Ultra vires ('beyond the powers') is a Latin phrase used in law to describe an act that requires legal authority but is done without it. Its opposite, an act done under proper authority, is intra vires ('within the powers'). Acts that are intra vires may equivalently be termed "valid", and those that are ultra vires termed "invalid".
Legal issues relating to ultra vires can arise in a variety of contexts:
Companies and other legal persons sometimes have limited legal capacity to act, and attempts to engage in activities beyond their legal capacities may be ultra vires.[3] Most countries have restricted the doctrine of ultra vires in relation to companies by statute.
Similarly, statutory and governmental bodies may have limits upon the acts and activities which they legally engage in.[4]
Subordinate legislation which is purported passed without the proper legal authority may be invalid as beyond the powers of the authority which issued it.[5][6]
In corporate law, ultra vires describes acts attempted by a corporation that are beyond the scope of powers granted by the corporation's objects clause, its articles of incorporation, its by-laws, similar founding documents, or laws authorizing a corporation's formation. Acts attempted by a corporation that are beyond the scope of its charter are void or voidable.
An ultra vires transaction cannot be ratified by shareholders, even if they wish it to be ratified.
The doctrine of estoppel usually precluded reliance on the defense of ultra vires where the transaction was fully performed by one party.
A fortiori, a transaction fully performed by both parties could not be attacked.
If the contract was fully executory, the defense of ultra vires might be raised by either party.
If the contract was partially performed, and the performance was held insufficient to bring the doctrine of estoppel into play, a suit for quasi-contract for recovery of benefits conferred was available.
If an agent of the corporation committed a tort within the scope of their employment, the corporation could not defend on the ground the act was ultra vires.
Several modern developments relating to corporate formation have limited the probability that ultra vires acts will occur. Except in the case of non-profit corporations (including municipal corporations), this legal doctrine is obsolescent; within recent years, almost all business corporations have been chartered to allow them to transact any lawful business. The Model Business Corporation Act of the United States states that: "The validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act." The doctrine still lives among non-profit corporations or state-created corporate bodies established for a specific public purpose, such as universities or charities.
Historically all companies in the United Kingdom were subject to the doctrine of ultra vires and any act which was outside of the objects specified in a company's memorandum of association would be ultra vires and void.[3] That result was commercially unpalatable. It led to companies being formed with extremely wide and generic objects clauses permitting a company to engage in all manner of commercial activities.[7]
The position was changed by statute by the Companies Act 1985, which essentially abolished the doctrine concerning commercial companies. The position is now regulated by the Companies Act 2006, sections 31 and 39, which similarly significantly reduces the applicability of ultra vires in corporate law. However, it can still apply to charities, and a shareholder may apply for an injunction, in advance only, to prevent an act which is claimed to be ultra vires.
United States
According to American laws, the concept of ultra vires can still arise in the following kinds of activities in some states:
Charitable or political contributions
Guaranty of indebtedness of another
Loans to officers or directors
Pensions, bonuses, stock option plans, job severance payments, and other fringe benefits
The power to acquire shares of other corporations
The power to enter into a partnership
Other jurisdictions
In many jurisdictions, such as Australia, legislation provides that a corporation has all the powers of a natural person[8] plus others; also, the validity of acts which are made ultra vires is preserved.[9]
Constitutional law
Under constitutional law, particularly in Canada and the United States, constitutions give federal and provincial or state governments various powers. To go outside those powers would be ultra vires; for example, although the court did not use the term in striking down a federal law in United States v. Lopez because it exceeded the constitutional authority of Congress, the Supreme Court still declared the law to be ultra vires.[10]
According to Article 15.2 of the Irish constitution, the Oireachtas (parliament) is the sole lawmaking body in the Republic of Ireland. In the case of CityView Press v AnCo, however, the Supreme Court of Ireland held that the Oireachtas may delegate certain powers to subordinate bodies through primary legislation, so long as these delegated powers allow the delegatee only to further the principles and policies laid down by the Oireachtas in primary legislation and not craft new principles or policies themselves. Any piece of primary legislation that grants the power to make public policy to a body other than the Oireachtas is unconstitutional; however, as there is a presumption in Irish constitutional law that the Oireachtas acts within the confines of the constitution, any legislation passed by the Oireachtas must be interpreted in such a way as to be constitutionally valid where possible.
