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Home > Journals > Michigan Law Review > MLR > Volume 13 > Issue 4 (1915)

 

Abstract

The principles underlying the obligations to third persons of the members of defectively incorporated associations, are few and not difficult of apprehension. Yet there is hardly a topic in the law of private corporations upon which the views of both courts and theoretical writers dre in more disagreement. This disagreement is concerned largely with three questions, namely: What is the basis and scope of the doctrine of de facto corporations? Are persons dealing with the associates on a corporate basis estopped to deny the corporate character of the association? Are the associates ipso facto liable as partners? Upon all of these questions there are various shades of opinion. The de facto doctrine, while of recent growth, is well established in American law, although some writers still deny its existence as a separate doctrine, and it finds no support in the English cases. But notwithstanding that the American courts almost universally accept the doctrine, there is disagreement as to its scope. According to the weight of opinion the doctrine does not extend to associations formed under unconstitutional statutes, but the decisions on that point seem few and about equally divided, Regarding the applicability of the principles of estoppel for the protection of the associates, there is no consensus. Some courts deny altogether that estoppel may arise. Others would confine estoppel to cases where the de facto doctrine exists. And still others would apply it independently of the de facto doctrine. There is less difference of opinion, but more confusion, upon the question of partnership liability. The view supported by the preponderance of judicial and text-book opinion, is that the association is ex proprio vigore, a partnership, and the associates are liable for its debts as partners, except perhaps in cases controlled by the de facto doctrine.

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