In City of Arcata v. Green (1909) 156 Cal. 759, the board of trustees of the city granted to the defendants the right to construct and operate an electric railroad within city limits. The grant was made on the condition that the defendants also construct and operate an electric railroad between Eureka and Arcata. The defendants failed to perform as required, and the city brought an action to recover on a bond they had posted. Our Supreme Court refused to permit recovery because the city had no power to condition the grant on the defendants' construction and operation of a railroad between Eureka and Arcata. The city could not regulate matters outside of its boundaries. The condition, therefore, was "extraterritorial" and void. ( Id., at pp. 763-764.) The city contended "that the defendants, having received the grant which they had sought, are estopped to deny the validity of their undertaking which they gave in consideration of such grant." ( Id., at p. 764.) The court held that the doctrine of estoppel was inapplicable because the condition imposed by the city was wholly beyond the scope of its powers. The court stated the following rule (hereafter Arcata rule): "A party contracting with a city regarding a subject-matter within the scope of the city's powers may, where he has received the benefit of the contract, be precluded from asserting that the contract was not, on the part of the city, executed in the manner required by law. The doctrine, however, cannot be made to cover contracts entirely beyond the range of the municipal authority." (Ibid.)