regulation of the business and conduct of the affairs of the corporation and any limitation upon its powers, and upon the powers of its directors and stockholders which does not exempt them from any obligation or from the performance of any duty imposed by law." The privilege is, however, rarely exercised as to the powers and duties of officers because changes may be desirable in these matters and if they have been incorporated in the charter, such changes are usually difficult and expensive and, in the face of opposition, sometimes impossible.

At times, however, provisions of special importance or permanence affecting the officers of the corporation are inserted in the charter for the express purpose of embarrassing or preventing changes. For instance, limitations may be placed by charter provision upon the compensation of officers, or qualifications may be prescribed, or special powers may be conferred upon certain officials.

§ 6. (c) By-Laws Affecting Corporate Officials.

The by-laws rank next in authority to the charter. They are usually adopted by the stockholders, though the power to amend and even to make them is sometimes delegated more or less fully to the directors.

The by-laws are peculiarly suitable for the regulation of matters such as the powers and duties of officers. The charter, as already stated, is not only too difficult of change to make it generally desirable for this purpose, but in many states is absolutely unavailable. The by-laws, on the other hand, are sufficiently authoritative and of such reasonable permanence as to fit them for this purpose, but, should the necessity arise, may be amended or repealed without the delay, formality and expense incident to an amendment of the charter. At the same time such change may only be made by certain prescribed methods-usually set forth in the by-laws themselves—which effectually prevent hasty and ill-considered alterations.

7 Bus. Corp. Law, N. Y., § 2.

8 See Chap. IV, "By-Law Provisions Affecting Treasurer "; also § 24.

The by-laws usually prescribe the duties of the corporate officials in detail, and also define the scope of their powers, provide the manner of their election, the method of filling vacancies, and such other general or specific regulations and provisions as are not to be left to the discretion of the directors. Many of these matters could not properly or conveniently be provided for elsewhere and if not included in the by-laws, would be left in a very ambiguous and unsatisfactory condition.

When the by-laws, as is usually the case, prescribe official powers, procedure and duties with fulness, it only remains for the board to provide for additional or special powers and duties, as the necessity arises.

§ 7. (d) Resolutions of Directors.

Next in authority to the by-laws come the resolutions of the directors. The directors are subject to and must comply with any provision of the state laws, and of the charter or bylaws of the corporation as far as applicable. These, however, are usually concerned only with methods and matters of routine procedure intended to secure the smooth and proper working of the corporate mechanism; hence the actual charge and control of the property, affairs and business of the corporation rest almost entirely in the hands of the directors.

For instance, the by-laws will prescribe perhaps that all important contracts entered into by the corporation shall be signed by the president and the treasurer and be sealed with the corporate seal. This fixes absolutely the method by which such corporate contracts shall be evidenced, but it does not restrict the directors in any way as to what contracts the corporation shall enter into nor does it compel them to enter into any contracts at all. As to these matters of practical business, they are free to use their discretion. The manner is prescribed but not the matter. General restrictions may perhaps exist, as a debt limit or a maximum salary provision, or requirements as to surplus, but these can be but general and the directors are

for all practical purposes in absolute control of the actual business operations of the company. Accordingly, as the various current matters come up, the directors consider and act upon them, and their action is authoritative and final.

§ 8. (e) Usage as a Source of Official Power.

When a corporation has been in existence for a term of years it will usually be found that the officers transact certain routine business as a matter of course and without any specific authorization. Notwithstanding this apparent lack of authority, the acts and contracts of the corporate officials in such matters are binding upon the corporation and upon the other parties as well. Usage has taken the place of direct authorization.10

Also if a corporation official performs duties which it is customary for such an official to perform, his action will be held valid and binding upon the corporation even though not specifically authorized,11 provided only that the other parties do not know that the official is exceeding his authorized power.

For instance, the by-laws of a corporation might designate some official other than the treasurer as the proper party to receive and receipt for all moneys due. Nevertheless, if the treasurer received money due the corporation from some one not aware of the treasurer's lack of the usual power, and gave a receipt therefor, the payment would be held good and the receipt conclusive, and this even though the treasurer diverted the money to his own use. 12 The treasurer might be liable for any loss resulting from his unauthorized action, but the corporation would be bound.

Or if a railroad appoints a purchasing agent, the mere

Fitzgerald, etc. Co. v. Fitzgerald, 137 U. S. 98 (1890); G. V. B. Min. Co. v. Bank, 95 Fed. Rep. 23 (1899); Phillips v. Campbell, 43 N. Y. 271 (1870).

10 See Chap. III, "Duties and powers of Treasurer."

11 Insurance Co. v. McCain, 96 U. S. 84 (1877); N. Y., etc. R. R. Co. v. Schuyler, 34 N. Y. 30 (1865); Story on Agency, §§ 126, 127.

12 Rathbun v. Snow, 123 N. Y. 343 (1890); Mining Co. v. Bank, 104 U. S. 192 (1881).

fact of his position makes it entirely safe for third persons to contract with his railroad through him, for the usual railroad supplies; or if a corporate officer placed in charge of a mercantile business buys goods dealt in by his corporation, his contracts for such goods are binding upon the corporation.

In all cases when the officers act as a matter of custom or routine and without specific authority, the corporation is estopped from denying the official action because it has, in name at least, placed its officers in positions which customarily confer the right to perform such duties, or otherwise has habitually allowed them to act in such matters.

A corporate officer cannot, however, undertake a transaction outside of his usual duties or routine and bind his corporation, unless specifically authorized thereto, and it is unsafe for a third person to deal with him in such matters unless first assured of his authority.13

9. (f) Ratification of Official Actions.

In all cases where an officer exceeds his authority in contracting or otherwise acting for a corporation, the corporation may, by ratifying the transaction, make it its own. The company is also bound by the implied ratification involved in an acceptance of the benefits of any such contract or other act. In either case, the officer by whom the act was performed is released from personal responsibility by the corporate ratification and the corporation, on the other hand, is liable exactly as if the officer had been duly authorized from the first. In other words, ratification is authorization though after the fact.

Officers not infrequently act without formal authorization, relying upon ratification by the board of directors later. In any such case, if the board ratifies their action, the officials involved are absolved from all responsibility in the matter,14

13 Slattery v. Bank, 175 Mass. 380 (1900); Craft v. S. B. R. R. Co., 150 Mass. 207 (1889); 5 L. R. A. 641; First Nat. Bk. v. Lumber Co., 116 N. C. 827 (1895); Jewett v. Bank, 173 Mass. 54 (1899); see also § 49.

14 Rolling Mill v. Railroad, 120 U. S. 256 (1886); Nims v. Boys' School, 160 Mass. 177 (1893); Sheldon Co. v. Eickmeyer Co., 90 N. Y. 607 (1882); Northwestern Fuel Co. v. Lee, 102 Wis. 426 (1899).

but if not, they are themselves personally liable to the parties with whom they dealt. "Whenever a person enters into a contract as an agent for another, he warrants his own authority, unless very special circumstances, or express agreement relieve him from that responsibility." "15

15 White v. Madison, 26 N. Y. 117 (1862); see also §§ 21, 49.