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THE

AMERICAN Law REVIEW.

SEPTEMBER-OCTOBER, 1916.

ENFORCEABILITY OF CONTRACTS OF UNREGISTERED FOREIGN CORPORATIONS. The effect upon contracts and legal rights of the doing of business within a State by a foreign corporation which has not complied with the foreign corporation laws of the State has been a fruitful source of litigation. The decisions of the various States are hopelessly irreconcilable. The practicing lawyer who desires to advise his client correctly on this subject must consult the latest decisions and statutes of the particular States.

Within recent years many of the States have enacted statutes expressly providing that contracts entered into by unqualified foreign corporations are to be held void or unenforceable at the suit of such corporations; while other States have expressly provided that failure to qualify shall not affect the validity of any contract. To the courts, however, are left the questions of determining what effect the statutes are to have in the Federal courts and those of, other States, and what effect is to be given to the conduct of parties acting on such contracts before or after complying with the State law.

Each State has the power to determine for itself what the contract rights of a foreign corporation doing business within its borders shall be, so long as the State does not impose direct burdens upon interstate business and the VOL. L.

(641)

41

activity of Federal agencies. If the State statute has the effect of wholly invalidating contracts, other jurisdictions, including the Federal courts, are bound thereby and may not entertain actions by foreign corporations on such contracts if the invalidity is pleaded. Where, however, the sole effect of the statute is to deny a remedy in the State courts, without invalidating the contracts, other jurisdictions, including the Federal courts, may enforce the contracts. See cases, infra.

The questions here considered arise almost entirely in cases where the foreign corporation seeks recovery upon a contract. When relief is sought against it, it is almost universally held that the corporation may not set up its own violation of the law as a defense. The existing rule in each State is attempted to be here set forth. Alabama.

In this State, it is provided that every foreign corporation shall, before doing business therein, file an instrument with the Secretary of State designating its authorized agent, and shall also file a certified copy of its articles of incorporation. Sec. 3642 Code. Doing business before filing such instrument is expressly made unlawful. Sec. 3644 Code. It is further provided that every corporation shall be required to procure from the Secretary of State a permit admitting it to do business in the State. Sec. 3651 Code.

1 Loomis v. People's Const. Co., 211 Fed. Rep. 453; Horn Silver Mining Co. v. N. Y., 143 U. S. 314; Taber v. Interstate B. & L. Assn., 91 Tex. 92; Butler Bros. Shoe Co. V. U. S. Rubber Co., 156 Fed. Rep. 1, and cases cited; Goodner Krumm Co. v. Owens Mfg. Co., 152 Pac. 86.

Of course, the statutes here considered do not apply to interstate commerce. The succeeding discussion is not concerned with the definition of “doing business" or "transacting business" in the par ticular States, but assumes that the

questions considered arise with respect to such corporations and such business or acts as come within the scope of the statute in question,

Some' States have special statutes applicable to insurance companies, public service companies, and building and loan associations; they are not included in this paper.

2 Chattanooga B. & L. Assn. V. Denson, 189 U. S. 408; Loomis v. People's Const. Co., supra: Chapman v. Hallwood Cash Register Co., 73 S. W. 967.

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