“The doctrine of ultra vires was a nuisance to the company and a trap to unwary third parties.” Explain the principles in the doctrine of ultra vires and the exceptions thereof.

• Ultra vires: literally means beyond the powers.
• This is a rule of capacity respecting registered companies.
• This rule means that a company‟s contractual capacity is restricted to transactions set forth in the objects clause of the memorandum and those that are reasonably incidental to the attainment or pursuit of such objects.
• A transaction is deemed ultra vires if it is beyond the capacity of a company.
• Such a transaction is null and void and unenforceable.
• This doctrine was explained in Ashbury Railway Carriage and Iron Co. V. Riche (1875) and Attorney General V. Great Eastern Railway Co. (1880).
• Since this doctrine restricts the company‟s capacity to contract it is arguably a nuisance to the company. In addition this doctrine may be pleaded either the company or the third party. Bell houses Ltd V. City wall properties Ltd (1966).
• It is a trap to unwary third parties in that a 3rdparty who is unaware of the company‟s capacity cannot enforce a transaction which is ultra vires the company.
• However, such a party may where circumstances permit sue the company for tracing or enforce subrogative rights.
• The party may also have a personal action against the directors of the company.
• However, this doctrine has been watered down and companies enjoy almost unrestricted capacity and the probability of a transaction being ultra vires the company is tremendously reduced for example:
o Inflating the objects clause.
o Use of subjective clauses.
o Use of independent objects clauses.
o Companies have capacity to alter the objects clause.
o Willingness of courts to imply powers where non is expressly provided for.

In my view, the doctrine is no longer a nuisance to the company.

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