ship  is  to  be  organised,  the  individualistic  answer  is  again
clear :  viz. that  it  should  depend  on  free  contract  among  the
members  of  the  group,  because  men  in  general  can  deter-
mine on  what  terms  they  can  combine  better  than  govern-
ment can  determine  for  them. If  such  collective  ownership
is  to  be  useful  it  must  carry  with  it  the  capacity  of  being  the
subject  of  rights  arising  out  of  contract ;  and,  obviously,  the
corporate  body  or  "artificial  person"  who  possesses  these  rights
must  equally  be  the  subject  of  contractual  obligations,  and
obligations  attaching  to  property. But  a  little  reflection  will
show  that  obligations  can  only  be  to  a  limited  extent  trans-
ferred to  .such  an  artificial  person  by  the  real  persons  com-
prising it. It  is  evident  that  such  persons  cannot  be  allowed
to  diminish  their  general  responsibility  for  the  observance  of
the  rights  of  others ;  it  would  be  absurd  that  by  any  com-
pact among  themselves  they  should  be  able  to  contract
themselves  out  of  prior  legal  obligations  to  other  men ;  there-
fore, if  anything  is  done  in  the  name  of  an  artificial  person,
by  which  such  obligations  are  violated,  the  individuals  who
do  it  must  be  liable  as  such.^

The  case  is  different  with  obligations  arising  out  of  con-
tract :  it  is  clearly  in  accordance  with  the  individualistic  prin-
ciple that  a  group  of  persons  should  be  allowed  to  contract
on  the  basis  of  "  limited  liability,"  provided  this  is  clearly

'  An  exception  to  this  rule  may  reasonably  be  made  in  the  case  of  the
secondary  and  indirect  liability  which  a  company — formed  on  the  basis  of
limited  liability — may  incur  for  the  acts  of  its  employees. In  this  case  the
limitation  of  liability  may  fairly  be  allowed  to  hold  good  for  liabilities  6a;
delicto,  as  well  as  for  liabilities  ex  contractu. The  rationale  for  this  exception
is,  that  the  extension  of  liability  from  agents  to  principals  is  hardly  justifiable
without  some  straining  of  the  conception  of  negligence. 