Ashbury

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Ashbury Railway Carriage and Iron Co Ltd v Riche [(1875) LR 7 HL 653] Aradhya Choubey
2011/B.A. LL.B./014
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facts
The Ashbury Railway Carriage and Iron is a Company incorporated under Companies Act, 1862 and its objects clause stated that the company is established to make and sell, or lend on hire, railway carriages and wagons, and all kinds of rail plant, fittings, machinery and rolling stock; to carry on the business of mechanical engineering and general contractors; to purchase and sell, as merchants, timber, coal, metals and other materials and to buy and sell any such materials on commission or as agents. The Directors agreed to purchase a concession for making railway in Belgium. Later difficulties arose and the shareholders disapproved of what had been done in the matter of the railway, and required the Directors to take over the company’s interest therein and to indemnify the shareholders. The Directors, however on behalf of the shareholders repudiated the contract for the construction of the railway, as being ultra-vires the company and Mr. Riche sued the company for damages for breach of contract. -------------------------------------------------

Issues
The issues brought before the Court are stated as follows:-
(1) Whether the corporation can enter into a transaction beyond its powers which are conferred by its charter or not? (2) Whether the contract entered into by the Ashbury Railway Carriage and Iron Co Ltd is ultra vires or not? (3) Whether the Ashbury Railway Carriage and Iron Co Ltd is entitled to repudiate the contract or not?

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Decision with reasons
The House of Lords, after considering the evidence at hand, held that:- (1) Dealing with the object clause in detail, the objects of M/s Ashbury Company, as stated in the Memorandum of Association, were to supply and sell the materials required to construct railways, but not to...
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