State laws in almost all jurisdictions have also significantly reduced the importance of ultra vires doctrine. For example, paragraph 3.04(a) of the revised Model Law on Business Corporations, drafted in 1984, states that «the validity of corporate actions may not be challenged on the basis that the Corporation has or does not have the authority to act». There are three exceptions to this prohibition: it may be invoked by the corporation or its shareholders against current or former officers or directors of the corporation for exceeding their powers, by the State Attorney General in connection with proceedings to dissolve the corporation or to prohibit the transaction of unauthorized transactions. or by shareholders against the company, to order the imposition of ultra vires legislation or the ultra vires transfer of real estate or personal property. The roots of the term come from a Latin phrase that means beyond power. This is the opposite of under the right authority – intra vires. You can also find the term in the legal profession. In Hammersmith and Fulham London Borough Council v Hazell, the House of Lords found that interest rate swaps entered into by local authorities (a popular method of circumventing legal restrictions on local authorities borrowing money at the time) were all ultra vires and void, triggering a number of satellite disputes. The doctrine of ultra vires has certain advantages: in administrative law, a legal act may be subject to judicial review for ultra vires in the narrow or broad sense. Ultra vires étroit applies if an insolvency practitioner lacked substantive decision-making authority or was vitiated by procedural irregularities. General ultra vires applies when an abuse of authority (e.g.
Wednesbury unreasonableness or bad faith) or failure to exercise administrative discretion (e.g., acting at the request of others or unlawfully applying government policy) or irrational and erroneous use of discretion.  Both doctrines may be entitled to various privileges, equitable remedies, or legal orders if satisfied. «Ultra vires.» Merriam-Webster.com Dictionary, Merriam-Webster, www.merriam-webster.com/dictionary/ultra%20vires. Retrieved 14 January 2022. The ultra vires doctrine has played an important role in the development of corporate power. Although the doctrine is largely outdated in modern private corporation law, it remains fully applicable to government agencies. An ultra vires act is an act that goes beyond the purposes or powers of a corporation. The first legal opinion was that such acts were null and void. Under this approach, a corporation was incorporated for limited purposes and could only do what it was entitled to do in its articles. Ultra vires (Latin for Beyond Powers) is a condition under which a company carries out activities beyond its powers or powers as specified in organizational documents such as object clauses, articles of association, articles of association, articles of association, articles of association, company agreements, and others.
The doctrine of ultra vires is part of company law, which governs all contracts concluded by a company. Therefore, any contract that does not fall within the entrepreneurial powers of the company is considered illegal. Ultra vires is the opposite of intra vires (Latin for Within Powers). Over time, a number of principles have developed that have prevented the application of the ultra vires doctrine. These principles included the ability of shareholders to ratify an ultra vires transaction; the application of the estoppel doctrine that precluded the defence of ultra-vires when the transaction was wholly carried out by a party; and the prohibition of invoking ultra vires when both parties have fully performed the contract. The Act also provided that if a representative of a company committed an unlawful act in the course of the agent`s employment, the company could not defend itself on the grounds that the act was ultra vires. Historically, all companies in the United Kingdom were subject to the doctrine of ultra vires, and any act that went beyond the objectives set out in a company`s articles of association was ultra vires and void.  This result was commercially unpleasant and led to the creation of companies with extremely broad and generic purpose clauses that allowed a company to engage in all sorts of business activities.
 In the case of a private corporation, the act of an employee who is not authorized to act on behalf of the business may nevertheless be contractually binding on the business if such an employee would normally be expected to have that authority. However, in the case of a public authority, it is normally necessary to prove that the worker was actually authorised to act in order to prevent a contract from being declared null and void as ultra vires. If a government employee exceeds its authority, the government agency may attempt to terminate the contract on the basis of an ultra vires claim. Legal issues related to ultra vires can arise in different contexts: Despite these principles, the ultra vires doctrine has been applied inconsistently and unpredictably. As a result, modern company law has sought to exclude the possibility of ultra vires acts. Most importantly, multi-purpose clauses and general clauses that allow companies to conduct lawful activities are now included in the articles of association. In addition, purpose clauses can now be easily changed if the company wants to do business in new areas. For example, under the traditional doctrine of ultra vires, a company that aimed to manufacture shoes could not manufacture motorcycles under its charter. Under modern company law, the purpose clause would either be so general that the company could enter the motorcycle business, or the company would amend its purpose clause to reflect the new company. These sample phrases are automatically selected from various online information sources to reflect the current use of the word «ultra vires». The views expressed in the examples do not represent the views of Merriam-Webster or its editors.
Send us your feedback. This first view proved unworkable and unfair. It allowed a company to accept the benefits of a contract and then refuse to fulfil its obligations on the ground that the contract was ultra vires. The doctrine also compromised the security of ownership of assets in fully executed transactions involving a corporation. Accordingly, the courts have held that such acts are questionable rather than void and that the facts must determine whether an act of enterprise should be effective. In U.S. law, the concept of ultra vires may still exist in some countries in the following types of activities: Although the development of modern corporate law has rendered the doctrine of ultra vires more or less obsolete, it remains relevant to government agencies. Here are some of the attributes of Ultra vires.
Ultra vires shares can also be defined as any excessive use of corporate power that has been granted. These acts cannot be legally defended in court. They will make the company vulnerable to lawsuits from employees or other parties. In many jurisdictions, such as Australia, legislation provides that a company has all the powers of a natural person and other persons; The validity of acts rendered ultra vires is also preserved.  While other types of entities, such as government agencies, take actions that are beyond the scope of their legislative powers, their actions can also be described as ultra vires. Ultra vires stocks are all actions that are beyond the control of a company. Ultra vires shares do not fall within the powers expressly enumerated in a charter or corporate law. This may also refer to any act expressly prohibited by the Company Charter.
In British constitutional law, ultra vires describes patents, ordinances and other similar patents granted under the prerogatives of the Crown and contrary to laws passed by the Crown in Parliament. Almost unknown in modern times, the ultra vires acts of the crown or its servants posed a major threat to the rule of law. Actions that violate the above guidelines can be classified as ultra vires. For example, a corporation`s articles of incorporation may describe the procedure for appointing directors to its board of directors. When board members are added or removed without following these procedures, these measures are called ultra vires. In the landmark case Anisminic v. Foreign Compensation Commission, Lord Reid is accredited to formulate ultra vires doctrine. However, ultra vires, as well as impropriety, were mentioned much earlier by Lord Russell in the famous Kruse v Johnson case, which involved challenging laws and other rules. Anisminic is best known for not depriving the courts of their jurisdiction to overturn a decision, even though a law expressly prohibits the decision from being subject to judicial review. Other cases such as Bromley LBC v. Greater London Council and Council of Civil Service Unions v. Minister of the Civil Service have tried to refine the doctrine.