Constructive notice
Constructive notice is the legal fiction that signifies that a person or entity should have known, as a reasonable person would have, even if they have no actual knowledge of it. For example, if it is not possible to serve notice personally then a summons may be posted on a court house bulletin board or legally advertised in an approved newspaper. The person is considered to have received notice even if they were not aware of it.[1][2]
The phrase "legal fiction" should not be construed to mean that the concept of constructive notice is legally invalid.
The recording of deeds, mortgages, liens, and similar documents in county registries in the United States is considered constructive notice that such land conveyances or encumbrances have taken place.
In companies law the doctrine of constructive notice is a doctrine where all persons dealing with a company are deemed (or "construed") to have knowledge of the company's articles of association and memorandum of association. The doctrine of indoor management is an exception to this rule.
The New York City Housing Court allows use of the concept of constructive notice by either the tenant or the landlord. For example, constructive notice could be given to a landlord if a broken and unsupported metal grate on a public sidewalk which when stepped on by a pedestrian collapses. The landlord is reasonably expected to know that this is a safety hazard.
Indoor management
The harshness of the doctrine of constructive notice is somewhat reduced by the "Rule of Indoor management" or "Turquand's Rule". The Rule derives its name from the case of Royal British Bank v Turquand, where the defendant was the liquidator of the insolvent Cameron's Coalbrook Steam, Coal and Swansea and Loughor Railway Company. The company had borrowed from Royal British Bank by giving a bond worth £2,000.
The articles of the company stated that the directors could only borrow if authorised by a resolution of the company's general meeting, and could not borrow more than the amount specified in the resolution.
The articles were registered with Companies House so there was constructive notice. But the bank could not have known about the resolution, as they were not registrable and thus were not a public document. The bond was held valid and there was no requirement to know the company's internal workings.[3]
References
- ↑ "constructive notice". Legal information institute. Retrieved November 18, 2012.
- ↑ "constructive notice". legal-dictionary.thefreedictionary.com. Retrieved November 18, 2012.
- ↑ Royal British Bank v Turquand