Thus, in several cases where bodies other than the Oireachtas were found to have used powers granted to them by primary legislation to make public policy, the impugned primary legislation was read in such a way that it would not have the effect of allowing a subordinate body to make public policy. In these cases, the primary legislation was held to be constitutional. Still, the subordinate or secondary legislation, which amounted to creating public policy, was held to be ultra vires the primary legislation and was struck down.
In UK constitutional law, ultra vires describes patents, ordinances, and the like enacted under the prerogative powers of the Crown that contradict statutes enacted by the Crown-in-Parliament. Almost unheard of in modern times, ultra vires acts by the Crown or its servants were previously a major threat to the rule of law.[citation needed]
In administrative law, an act may be judicially reviewable for ultra vires in a narrow or broad sense. Narrow ultra vires applies if an administrator did not have the substantive power to make a decision or it was wrought with procedural defects. Broad ultra vires applies if there is an abuse of power (e.g., Wednesbury unreasonableness or bad faith) or a failure to exercise an administrative discretion (e.g., acting at the behest of another or unlawfully applying a government policy) or application of discretionary powers in an irrational and wrong way.[11] Either doctrine may entitle a claimant to various prerogative writs, equitable remedies or statutory orders if they are satisfied.
Mark Elliott (St Catharine's College, Cambridge proposes the modified ultra vires doctrine for administrative law, placing it firmly in the correct constitutional setting. (The Ultra Vires Doctrine in a Constitutional Setting: Still the Central Principle of Administrative Law [1999] Cambridge Law Journal Vol. 58 129)
↑ Örücü Esin, The Liability of administration in England and main principles applied in judicial review, in Onar Armagani, Fakulteler Matbaasi, Istanbul 1977, p.660
↑ Anisminic v Foreign Compensation Commission [1969] 2 WLR 163
The law of Ireland consists of constitutional, statute, and common law. The highest law in the State is the Constitution of Ireland, from which all other law derives its authority. The Republic has a common-law legal system with a written constitution that provides for a parliamentary democracy based on the British parliamentary system, albeit with a popularly elected president, a separation of powers, a developed system of constitutional rights and judicial review of primary legislation.
Canadian federalism involves the current nature and historical development of the federal system in Canada.
Delegated legislation or secondary legislation in the United Kingdom is law that is not enacted by a legislative assembly such as the UK Parliament, but made by a government minister, a delegated person or an authorised body under powers given to them by an Act of Parliament.
A plenary power or plenary authority is a complete and absolute power to take action on a particular issue, with no limitations. It is derived from the Latin term plenus, 'full'.
Multiple Access Ltd v McCutcheon is a leading constitutional decision of the Supreme Court of Canada on the resolution of overlapping federal and provincial laws under the doctrine of double aspect.
Judicial review is a part of UK constitutional law that enables people to challenge the exercise of power, usually by a public body. A person who contends that an exercise of power is unlawful may apply to the Administrative Court for a decision. If the court finds the decision unlawful it may have it set aside (quashed) and possibly award damages. A court may impose an injunction upon the public body.
United Kingdom administrative law is part of UK constitutional law that is designed through judicial review to hold executive power and public bodies accountable under the law. A person can apply to the High Court to challenge a public body's decision if they have a "sufficient interest", within three months of the grounds of the cause of action becoming known. By contrast, claims against public bodies in tort or contract are usually limited by the Limitation Act 1980 to a period of 6 years.
Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653 is a UK company law case, which concerned the objects clause of a company's memorandum of association.
Judicial review is a process under which a government's executive, legislative, or administrative actions are subject to review by the judiciary. In a judicial review, a court may invalidate laws, acts, or governmental actions that are incompatible with a higher authority. For example, an executive decision may be invalidated for being unlawful, or a statute may be invalidated for violating the terms of a constitution. Judicial review is one of the checks and balances in the separation of powers—the power of the judiciary to supervise the legislative and executive branches when the latter exceed their authority. The doctrine varies between jurisdictions, so the procedure and scope of judicial review may differ between and within countries.
