§ 110 The Acts and Liabilities of a Corporation
When a natural person acts by an agent, the authority of the agent is conferred, and its limits are determined, by the will and consent of the principal. In general only those acts of the agent are imputed by the law to the principal, which are within the limits of the agent’s authority as thus created and circumscribed. But in the case of a corporation it is necessarily otherwise. A legal person is as incapable of conferring authority upon an agent to act on its behalf, as of doing the act in propria persona. The authority of the agents and representatives of a corporation is therefore conferred, limited, and determined, not by the consent of the principal, but by the law itself. It is the law that determines who shall act for a corporation, and within what limits his activity must be confined. Any act which lies beyond these legally appointed limits will not be imputed to the corporation, even though done in its name and on its behalf. It is said to be ultra vires of the corporation, and as a corporate act it is null and void.
Speaking generally, we may say that a corporation can do those things only which are incidental to the fulfilment of the purposes for which the law created it. All its acts must be directed to its legally appointed end. Thus the memorandum of association of a company must set forth the purposes for which it is established; and even the unanimous consent of the whole body of shareholders cannot effectively enable the company to act beyond the limits so marked out for its activity.
It is well settled in the law of England that a corporation may be held liable for wrongful acts, and that this liability extends even to those cases in which malice, fraud, or other wrongful motive or intent is a necessary element. A company may be sued for libel, malicious prosecution, or deceit.291 Nor is this responsibility civil only. Corporations, no less than men, are within reach of the arm of the criminal law. They may be indicted or otherwise prosecuted for a breach of their statutory duties, and punished by way of fine and forfeiture.292
Although this is now established law, the theoretical basis of the liability of corporations is a matter of some difficulty and debate. For in the first place it may be made a question whether such liability is consistent with natural justice. To punish a body corporate, either criminally or by the enforcement of penal redress, is in reality to punish the beneficiaries on whose behalf its property is held, for the acts of the agents by whom it fulfils its functions. So far, therefore, as the beneficiaries and the agents are different persons, the liability of bodies corporate is an instance of vicarious responsibility, and it is to be justified on the same principles as are applicable to the vicarious liability of a principal for the unauthorised acts of his agent—principles which will be considered by us at a later stage of our enquiry. For although the representatives of a corporation are in form and legal theory the agents of that fictitious person, yet in substance and fact they are the agents of the beneficiaries. A company is justly held liable for the acts of its directors, because in truth the directors are the servants of the shareholders.
A more serious difficulty in imposing liability upon bodies corporate arises from the following consideration. The wrongful acts so attributed by the law to fictitious persons are in reality the acts of their agents. Now we have already seen that the limits of the authority of those agents are determined by the law itself, and that acts beyond those limits will not be deemed in law to be the acts of the corporation. How, then, can an illegal act be imputed to a corporation? If illegal, it cannot be within the limits of lawful authority; and if not within these limits, it cannot be the act of the corporation. The solution of this difficulty is twofold. In the first place, the argument does not extend to wrongful acts of omission, for these are done by the body politic in person, and not merely by its representatives. No fictitious person can do in person what by law it ought not to do, but it can in person fail to do what in law it ought. And in the second place, the liability of a corporation for the acts of its representatives is a perfectly logical application of the law as to an employer’s liability for his servants. The responsibility of a master does not depend on any authority given to his servant to commit the wrongful act. It is the outcome of an absolute rule of law that the employer is himself answerable for all wrongs committed by his servant in the course and process of doing that which he is employed to do. I am liable for the negligence of my servant in driving my carriage, not because I authorised him to be negligent, but because I authorised him to drive the carriage. So in the case of the agents of a corporation: the law imputes to the corporation not only all acts which its agents are lawfully authorised to do, but all unlawful acts which they do in or about the business so authorised. The corporation is responsible not only for what its agents do, being thereunto lawfully authorised, but also for the manner in which they do it. If its agents do negligently or fraudulently that which they might have done lawfully and with authority, the law will hold the corporation answerable.293