Rule of Constructive Notice

Constructive notice is a notice where all people dealing in a company deemed to have knowledge of the company’s articles of connection and memorandum of association.

The notice prevents outsiders from suing the company with grounds of not understanding the company’s current powers and positions. Under the law, each party to a legal action must be given notice of the action with copies of documents filed with the court. It is an idea in a legal world that a person may be informed by the public posting of a pending legal action. The Doctrine of Constructive notice provides protection to the company from outsiders and restricted to the external position and affairs of the company. Memorandum and Articles of association are public documents. It attracts society with its complexities in the areas of the economy, infrastructure, law. The outsider does the business of the company and expects each outsider not only to know the documents of the company but also presume to understand the exact nature of documents. If a person enters into a contract which was against the memorandum or beyond the powers. The doctrine is generally constructed with regards to a legal notice published or posted them at a designated place.

Introduction

Constructive notice is a notice that refers to memorandum articles and any supplementary document which is publically filed with the registrar. This notice prevents outsiders from suing the company with the basis of not understanding the companies present powers and positions. Under the law, each party to a legal action must be given notice of the action with copies of documents filed in the court. Example of Constructive notice is the recording in divorce papers, registries of deeds, liens, Mortgages and other types of documents that are essential for Public Information. Courts may actually work with plaintiffs on cases wherein service may be hard to perform. Providing proper notice is so critical to a case. Courts will not forgive proper notice even if the interested parties receive actual notice of the suit. Notice can be provided in -hand (In personam) or (In rem) which means to anyone in the world that may be affected by the outcome of the case. The plaintiff’s attempts to serve notice on the defendant fail when he cannot be located on manage to avoid personal service. The concept of constructive notice allows the defendant to be noticed through public posting. The doctrine of constructive notice is more real and unreal doctrine. Constructive notice in real estate is a notice that provides the public via recorded documents about interests and rights in real estate. Constrictive notice can even be provided through publications in a local newspaper. In company law one of the most important doctrines that come our way is the doctrine of constructive notice. The doctrine of constructive notice implies that the article of association is well known by the outsider who seeks to hold any relation with the company in the near future because the article of association of the company is a public document and is available to everyone according to Section 399 of the companies Act. The rule of constructive notice extends not merely to memorandum and articles but also to all the other documents which are required to be registered with the registrar of companies for the sake of records only. The doctor of constructive notice doesn’t apply. Under the doctrine of constructive notice, it is the outsider. It is burdened with the responsibility to know the documents that guide the company. A person should be well aware of all legal documents before signing any deal with the company. It is also the responsibility of the third party to understand the real meaning of the provision and terms therein. The doctrine favors corporate bodies.

Fundamental Clauses Under the Rule of Constructive Notice

  1. Name clause
  2. Registered office clause
  3. Objects clause
  4. Liability clause
  5. Capital clause

There are Several Types of Notices

  1. Public notice (legal notice)
  2. Actual notice
  3. Constructive notice
  4. Implied notice

This notice is information that is given legally or normally to a person or group of persons to certain information or notice which is given legally asks by the court to a person notifying. Notice is mainly stimulated by the information related to any topic.

Constructive Notice V. Actual Notice

Constructive notice contradicts from an actual notice in that Constructive notice prepare that the interested party to legal action by making the information as public as possible. Constructive notice is also known as legal fiction because the courts prepare the interested parties to have knowledge that they may not actually have. Constructive notice has exactly relied upon an interested party. Actual notice, on the other hand, refers to a person being directly given notice that an extant case may affect his interests. The rule of constructive liability is an unrealistic doctrine.  

Legal Terms Related to Constructive Notice

Affidavit of Service

An authentic document signed by a process attendant that notes the time, date, type of service. Identity of the person served. If the person who was served claims to have not been notified of the lawsuit. It can be presented to the court to prove otherwise.

Plaintiff

A person who conducts a legal action against another person or organization. Such as a civil lawsuit or criminal activities.

Process Attendant

A person whose job is to serve individuals with legal documents. E.g- Warrants, Writs.

Summary Judgement

A final decision on the case handed down by the Judge on the basis of statements and Evidence presented without a full trial.

Summons

An order or deception to appear in court or to appear before a judge or magistrate.

Leading Case Under the Doctrine of Constructive Notice

Kotla Venkataswamy V. Chinta Ramamurthy:  AIR 1934 Madras 579A:  In the article of the company there was written that if the company property will be mortgage then in the Mortgage deed there will be a requirement of three signatures is of the managing director, working director, company secretary. But in this case, there were only two signatures on the mortgage deed which is of secretary and working director. The court said that the mortgage deed was invalid due to two signatures over it. And the plaintiff cannot claim under this. It was presumed that the lady was known about the facts. The court has presumed that you have gone through the facts of the company or read before dealing with the company. And hence she was not entitled to claim from the company. She is liable for her own wrong. The Company has not been made liable. So this case is co-related with the Doctrine of Constructive notice. It clarifies that the Doctrine of Constructive Notice works in the favor of the company not the outsiders. Before dealing with any company the outsider must read the articles and memorandum of the company. So, that if any damage happens then the company is not liable. In the eyes of law, it is the assumption of the knowledge before dealing with any company.

Exceptions

Once the person has actual knowledge or constructive notice of any divergence in the internal proceedings of the company. Once the person dealing with the company was negligent the irregularities could have been discovered through inquiries acted in a prudent manner. Once the person dealing with the company banks upon a forged document.

Effects of Doctrine of Constructive Liability

Every person dealing with a company makes sure that the contract is having conformity with provisions. Article 15 of the company provides cheques, Certificates and other instruments. The person dealing with the company is considered not only to read the documents but understood them in a proper manner. In the case of ultra vires acts of the companies, another party cannot claim relief on the grounds of the unaware powers of the company. The courts of India have also been reluctant in applying the doctrine of constructive liability.

Conclusion

The effect of Constructive notice harsh on the outsider who does business with a company. An outsider who deals with companies is deemed to have constructive notice of the contents of the documents of the company. A stranger cannot claim resistance on the grounds that he was unaware of the powers of the company in case of ultra vires of the company. As censure of the doctrine of Constructive notice. Notice that a person can apply average care and actuality as a matter of duty. The notice must provide information to all interested parties for a lawsuit. It must provide a written notice to the defendant and also provides an opportunity for the defendant to respond to the complaint in the court.

Questions

Q1. What is the notice? Relate it to the Constructive notice.

Q2. What is In Personam or In rem?

Q3. what are the types of notice?

Q4. Describe some legal terms related to constructive notice in your words.

Q5. What are the facts of the leading case of Kotla Venkataswamy V. Chinta Ramamurthy?

Leave a Reply

Your email address will not be published. Required fields are marked *