372
THE GREEN BAG
CONTRACTS (Parties. Public Service Companies)
AN argument against the " Liability of Water Companies for Fire Loss," by Albert Martin Kales, is published in the May Michigan Law Review (V. iii, p. 501). He contends for a strict application of the law of contracts and shows that even under the common excep tions, known as the "Lawrence v. Fox" and the "sole beneficiary " rules, a property owner can claim no right to sue on the contract of a water company with the city to supply water for fire purposes. To the argument from hardship that if the citizen damaged cannot sue there is no real remedy, because the city cannot recover substantial damages, he says that there is sufficient protection in the right of the city to enforce specifically the per formance of the contract, and to protect itself by forfeiture of the franchise. CORPORATIONS (See Associations and Contracts) CORPORATIONS (Federal Control) FEDERAL incorporation or regulation as the remedy for the present uncertainty and diver sity of corporation laws is advocated in an article in the May Yale Law Journal (V. xiv, p. 385), entitled " Incorporation by the States," by Herbert Knox Smith, Deputy Commis sioner of Corporations, Department of Com merce and Labor. "For the legal theory of the corporation we are indebted largely to the Roman law, which, with the strict logic of Ahat law, laid stress upon the wholly artificial nature of the corporate entity, regardless of the natural in dividuals composing its membership. This tendency in the treatment of the corporation was naturally predominant at the time when our corporate system was formed, at which time the corporation was more important as a theory than as a fact. Our courts accord ingly developed the corporation on theoretical lines. Logic demanded that the relation of the individual stock-holder to the corporation, and as a part of the corporation, be minimized, and the result was that, when, in the latter half of the last century, the economic forces began to operate upon our corporate system, the corporation known to our law was a highly artificial entity. "... "Then came the swift progress of the coun
try towards material prosperity, the accumu lation in the hands of many individuals of small surpluses of capital, the development of great enterprises, the increase of the minimum ' unit of efficiency ' in given businesses, and the accompanying concentration of capital in a few hands. To meet these conditions, the legal form of doing business known as the corporation was required, and into the old artificial framework of corporation law already constructed was turned the rush of these great economic forces, and the over-predominance of legal theory gave way to a corresponding over-predominance of practical necessity, until our present corporation system, in its distorted and disproportionate outline, shows the effect of these forces, as a geological formation shows the effect of overwhelming forces of disturb ances. "With these forces pressing upon the legis latures, the modern history of our corporate system opens. The results reflect the motive forces. Regardless of theory, or consistency, or permanence, or the proper and proportion ate protection of the interests involved, legis lation yielded to the new pressures, and a structure was built up which is a marvel and a monument of opportunist make-shift. "At first, it is true, the states held back, retaining the old notion of the semi-sacredness of the corporate franchise as a special privilege and grant of sovereignty. Then the comity of the states began its logical work; the more accommodating states got the larger share of the revenue-bringing incorporation. The con servative states gained only empty credit for their caution, and their own citizens journeyed to other states for easy incorporation, and returned home a foreign corporation, paying taxes and owing allegiance elsewhere, but, through the comity of states, doing business freely in the practically helpless conservative state. Then as the century closed, the use of the corporation as a mere stock-jobbing tool became suddenly important. This process is as yet only partially complete, but what the final product will be under existing conditions is obvious now." . . . "Since the earliest historic times, our race has been engaged in a continuous struggle to establish the liberty of the individual, and the one continuous method for this end, and the one toward which our struggles have beer
