Aadesh
It is mandatory for companies to disclose information relevant to society through their public documents such as, the ‘Memorandum of association’ and the ‘Articles of association’. Any individual or group interested in doing business with a company must peruse these documents to obtain enough knowledge about the company as required by them.
Ideally, when entering into a contract, it is unlawful for one party to suppress information that would likely impact the other. The Doctrine of Constructive Notice is a legal concept which presumes that a party which has agreed to engage in business with a company, is aware of all the details mentioned in its public documents and that the company need not ensure that the party is well aware of these facts. This doctrine protects companies from being sued by such parties on grounds of concealing crucial facts provided, these information have been mentioned in its public documents.
An exception to this concept is the Doctrine of Indoor Management. propounds that a party unaware of internal and sensitive information of the company, can presume that acts done by it are lawful and within its scope. Therefore, in the event of liability arising out of such acts, the party is exempted from any liability. The party cannot be held accountable, irrespective of its degree of involvement in the transaction, owing to the fact that it has no knowledge of the inner discrepancies which fall under the company’s internal management and were not open for the party to know about it .
Hence, the Doctrine of Constructive notice protects companies from legal action initiated by contractual parties, while the Doctrine of Indoor Management protects parties from any liability,for wrongs committed by companies which are hidden from the party.
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