Capacity in English law refers to the ability of a contracting party to enter into legally binding relations. If a party does not have the capacity to do so, then subsequent contracts may be invalid; however, in the interests of certainty, there is a prima facie presumption that both parties hold the capacity to contract. Those who contract without a full knowledge of the relevant subject matter, or those who are illiterate or unfamiliar with the English language, will not often be released from their bargains.
British Coal Corp v R is a decision of the Judicial Committee of the Privy Council in which the authority of the Canadian Parliament to prohibit appeals to the JCPC in criminal cases was upheld.
Teo Soh Lung v Minister for Home Affairs is the name of two cases of the Singapore courts, a High Court decision delivered in 1989 and the 1990 judgment in the appeal from that decision to the Court of Appeal. The cases were concerned with the constitutionality of amendments made to the Constitution of the Republic of Singapore and the Internal Security Act ("ISA") in 1989. The latter statute authorizes detention without trial on security grounds. These amendments had the effect of changing the law on judicial review of executive discretion under the ISA by re-establishing the subjective test enunciated in the 1971 High Court decision Lee Mau Seng v Minister for Home Affairs which had been overruled in 1988 by Chng Suan Tze v Minister for Home Affairs, and limiting the right of judicial review to ensuring compliance with procedures specified in the ISA. In other words, the amendments were intended to render the exercise of power by the President and the Minister for Home Affairs under the ISA to detain persons without trial not justiciable by the courts. Both the High Court and Court of Appeal found that these amendments were constitutional because Parliament had done nothing more than enact the rule of law relating to the law applicable to judicial review. Thus, the amendments validly operated to deprive the applicant Teo Soh Lung of the ability to apply to the courts for judicial review.
An objects clause is a provision in a company's constitution stating the purpose and range of activities for which the company is carried on. In UK company law, until reforms enacted in the Companies Act 1989 and the Companies Act 2006, an objects clause circumscribed the capacity, or power, of a company to act. To avoid problems, long and unwieldy 'catch-all' objects clauses were often drafted to include as much potential activity as possible, and thus avoid dealings being found to be ultra vires: the legal position was that any contract entered into beyond the power, or ultra vires, would be deemed void ab initio.
Rolled Steel Products (Holdings) Ltd v British Steel Corp [1986] Ch 246 is a UK company law case, concerning the enforceability of obligations against a company. The case was one of the last significant cases on ultra vires under English company law before the provisions abrogating that doctrine in the Companies Act 1985 became effective.
Illegality is one of the three broad headings of judicial review of administrative action in Singapore, the others being irrationality and procedural impropriety. To avoid acting illegally, an administrative body or public authority must correctly understand the law regulating its power to act and to make decisions, and give effect to it.
Attribution of liability to United Kingdom companies involves the rules of contract, agency, capacity, tort and crime as they relate to UK company law. They establish under what circumstances a company may be sued for the actions of its directors, employees and other agents.
South African administrative law is the branch of public law which regulates the legal relations of public authorities, whether with private individuals and organisations or with other public authorities, or better say, in present-day South Africa, which regulates "the activities of bodies that exercise public powers or perform public functions, irrespective of whether those bodies are public authorities in a strict sense." According to the Constitutional Court, administrative law is "an incident of the separation of powers under which the courts regulate and control the exercise of public power by the other branches of government."
An ouster clause or privative clause is, in countries with common law legal systems, a clause or provision included in a piece of legislation by a legislative body to exclude judicial review of acts and decisions of the executive by stripping the courts of their supervisory judicial function. According to the doctrine of the separation of powers, one of the important functions of the judiciary is to keep the executive in check by ensuring that its acts comply with the law, including, where applicable, the constitution. Ouster clauses prevent courts from carrying out this function, but may be justified on the ground that they preserve the powers of the executive and promote the finality of its acts and decisions.
Hazell v Hammersmith and Fulham LBC [1992] 2 AC 1 is an English administrative law case, which declared that local authorities had no power to engage in interest rate swap agreements because they were beyond the council's borrowing powers, and that all the contracts were void. Their actions were held to contravene the Local Government Act 1972.
The local authorities swaps litigation refers to a series of cases during the 1990s under English law relating to interest rate swap transactions entered into between banks and local authorities. The House of Lords ruled that such transactions were unlawful. As a result of the decision over 200 separate actions were filed as hundreds of interest rate swap contracts had to be unwound by the courts at great expense.
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