Implied powers rule, Business Law and Ethics

Implied powers rule:

The courts would regard such things as impliedly within the company's powers unless they are "expressly prohibited" by the memorandum. The range of transactions that could be encompassed within the "implied powers rule" was illustrated by Lord Buckley in 1907 when, in Attorney - General v Mersey Railway Co, he stated:

"To ascertain whether any particular act is ultra vires or not the (stated objects) must first be ascertained; then the special powers for effectuating those (objects) must be looked for, and then, if the act is not within either the (stated objects) as described in the memorandum, the inquiry remains whether the act is incidental to or consequential upon the (stated objects) and is a thing reasonably to be done for effectuating it ... By way of illustration, let me suppose that the (stated object) found in the memorandum of association of a (registered) company is to establish and carry on a hotel, and that express power is given to buy land at a particular place and to build and that as to anything further the... memorandum of association is silent. It is quite clear that all such acts as are reasonably necessary for effectuating that purpose are intra vires, such, for instance, as the purchase of furniture, and of linen, of provisions, and of wines and spirits, the hiring of servants, the payment of licences, the ownership probably of horses and carriages, the maintenance and working of an omnibus which shall attend at the railway station to take intending guests to the hotel and the like. In a large number of cases the maintenance of a garden and pleasure grounds would be intra vires... The maintenance of tennis lawns or of a bowling green would, in many circumstances, be legitimate. Under circumstances such as presently put, a golf links might be intra vires. All these and the like will without express mention be within the company's powers. Then I may instance other acts as to which it would be a question of fact in the case of the particular hotel whether it was such an act as was reasonably incidental or consequential. If, for instance, the hotel were at Bundoran or Rosapenna or elsewhere in the country it might be intra vires to lay out and maintain in good order a golf links or to acquire rights of fishing and to own boats and supply gillies for the purpose of fishing upon the lakes. It may be that in the particular locality customers could only be reasonably expected or obtained by offering these attractions, and they might be as necessary as a smoking-room or a bowling green elsewhere. If the hotel in question were the Savoy Hotel in the Strand or the Great Central Hotel in the Marylebone Road the proposition would cease to be true. So, again, if the hotel were situated in a place inaccessible unless special means of communication were provided-say, at a lovely spot at the end of a Scotch Loch to which there is no road, or at a place to which there is access by road but which is not served by any coach or mail cart service-it might be intra vires for that hotel to run a steam launch or a motor-car to bring its guests to their destination. It would in such a case be analogous to the omnibus which the hotel in the country town sends to the railway station. The question is in each case a question of fact.

Posted Date: 1/12/2013 2:34:22 AM | Location : United States







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