Ultra vires- objects clause, Business Law and Ethics

The Doctrine of 'Ultra Vires':

                         The doctrine of ultra vires is a legal rule that was articulated by the House of Lords in the case of Ashbury Rail, Carriage and Iron Co Ltd v Riche (22) to the effect that, where a contract made by a company (usually by the directors on its behalf) is beyond the objects of the company as written in the company's memorandum of association, it is beyond the powers of the company to make the contract. The contract is void, illegal and unenforceable. Lord Cairns stated in an obiter dictum that such a contract cannot be ratified even by the unanimous consent of all the shareholders of the company. His Lordship observed that any purported ratification would mean that "the shareholders would thereby, by unanimous consent, have been attempting to do the very thing which, by Act of Parliament, they were prohibited from doing".

Posted Date: 1/12/2013 2:30:15 AM | Location : United States

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