Ultra vires

Wilmington, Delawareis the incorporation capital of the United States.Delaware has largely abolishedultra viresin relation to corporations under theDelaware General Corporation Law.

Ultra vires('beyond the powers') is aLatin phraseused in law to describe an act that requires legal authority but is done without it. Its opposite, an act done under proper authority, isintra vires('within the powers'). Acts that areintra viresmay equivalently be termed "valid", and those that areultra virestermed "invalid".

Legal issues relating toultra virescan arise in a variety of contexts:

• Companiesand otherlegal personssometimes have limitedlegal capacity to act,and attempts to engage in activities beyond their legal capacities may beultra vires.Most countries have restricted the doctrine ofultra viresin relation to companies by statute.
• Similarly, statutory and governmental bodies may have limits upon the acts and activities which they legally engage in.
• Subordinate legislationwhich is purported passed without the proper legal authority may be invalid as beyond the powers of the authority which issued it.

Corporate law

See also:Corporate law

In corporate law,ultra viresdescribes acts attempted by a corporation that are beyond the scope of powers granted by the corporation'sobjects clause,itsarticles of incorporation,itsby-laws,similar founding documents, or laws authorizing a corporation's formation. Acts attempted by a corporation that are beyond the scope of its charter arevoidorvoidable.

1. Anultra virestransaction cannot be ratified by shareholders, even if they wish it to be ratified.
2. The doctrine ofestoppelusually precluded reliance on the defense ofultra vireswhere the transaction was fully performed by one party.
3. A fortiori,a transaction fully performed by both parties could not be attacked.
4. If the contract was fully executory, the defense ofultra viresmight be raised by either party.
5. If the contract was partially performed, and the performance was held insufficient to bring the doctrine of estoppel into play, a suit forquasi-contractfor recovery of benefits conferred was available.
6. If anagentof the corporation committed atortwithin the scope of their employment, the corporation could not defend on the ground the act wasultra vires.

Several modern developments relating to corporate formation have limited the probability thatultra viresacts will occur. Except in the case ofnon-profit corporations(includingmunicipal corporations), this legal doctrine isobsolescent;within recent years, almost all business corporations have been chartered to allow them to transact any lawful business. TheModel Business Corporation Actof the United States states that: "The validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act." The doctrine still lives among non-profit corporations or state-created corporate bodies established for a specific public purpose, such as universities or charities.

United Kingdom

See also:United Kingdom company law

Historically all companies in the United Kingdom were subject to the doctrine ofultra viresand any act which was outside of the objects specified in a company'smemorandum of associationwould beultra viresandvoid.That result was commercially unpalatable. It led to companies being formed with extremely wide and generic objects clauses permitting a company to engage in all manner of commercial activities.

The position was changed by statute by theCompanies Act 1985,which essentially abolished the doctrine concerning commercial companies. The position is now regulated by theCompanies Act 2006,sections 31 and 39, which similarly significantly reduces the applicability ofultra viresin corporate law. However, it can still apply to charities, and a shareholder may apply for aninjunction,in advance only, to prevent an act which is claimed to beultra vires.

United States

According to American laws, the concept ofultra virescan still arise in the following kinds of activities in some states:

1. Charitable or political contributions
2. Guaranty of indebtedness of another
3. Loans to officers or directors
4. Pensions, bonuses, stock option plans, job severance payments, and other fringe benefits
5. The power to acquire shares of other corporations
6. The power to enter into a partnership

Other jurisdictions

In many jurisdictions, such as Australia, legislation provides that a corporation has all the powers of a natural personplus others; also, the validity of acts which are madeultra viresis preserved.

Constitutional law

Underconstitutional law,particularly inCanadaand theUnited States,constitutions give federal and provincial or state governments various powers. To go outside those powers would beultra vires;for example, although the court did not use the term in striking down a federal law inUnited States v. Lopezbecause it exceeded the constitutional authority of Congress, the Supreme Court still declared the law to beultra vires.

According to Article 15.2 of theIrish constitution,theOireachtas(parliament) is the sole lawmaking body in theRepublic of Ireland.In the case ofCityView Press v AnCo,however, theSupreme Court of Irelandheld that the Oireachtas may delegate certain powers to subordinate bodies through primary legislation, so long as these delegated powers allow the delegatee only to further the principles and policies laid down by the Oireachtas in primary legislation and not craft new principles or policies themselves. Any piece of primary legislation that grants the power to make public policy to a body other than the Oireachtas is unconstitutional; however, as there is a presumption inIrish constitutional lawthat the Oireachtas acts within the confines of the constitution, any legislation passed by the Oireachtas must be interpreted in such a way as to be constitutionally valid where possible.

Thus, in several cases where bodies other than the Oireachtas were found to have used powers granted to them by primary legislation to make public policy, the impugned primary legislation was read in such a way that it would not have the effect of allowing a subordinate body to make public policy. In these cases, the primary legislation was held to be constitutional. Still, the subordinate or secondary legislation, which amounted to creating public policy, was held to beultra viresthe primary legislation and was struck down.

InUK constitutional law,ultra viresdescribes patents, ordinances, and the like enacted under theprerogative powersof the Crown that contradict statutes enacted by theCrown-in-Parliament.Almost unheard of in modern times,ultra viresacts by the Crown or its servants were previously a major threat to therule of law.

Boddington v British Transport Policeis an example of an appeal heard by the House of Lords that contested that a by-law was beyond the powers conferred to it under section 67 of theTransport Act 1962.

Administrative law

Inadministrative law,an act may bejudicially reviewableforultra viresin a narrow or broad sense. Narrowultra viresapplies if an administrator did not have the substantive power to make a decision or it was wrought with procedural defects. Broadultra viresapplies if there is an abuse of power (e.g.,Wednesbury unreasonablenessor bad faith) or a failure to exercise an administrative discretion (e.g., acting at the behest of another or unlawfully applying a government policy) or application of discretionary powers in an irrational and wrong way.Either doctrine may entitle a claimant to various prerogative writs, equitable remedies or statutory orders if they are satisfied.

United Kingdom

In the seminal case ofAnisminic v Foreign Compensation Commission,Lord Reid is credited with formulating the doctrine ofultra vires.However,ultra vires,together with unreasonableness, was mentioned much earlier by Lord Russell in the well-known case,Kruse v Johnson,regarding challenging by-laws and other rules.Anisminicis better known for not depriving courts of their jurisdiction to declare a decision a nullity, even if a statute expressly prevents it from being subject to judicial review. Further cases such asBromley LBC v Greater London CouncilandCouncil of Civil Service Unions v Minister for the Civil Servicehave sought to refine the doctrine.

InHammersmith and Fulham London Borough Council v Hazell,theHouse of Lordsheld thatinterest rate swapsentered into bylocal authorities(a popular method of circumventing statutory restrictions on local authorities borrowing money at that time) were allultra viresandvoid,sparking araft of satellite litigation.

Mark Elliott (St Catharine's College, Cambridge) proposes a modifiedultra viresdoctrine for administrative law, placing it firmly in the correct constitutional setting.

See also

• Judicial activism
• Judicial Review in English Law
• Precedent

References

• Robert W. Hamilton.The Law of Corporation4th Edition, 1996 West Group