A promoter though he purport to act on behalf of a projected corporation cannot bind it by acts performed before it came into existence; Weatherford, M. W. & N. W. Ry. Co. v. Granger, 86 Tex. 350, 24 S. W. 795, 40 Am. St. Rep. 837; also Perry v. R. Co., 44 Ark. 383 ; Davis v. Creamery Ass'n, 63 Mo. App. 477; Long v. Bank, 8 Utah 104, 29 Pac. 878 ; Arapahoe Inv. Co. v. Platt, 5 Colo. App. 515, 39 Pac. 584; Schreyer v. Mills Co., 29 Or. 1, 43 Pac. 719. It has been said in one case, Oakes v. Water Co., 143 N. Y. 430, 38 N. B. 461, 26 L. R. A. 544, that this rule does not apply to a private corpora tion. The rule does net apply when there was a de facto corporation in existence when the acts were performed; Wood v. Whelen, 93 Ill. 153; or when the charter provides that the company shall be liable; Hill v. Gould, 129 Mo. 106, 00 S. W. 181; Munson v. R. Co., 103 N. Y. 8 N. E. 355. "Ex cept as a fiction, therefore, this doctrine that a company can be bound'before it is formed, and enters upon its corporate life `cum onere,' must be regarded as unfounded in principle. . . . It is discredited in Eng land and has not been followed (as far, as can be ascertained) since the decision in 2 Macq. H. of L. 393. The American authori ties repudiate it." Lloyd, Corp. Liab. for Acts of Prom. 42, citing 5 H. L. 605. The fact that all the stockholders were promoters and entered into the contract, does not make it binding upon the company when form ed ; Battelle v. Pay. Co., 37 Minn. 89, 33 N. W. Little Rock & Ft. S. R. Co. v. Perry, 37 Ark. 164 ; but see Paxton v. Min. Co., 2 Nev. 257. A corporation cannot, by ratifica tion, become liable on a contract made by its promoters before it came into existence; L. R. 2 C. P. 175 ; L. R. 9 C. P. 503 ; Weather ford, M. W. & N. W. R. Co. v. Granger, 86 Tex. 350, 24 S. W. 795, 40 Am. St. Rep. 837; contra, Stanton v. R. Co., 59 Conn. 272, 22 Atl. 300, 21 Am. St. Rep. 110; Paxton C. Co. v. Bank, 21 Neb. 621, 33 N. W. 271, 59 Am. Rep. 852; Hill v. Gould, 129 Mo. 106, 30 S. W. 181; such ratification, if binding, would date back to the original agreement ; Stanton v. R. Co., 59 Conn. 272, 22 Atl. 300, 21 Am. St. Rep. 110. It has been held that the company may "adopt" the original con tract and thus become liable under it; Weatherford, M. W. & N. W. R. Co. v. Granger, 86 Tex. 350, 24 S. W. 795, 40 Am. St. Rep. 837; Munson v. R. Co., 103 N. Y. 59, 8 N. E. 355 ; Penn M. Co. v. Hapgood, 141 Mass. 145, 7 N. E. 22; but see Abbott v. Hapgood, 150 Mass. 248, 22 N. E. 907, 5 L. R. A. 586, 15 Am. St. Rep. 193 ; West ern S. & M, Co. v. Cousley, 72 Ill. 531. But adoption is, in effect, the making of a new contract ou the same terms as the old ; L. R. 33 Ch. Div. 16; McArthur v. Print. Co., 48 Minn. 319, 51 N. W. 216, 31 Am. St. Rep. 653. It has been held that estoppel will constitute ground of liability ; Grape Sugar & V. Mfg. Co. v. Small, 40 Md. 395 ; Weather ford, M. W. & N. W. R. Co. v. Granger, 86 Tex. 350, 24 S. W. 795, 40 Am. St. Rep. 837.
Where a promoter has contracted for something to be performed after incorpora tion, the company, if it accept performance, with knowledge of the facts, is liable; Penn M. Co. v. Hapgood, 141 Mass. 145, 7 N. E.
