Diamond Glue Co. v. United States Glue Co.
Headline: Court upheld Wisconsin’s rule that out-of-state corporations must file charters before doing business, allowing a Wisconsin company to decline performance when the Illinois firm had not complied with the registration requirement.
Holding:
- Allows states to require foreign corporations to register before doing business.
- Permits local companies to refuse contract performance if an out-of-state firm hasn’t complied.
- Limits constitutional contract protections and interstate-commerce objections to state registration rules.
Summary
Background
An Illinois corporation agreed to supervise, manage, and operate a glue factory to be built in Wisconsin for a Wisconsin corporation. The five-year contract required the Illinois firm to supply a superintendent, manage manufacture, and handle sales. Wisconsin had enacted a law requiring out-of-state corporations to file a copy of their charter and pay a small fee before doing business there; the Illinois company had not filed. The Wisconsin company refused to continue, the trial court upheld that refusal, and the Illinois firm challenged the ruling as unconstitutional.
Reasoning
The Court addressed whether the state law invalidated or unlawfully impaired the contract or unconstitutionally interfered with interstate commerce. It held the filing rule was not retroactive in an unfair way, because the statute had been enacted before the contract and later came into effect with clear notice. The Court said the contract plainly required the Illinois company to carry on business in Wisconsin, so the filing condition applied. The filing and small fee were a lawful condition that could be avoided by compliance, and the rule did not meaningfully impair the contract under the Constitution. The Court also found the contract’s possible interstate sales did not prevent regulation, and it treated the part of the statute applying to partnerships as severable.
Real world impact
The Court affirmed the lower-court judgment, allowing the Wisconsin company to refuse performance when the out-of-state firm had not complied with the registration requirement. Businesses doing work inside a State must follow that State’s registration rules or risk losing contract rights.
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