6. Ultra Vires Lending.
7. Ultra Vires Torts.
In the first place, that the members are entitled to hold a registered company to its registered objects has been recognized long since. Hence whenever an ultra vires act has been or is about to be undertaken, any member of the company can get an injunction to restrain it from proceeding with it. In this case the House of Lords observed that the doctrine of ultra vires, as it was explained in the Ashbury’s case, should be maintained. But it ought to be reasonably and not unreasonably understood and applied and that whatever may fairly be regarded as incidental to the objects authorized ought not to be held ultra vires, unless it is expressly prohibited.
Accordingly in London County Council V Attorney General , the council having statutory power to work tramways was restrained from running omnibus in connection with tramways. The court found that the omnibus business was in no way incidental to the business of working tramways, and therefore, could not be undertaken although it might have materially contributed to the…show more content… To put it in other words, that ultra vires contract is void and without any legal effect, which may cause hardship to innocent persons who are unaware with the capacity of the company to enter in to such contract. The observation made in the historical example of the famous case of Ashbury Railway Carriage & Iron Co. V Riche , concluded that an ultra vires contract being void- abinitio which cannot become intra vires by reason of estoppels, lapse of time, delay or acquiescence.
The incapacity of the company to make contract sometimes caused great injustice and hardships to the person who had no knowledge of such incapacity of the company. For example, in Beauforte (Jon) London, Ltd.
The company, Jon Beauforte Ltd., was authorized by its memorandum of association to carry on