A _______ declares that any act contrary or in excess of the scope of the activity of the company will be null and void and not binding on the company.

Question

Accepted Answer

The correct option is 3:
The principle that governs a company's actions being beyond its legal authority is the **Doctrine of Ultravires**. The Latin term *Ultra Vires* literally translates to "beyond the powers." This fundamental doctrine of company law is rooted in a company's Memorandum of Association (MoA), which explicitly defines the objects and scope of activities the company is legally authorized to undertake. Any transaction or act performed by the company that is not authorized by the MoA is deemed *ultra vires* the company, and the effect is that such an act is **null and void** from the very beginning. It is legally ineffective and cannot be ratified by the shareholders, thus protecting both the shareholders and creditors from unauthorized use of the company's funds and resources.

The incorrect option is 1:
A **Quasi-Contract** is not a formal contract but an obligation imposed by law on a party to pay another to prevent unjust enrichment. It operates on the principle of equity and justice, where the law creates a fictional contract to ensure fairness, such as paying for goods mistakenly delivered to you. This concept is entirely a matter of general contract law and is not related to the powers or capacity of a company as defined in its constitutional documents. It does not declare an act to be null and void because of a company's lack of authority.

The incorrect option is 2:
An **Illegal Contract** is an agreement whose object or consideration is unlawful, such as an agreement to commit a crime, and is thus explicitly forbidden by law or opposed to public policy. An illegal contract is indeed null and void. However, the Doctrine of Ultra Vires is a more specific concept in corporate law, voiding an act not because it is inherently illegal, but simply because it is *outside the scope of the company's defined objective* as stated in its foundational document, the MoA, even if the act is otherwise lawful.

The incorrect option is 4:
**Void Contracts** are a broad category of agreements that are unenforceable by law (e.g., contracts with a minor or an agreement with an uncertain meaning). While an *ultra vires* act does result in a contract that is void, the term 'Void Contract' is a general term from contract law that refers to the legal status of an agreement. The term that specifically *declares the principle* that acts exceeding a company's power are null and void is the more precise corporate law concept: the Doctrine of Ultra Vires.