McArthur v. Times Printing Co.
51 N.W. 216, 1892 Minn. LEXIS 414, 48 Minn. 319 (1892)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A corporation that knowingly accepts the benefits of a contract made on its behalf by a promoter prior to its incorporation is considered to have adopted the contract, creating a new agreement as of the date of adoption, not ratifying the original one.
Facts:
- Around September 12, 1889, C. A. Nimocks, a promoter for a yet-to-be-formed newspaper company, contracted with McArthur for his services as an advertising solicitor.
- The contract stipulated a one-year term of employment, beginning on October 1, 1889.
- The defendant corporation, the Times Printing Company, was officially organized on October 16, 1889.
- McArthur began working as an advertising solicitor on October 1, 1889, as agreed with Nimocks.
- After its organization, the Times Printing Company continued to employ McArthur in the same capacity.
- All stockholders, directors, and officers of the corporation were aware of the pre-incorporation contract with McArthur and did not object to or repudiate it.
- The corporation retained McArthur's services without making any new or different contract with him.
- In April 1890, the Times Printing Company discharged McArthur.
Procedural Posture:
- McArthur (plaintiff) sued the Times Printing Company (defendant) in a trial court for damages from a breach of contract.
- The Times Printing Company asserted as defenses that the employment was not for a fixed term and that McArthur was discharged for cause.
- A jury trial was held, resulting in a verdict in favor of the plaintiff, McArthur.
- The defendant, Times Printing Company, as appellant, appealed from the trial court's order to the state's highest court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a corporation's adoption of a one-year employment contract, originally made by its promoter before incorporation, violate the statute of frauds when the agreement was made more than one year before performance would be complete, but the corporate adoption occurred within the one-year performance period?
Opinions:
Majority - Mitchell, J.
No. The contract does not violate the statute of frauds because the corporation's liability is based on adoption, not ratification, which creates a new contract on the date of adoption. The court reasoned that a corporation cannot, in a legal sense, ratify a contract made before it existed, because ratification implies the principal was in existence at the time the agent acted. Instead, a corporation 'adopts' the contract. This adoption is not a retroactive act but is legally equivalent to making a new contract as of the date of adoption. In this case, the adoption occurred after the corporation was organized (October 16), which was within one year of the end date of the employment term (October 1). Therefore, the contract was not one that, by its terms, could not be performed within one year from its making, and the statute of frauds does not apply.
Analysis:
This case establishes the critical distinction between 'ratification' and 'adoption' for pre-incorporation contracts. By rejecting the ratification theory, which would retroactively apply the contract to a time when the corporation did not exist, the court provides a sound logical basis for corporate liability. The 'adoption' theory treats the corporation's acceptance of the contract's benefits as the formation of a new agreement. This has significant implications for statute of frauds analyses, as the one-year period is measured from the date of adoption, not the date of the promoter's original agreement.