22 ; L. R. 38 Ch. Div. 156; Oakes v. Water Co., 143 N. Y. 430, 38 N. E. 461, 26 L. R. A. 544. Where the performance is partly be fore and partly after incorporation, the com pany may, by acceptance, render itself lia ble ; McArthur v. Printing Co., 48 Minn. 319, 51 N. W. 216, 31 Ath. St. Rep. 653; but see Weatherford, M. W. & N. W. R. Co. v. Gran ger, 86 Tex. 350, 24 S. W. 795, 40 Am. St. Rep. 837, where services were rendered, un der different contracts, before and after in corporation, and a recovery was allowed for the latter and not for the former.
A vote of the directors (under a clause in the articles of association) that the pro moter's preliminary expenses be paid, was held not a ground of recovery ; L. R. 9 C. P. 503; but see Stanton v. R. Co., 59 Conn. 272, 22 Atl. 300, 21 Am. St. Rep. 110 ; and a vote of the directors that "the agreement of purchase be ratified" was held not to bind the corporation ; L. R. 16 Ch. Div. 125.
A recovery for work done before incorpo ration, at the request of a promoter, has been allowed on the ground of a tractual obligation; Grier v. H., H. & Co., 13 N. Y. Supp. 583 ; but see New York & N. H. R. Co. v. Ketchum, 27 Conn. 170 ; Rockford, R. I. & St. L. R. Co. v. Sage, 65 Ill. 328, 16 Am. Rep. 587; L. R. 9 C. P. 503; Weatherford, M. W. & N. W. R. Co. v. Granger, 86 Tex. 350, 24 S. W. 795, 40 Am. St. Rep. 837. See Keener, Quasi-Contracts.
Ratification may be express, or may be implied from the voluntary acceptance of the benefit of the contract, whereby an estop pel is worked. See Despatch Line of Pack ets v. Mfg. Co., 12 N. H. 205, 37 Am. Dec. 203; Fister v. La Rue, 15 Barb. (N. Y.) 323. See, also, 7 Ch. Div. 368 ; L. R. 2 C. P. 174. A corporation cannot enforce a subscription to shares made before its formation on the faith of certain promises of its promoters, without fulfilling the promises; Burrows v. Smith, 10 N. Y. 550.
"Both the English and American decisions recognize the possibility of a new contract between the corporation when organized and the third person, the broad line of distinc tion between the cases being the manner in Which such contract can be made out; the English courts taking the position that acts of the corporation which are clearly attribu table to the erroneous belief on its part that it is liable on the original contract cannot be received as evidence of a new contrast, particularly when coupled with the further fact that direct negotiations between the third party and the corporation cannot be shown. The American courts, on the other hand, receive as evidence of a new contract all acts indicating an intent by the corpora tion to receive the benefits of the original contract." 19 Harv. L. Rev. 1042, an article by H. S. Richards.
As to whether a subscriber to the stock of a corporation not yet formed cab, after its formation, rescind his subscription on the ground of the promoter's fraud, see 36 Am. L. Rev. 855, by A. C. Ritchie, maintaining the affirmation, and a criticism of his, view in 16 Harv. L. Rev. 380.
in a number of jurisdictions the agreement between the promoter and a third person is regarded as an open offer to the corporation, which it may accept when organized and thus create a new contract between the third per son and the corporation; 19 Harv. L. Rev. 104, citing Smith v. Parker, 148 Ind. 127,.
him through mistake, contracts towards the payer the obligation of returning him as much. Pothier, de l'Usure, pt. 3, s. 1, a. 1.
This contract is called promutuum, because it has much resemblance to that of mutuum. This resemblance consists in this : first, that in both a sum of money or some fungible things are required; second, that in both there must be a transfer of the property in the thing; third, that in both there must be re turned the same amount or quantity of the thing received. But, though there is this , general resemblance between the two, the mutuum differs essentially from the promu tuum. The former is the actual contract of the parties, made expressly, but the latter is a quasi-contract, which is the effect of an error or mistake. 1 Bouvier, Inst. n. 1125.