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Just having trouble understanding the following paragraphh in bpp textbook:
constiitution as a supplement to contracts:
if an outsider makes a separate contract with the company and that contract contains no specific term on a particular point but the constitution does does, then the contract is deemed to incorporatebthe constitution to that extent. One example is is when services , say as a director, are provided under contract without agreement to remuneration.
I’ ve understood that the constitution doesn’t bind members in another capacity to the company never mind outsiders? Really confusing….Hi, you’re corrcet, it doesn’t. But in the example you have quoted, we are not relying on the constitution to establish whether ther is a contract. We can see there is a separate agreement. the only thing missing from that separate agreement is the rate of pay. There is still an agreement! Now, how do we resolve the “rate of pay” problem? The court won’t get involved – it won’t say “you should pay ( say ) 150,000 per annum”. However, the court will look to see what figure both parties thought was reasonable and, in our case, both parties have indicated that the figure mentioned in the contract was reasonable
thanks! So just to recap, that i got it right. in the case of new british iron co, it was a member director whose salary was not fixed. so the book means by “an outsider” as an outsider to the constitution, as the claim is made in the employee’s capacity rather than member’s capacity? This could never be applied to a total outsider to the company say just making a totally unrelated contract?
agreed. In New British Iron, Beckwith agreed to serve as MD and the company appointed him MD but without the formality of a detailed contract. However, this was a contract by conduct ( or an oral contract – it really doesn’t matter which ). The only thing missing from the contract was the specification of how much the salary should be. the articles specified the amount and the court took the article figure to be an indication of the amount both parties had assumed to be a reasonable sum
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