Ultra Vires Doctrine
THE DOCTRINE OF ULTRA VIRES
TABLE OF CONTENTS
i. Introduction ii. Origin Of Doctrine Of Ultra Vires iii. Development of The Doctrine iv. Establishment Of The Doctrine
v. Ascertainment Of The Ultra Vires vi. Evasion By Businessmen And Principle Developed By The Courts To Prevent Such Evasion vii. Independent Objects Clause viii. Effect Of Ultra ViresTransactions Ø Ultra vires contracts Ø Ultra vires borrowings Ø Ultra vires torts or crimes ix. Exceptions To The Doctrine Of Ultra Vires
x. Present Position Ø England Ø India xi. Conclusion
Introduction
The object clause of the Memorandum of the company contains the object for which the company is formed. An act of the company must not be beyond the objects clause, otherwise it will be ultra vires and, therefore, void and cannot be ratified even if all the members wish to ratify it. This is called the doctrine of ultra vires, which has been firmly established in the case of Ashtray Railway Carriage and Iron Company Ltd v. Riche.
The expression “ultra vires” consists of two words: ‘ultra’ and ‘vires’. ‘Ultra’ means beyond and ‘Vires’ means powers. Thus the expression ultra vires means an act beyond the powers. Here the expression ultra vires is used to indicate an act of the company which is beyond the powers conferred on the company by the objects clause of its memorandum. An ultra vires act is void and cannot be ratified even if all the directors wish to ratify it.
Sometimes the expression ultra vires is used to describe the situation when the directors of a company have exceeded the powers delegated to them. Where a company exceeds its power as conferred on it by the objects clause of its memorandum, it is not bound by it because it lacks legal capacity to incur responsibility for the action, but when the directors of a company have exceeded the powers delegated to them. This use must be avoided for it is apt to cause confusion between two entirely distinct legal principles.
TABLE OF CONTENTS
i. Introduction ii. Origin Of Doctrine Of Ultra Vires iii. Development of The Doctrine iv. Establishment Of The Doctrine
v. Ascertainment Of The Ultra Vires vi. Evasion By Businessmen And Principle Developed By The Courts To Prevent Such Evasion vii. Independent Objects Clause viii. Effect Of Ultra ViresTransactions Ø Ultra vires contracts Ø Ultra vires borrowings Ø Ultra vires torts or crimes ix. Exceptions To The Doctrine Of Ultra Vires
x. Present Position Ø England Ø India xi. Conclusion
Introduction
The object clause of the Memorandum of the company contains the object for which the company is formed. An act of the company must not be beyond the objects clause, otherwise it will be ultra vires and, therefore, void and cannot be ratified even if all the members wish to ratify it. This is called the doctrine of ultra vires, which has been firmly established in the case of Ashtray Railway Carriage and Iron Company Ltd v. Riche.
The expression “ultra vires” consists of two words: ‘ultra’ and ‘vires’. ‘Ultra’ means beyond and ‘Vires’ means powers. Thus the expression ultra vires means an act beyond the powers. Here the expression ultra vires is used to indicate an act of the company which is beyond the powers conferred on the company by the objects clause of its memorandum. An ultra vires act is void and cannot be ratified even if all the directors wish to ratify it.
Sometimes the expression ultra vires is used to describe the situation when the directors of a company have exceeded the powers delegated to them. Where a company exceeds its power as conferred on it by the objects clause of its memorandum, it is not bound by it because it lacks legal capacity to incur responsibility for the action, but when the directors of a company have exceeded the powers delegated to them. This use must be avoided for it is apt to cause confusion between two entirely distinct legal principles.
Bibliography: 7. Cotman v. Brogham, (1918) A.C. 514 8 9. Jon Beaufore (London) Ltd ., (1953) Ch. 131 10 11. S. Sivashanmugham And Others v. Butterfly Marketing PrivateLtd., (2001) 105 Comp. Cas. Mad 763 12 13. Weeks v. Propert, (1873) L.R. 427 14 15. European Communities Act, 1972 16