necessary some other mode of combining capital for carrying on enterprises requiring vast resources, and, from their nature, demanding long time and freedom from interruption for their accomplishment. For instance, no one would dare to assume personal responsibility for the debts of a railroad, nor could such an enterprise be managed if every transfer of interest dissolved the company. The desired limitation of responsibility and facility of transfer of interest are secured by the formation of corporations.

Nature. But responsibility there must be, or the combination could transact no business. And responsibility depends upon personality-a thing cannot be held responsible. As this personality does not exist aside from the persons of those uniting their resources, it must be created. The creative power is the legis lature. The personality created is the corporation.* A corporation is, therefore, an artificial or ficticious person, created under general law or by a special act of the legislature,† and capable of acting within prescribed limits as if it were a natural person, but beyond those limits incapable of acting at all.

Management.-The persons who contribute to the capital of the corporation, or company, receive certificates of stock, that is, pieces of paper certifying that said persons own so many shares in the company. The capital, be it remembered, is the property of the corporation, not of the individuals. The number of these stockholders may be large or small, a dozen or a thousand. The general management of corporate business is necessarily entrusted to a small number of

*From the Latin corpus, corporis, a body.

This special act defining the powers and duties of the corporation is called its charter.

persons called directors. These are elected by the stockholders, each share having one vote. The directors select from their own number a president, a secretary, and other necessary officers. These persons and the other agents of the corporation carry out the policy determined upon by the directors.

Why Limited in Powers.-The question suggests itself, Why can a corporation do only certain things? The most obvious answer is, that this is consequent upon its mode of creation. Being a creature of the legislature, it can have only those powers which are specifically or impliedly granted to it. But pushing the matter farther, it may pertinently be asked, Why doesn't the legislature endow it with power to do anything that may properly be done by a natural person? Two reasons, at least, appear. First, from the corporation's standpoint, it is a matter of business prudence to have its purpose and powers defined: (a) to enable it to secure subscribers to its stock, as no one would like to risk his money blindly; and (b) because thus only can the directors be held to accountability. Second, from the standpoint of the public, for whom the legislature acts, the defining is necessary in order that corporations may be controlled and dangerous combinations prevented.

In this connection it may be noted that corporations are granted some privileges not possessed by individuals. For instance, private property such as land may be taken, even against the wishes of the owner, to permit the building of a railroad. This can be done, however, only on the ground of public good, and by giving the owner just compensation.

Responsibility.--A corporation, like any other person is responsible for any contracts that it makes,

within its charter. It necessarily acts entirely through agents, hence the law of agency has an important bearing upon all contracts with a corporation.

Debts incurred lie against the corporation, not as a rule against the stockholders individually. Sometimes stockholders are by the charter made liable to limited extent, say to an amount equal to the par value of their stock.

Dissolution. Some companies are incorporated so that they may last forever. Others are incorporated for a specified time. The latter expire by limitation or by becoming insolvent. A corporation of either kind may secure dissolution by voluntarily surrendering its charter. And sometimes the legislature reserves in the charter the right to dissolve the company under certain conditions.

The affairs of a corporation are usually closed up by a "receiver," who collects the bills, disposes of the property, pays the indebtedness as far as he can, and distributes the residue among the stockholders.

Who constitute the managing body in a school district? In a town? In a village? In a city? In a county? In the state?

In the United States?* In a railroad? In a mining company? In a bank? In a church? In a college?

Write a list of all the corporations that you know or have ever heard of, grouping them under the heads public and private. How could a pastor collect his salary if the church should refuse to pay it?

Could a bank buy a piece of ground "on speculation?" To build its banking-house on? Could a county lend money if it had a surplus? State the general powers of a corporation. Some of the special powers of a bank. Of a city

A portion of a man's farm is taken for a highway, and he is paid damages; to whom does said land belong? The road intersects the farm, and crossing the road is a brook containing trout, which have been put there and cared for by the farmer; may a boy sit on the public bridge and catch trout from that brook? If the road should be abandoned or lifted, to whom would the use of the land go?

CHAPTER XXXV.

COMMERCIAL PAPER.

Kinds and Uses.-If a man wishes to buy some commodity from another but has not the money to pay for it, he may secure what he wants by giving his written promise to pay at some future time. This written promise, or note, the seller prefers to an oral promise for several reasons, only two of which need be mentioned here: first, because it is prima facie evidence of the debt; and, second, because it may be more easily transferred or handed over to some one else.

If J. M. Johnson, of Saint Paul, owes C. M. Jones, of Chicago, a hundred dollars, and Nelson Blake, of Chicago, owes J. M. Johnson a hundred dollars, it is plain that the risk, expense, time and trouble of sending the money to and from Chicago may be avoided,

*The United States: "Its charter, the constitution. symbol of its power; its seal, of its authority."-Dole.

*

* * Its flag the

and the indebtedness wiped out by J. M. Johnson ordering Nelson Blake to pay the hundred dollars to C. M. Jones. The written order to this effect, called a draft, would be sent to C. M. Jones, who would present it for payment to Nelson Blake, and upon receiving his money would turn the draft over to Blake.

To avoid the risk of being robbed, merchants and some others are in the habit of depositing each evening in a bank the receipts of the day, with the understanding that the money will be paid out, at any time, to any person whom they order it paid to. The order on

the bank is called a check.

It is very easy to see that these three devices are of immense value to the commercial world; the first by rendering available future resources, and the other two by enabling payments to be made safely.

Definitions. A note is an unconditional promise in writing, to pay a definite sum of money at a certain time to a specified person.

A draft is an order, written by one person and addressed to another, directing him to pay a definite sum of money at a certain time to a specified third party.

A check is a draft for immediate payment, drawn upon a bank or banker.

In the case of a note, the person who promises to pay is called the maker of the note; and the person named to be paid, the payée.

In the case of a draft or check, the person ordering the payment is called the drawer; the person addressed, the person drawn upon or the drawee; and the person to be paid, the payee.

Negotiability. The payee in any of these cases may wish to transfer the paper to some other person. For instance, the holder of the note may wish to use the