Ashbury Railway Carriage & Iron Co. v Riche (1875)

Company Law · Pre-Incorporation Contracts

Facts.

A company whose objects were to make and sell railway carriages contracted to finance the construction of a railway line in Belgium. The directors later repudiated; Riche sued.

Issue.

Was a contract outside the object clause binding, and could shareholders ratify it?

Held.

The contract was ultra vires and void; it was outside the company’s capacity and could not be ratified even by all the shareholders.

Why it matters.

The leading authority on ultra vires — a company’s powers are bounded by its objects, and acts beyond them are legal nullities.

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