. 
= 
18 BULLETIN 1106, U. S. DEPARTMENT OF AGRICULTURE. 
lation of the positive prohibition of the law in that regard.” ** In an 
Towa case ** it was said, “ A corporation debt contracted in excess of 
the maximum limitation in its articles of incorporation is not void 
because of such excess.” In the case of a corporation there are no 
public records by which one about to extend credit to it can ascertain 
the amount of indebtedness already incurred at the time credit is 
extended, and this furnishes a sufficient reason for holding a corpora- 
tion liable in cases like those just discussed. 
As pointed out elsewhere, officers and directors are liable to the 
corporation for all damages suffered by it where they exceed the 
limit of indebtedness fixed by the statute, charter, or by-laws. And 
directors and officers are made personally lable by statute in some 
- States to third persons for debts in excess of the statutory amount. 
\ 
LIABILITY OF CORPORATION FOR PROMOTION EXPENSES. 
What is the liability of a corporation on contracts made or obliga- 
tions incurred by its promoters or those who are active in forming 
and organizing it? The answer is that as a general rule it is not 
liable unless it recognizes and ratifies the contracts or obligations 
after its formation. This question arises in connection with the 
work done or contracts made incident to the promotion of a corpora- 
tion and prior thereto by those who are active in bringing about 
the existence of the corporation. 
In a North Dakota case,®* in which the claim involved arose out 
of work done by a stock subscription solicitor in obtaining sub- 
scribers to the capital stock of a corporation to be organized, it 
was said: 
It is elementary that a corporation is not liable upon contracts entered into 
by its promoters. Before the corporation comes into existence, it can have 
no representative and no one is capable of acting for it. Those interested 
in promoting it may nevertheless contemplate the ultimate payment by cor- 
poration of the legitimate promotion expenses. But the corporation does 
not become liable for such expenses in the absence of a subsequent undertaking 
in some form. 
In a Montana case ®® appears the following: 
In the absence of a statute, a corporation will be held liable for services 
rendered by its promoters before incorporation, only when by express action 
taken after it becomes a legal entity it recognizes or affirms such claim, a 
failure to object when the claim is mentioned is not such an assumption or 
adoption as will bind the corporation. 
oi Neh ts es a eee eet ee EEE 
66 Weber v. Spokane Nat. Bank, 64 Fed. 208; see also H. Scherer & Co. v. Everest, 
168 Fed. 822; Grand Valley Water Users’ Association v. Zunbrunn, 272 Fed. 943. 
57 Juskin v. Plain Dealer Pub. Co., (Iowa) 165 N. W. 339. 
58 Davis v. Joerke, (N. Dak.) 181 N. W. 68. 
89 Kirkup v. Anaconda Amusement Co., (Mont.) 197 Pac. 1005; see also Cushion 
Heel Co. v. Hartt, 181 Ind. 167, 103 N. H. 1013, 50 L. R. A. (N. 8.) 979. 
