Legal justification - constructive notice, Business Law and Ethics

Assignment Help:

Legal justification - Constructive notice:

The legal justification for this rule is that since the company's public documents in its file at the Companies Registry are available there for inspection by any interested member of the public he should have gone to the Registry, asked for the Company's file, inspect the contents and, having found the memorandum of association, read the objects clause in order to ascertain whether the proposed contract is consistent with the company's objects. He would then have realised that the contract was not within the company's objects. If he fails to do so and it happens that the concluded contract was neither expressly nor impliedly within the company's objects, he will be regarded as having been aware that the contract was ultra vires. He cannot therefore be allowed to enforce it. The "constructive notice' rule may be likened to the old adage, "you can take a donkey to the river but you cannot force it to drink", but with the addition that, on your way back home, you would be entitled to tell the donkey: "Since you have simply refused to drink for no apparent reason, I will take it that you have drunk for today. I will therefore not take you to the river again today but will do so tomorrow when the drinking time comes".

There appears to be no moral justification for allowing a person contracting with a company to rely on his own inaction as the basis for instituting legal proceedings against the company. It is rather tempting to say that the law, like God, protects only those who also protect themselves.

The only plausible criticism that could be made against the constructive notice rule is its assumption that a potential contracting party who reads a company's objects will be able to make the correct legal conclusion regarding the vires of the proposed transaction, and its refusal to validate the transaction in cases where the party mistakenly believed the proposed contract to be intra vires the company.

The fact that a perusal of the company's objects clause does not guarantee its correct interpretation is amply demonstrated by a number of English cases in which judges of the High Court, having read a disputed clause, concluded that the transaction was intra vires but the decision was later on reversed by the Court of Appeal or the House of Lords. If such senior judges can differ over the vires of a particular transaction, why should an ordinary businessman, or his legal advisor, be expected to decide the matter correctly?

A close study of some of the relevant English cases pertaining to this issue, particularly the Ashbury case, seem to indicate that the decision of the higher court which finally disposed of the case was "correct" only in the sense that the higher court, being constitutionally mandated to make the final decision, also made the "correct" decision.

There seems to be no legal justification for retention of the constructive notice rule. The fact that a person intending to contract with a company read the company's objects does not guarantee that he will interpret it correctly. And there appears to be no moral justification for blaming a person for not making a decision that was beyond his technical competence to make.


Related Discussions:- Legal justification - constructive notice

Duty of an auditor, Duty of an auditor: The duty of an auditor general...

Duty of an auditor: The duty of an auditor generally was very carefully considered by this court in RE: LONDON AND GENERAL BANK (1895) and I cannot usefully add anything to wh

Importance of sound public opinion in public policy making, Question 1: ...

Question 1: "Defining the problems of society and ensuring that they are placed on the governmental agenda constitutes the most important stage of policy making process." Discu

Describe about the policy agenda setting, Describe about the Policy Agenda ...

Describe about the Policy Agenda Setting Agenda setting under direct democracy. Agenda setting concerns to the rules on the grounds of which policy proposals come up for a vote

"detriment" as consideration, "Detriment" as consideration  An example...

"Detriment" as consideration  An example of a 'detriment' that will legally suffice like the consideration for a promise is provided with the case of Carlill v. Carbolic Smoke

Interpret compliance requirements, For this unit you will be given a hypoth...

For this unit you will be given a hypothetical business situation, which is to be developed in line with statutory and voluntary compliance requirements to enable the business to o

Wbp, what is wbp? and its danger and benefits ? components of wbp?

what is wbp? and its danger and benefits ? components of wbp?

Best arguments to support the objections, A man is standing at a bar. ...

A man is standing at a bar.  His friend Sam says to him, "Jim, it was Claude who scratched your car and slashed all your seats." Two days later Jim is found beaten i

incorporation, Incorporation  Osborne's "Concise Law Dictionary" defi...

Incorporation  Osborne's "Concise Law Dictionary" defines incorporation as a "merging together to form a single whole; conferring legal personality upon an association of indi

Ethics, Assignments should be submitted on or before the due date. Zero mar...

Assignments should be submitted on or before the due date. Zero mark will follow late submission of an assignment unless you have an acceptable reason approved by the instructor.

Examine the features of the main sources of law in mauritius, QUESTION 1 ...

QUESTION 1 Arbitration has proved itself to be a valuable scheme in alternative dispute resolution of conflicts. Discuss the advantages and disadvantages of Arbitration as a su

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd