These principles included the ability of shareholders to ratify an ultra vires transaction; the application of the doctrine of estoppel, which prevented the defense of ultra vires when the transaction was fully performed by one party; and the prohibition against asserting ultra vires when both parties had fully performed the contract.
In corporate law, ultra vires describes acts attempted by a corporation that are beyond the scope of powers granted by the corporation's charter, the laws authorizing its formation, or similar founding documents.
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).
Even though dicta supporting the view that ultra vires acts were totally void appeared in many cases, most courts actually adopted the view that such acts were voidable rather than void.
If an agent of the corporation committed a tort within the scope of his or her 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 are chartered to allow them to transact any lawful business.
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