent to him; if
neglecting to do this, he cannot charge the corporation with neglect
should it continue to send notices to the former address.