“A corporation may be defined as a legal entity or artificial person.” Explain what is meant this statement

“A corporation may be defined as a legal entity or artificial person.” Explain what is meant this statement

ANSWER

  • A corporation is an association of persons recognized as a legal entity. It has an independent legal existence. It is a body corporate or a juristic person. It is an abstraction of law. This statement is a correct observation.
  • A corporation is an artificial person in that inter alia, it is created through a legal process for example charter, statute or registration. The person formed is juristic or abstraction of law. In company law, this is referred to as the rule in Salomon V. Salomon and Co. Ltd.
  • A corporation has several characteristics peculiar to it, for example:
    • Perpetual Succession: being a creation of law, it has capacity to exist in perpetuity, it can only be killed through a legal process.
    • Sue or be sued: a corporation has capacity to sue to enforce its rights and maybe sued on its obligations.
    • Capacity to contract: a corporation has legal ability to enter into contractual relationships. It can hire and fire.
    • Owing of Property: it has capacity to own property. The property of a corporation is vested in it. It has an insurable interest in it.
    • Common Seal: a corporation has a common seal to authenticate its transactions.

These characteristics clearly demonstrate that a corporation is an artificial person.

Among the various ways in which a contract may be discharged is performance which literally means fulfillment of the parties obligations as originally agreed. Originally, the common law did not acknowledge discharge performance unless the obligations were performed precisely and exactly. This is the common law doctrine “precise and exact” which insisted that every part of the contract had to be performed i.e. contractual obligations had to be observed to the letter.

  • This doctrine is best exemplified the decision in Cutter V. Powell. Where it was held that Mrs. Cutter was not entitled to compensation as her husband had not performed his part of the contract precisely and exactly. This decision illustrates how unfair the doctrine of precise and exact can be in that Mr. Cutter had rendered services from August 2nd to September 20th when he died. Yet the employer is under no obligation to pay anything. This far it is evident that discharge performance means performance must be precise and exact. However, the doctrine of price and exact has been modified and there are several circumstances in which performance need not necessarily be precise and exact for parties to be discharged for example.
  • Divisible Contracts: if a contract can be divided into different compartments to be paid for separately, e.g. contract of carriage of goods payable per tonne, performance of part thereof entitles the party to payment on Quantum Meruit. As was the case in Ritchie V. Atkinson.
  • Substantial Performance: if contractual obligations are almost fully performed the party performing is entitled to payment for work done. What amounts to substantial performance is a question of fact. This exception is illustrated the decision in Marshides Mehta and Co. Ltd. V. Barrong Verhegen.
  • Partial Performance if accepted: if a party to a contract expressly or implied agrees to pay for a partially performed contract, the party is bound to pay for the portion completed. The decision in Sumpter V. Hedges illustrates this exception.
  • Prevented Performance: if a party ready and willing to perform its part of the contract is prevented from doing so the other or the others fault, the party is entitled to payment on Quantum Meruit. The decision in Planche V. Colburn is explicit on this.
  • Frustration of Contract: a contract is frustrated when performance of the obligations is rendered impossible unforeseen or extraneous circumstances for which neither party is to blame. In such a case parties are discharged without precise and exact performance.

In summation, it is arguable that whereas it is true to surmise that for a contract to be discharged performance, performance must be precise and exact, this is only the general rule to which there are many exceptions.