Howard V. Patent Ivory Company Case Summary
The rule will not be applicable if the person dealing with the company has slight knowledge about the lack of authority of the person who is acting on behalf of the company. The doctrine of indoor management will not be applicable in this case.
In the case of Howard v. Patent Ivory Co. , according to the articles of the Company, the directors cannot borrow more than 1000 pounds without the consent of the company’s annual general meeting. In the above case, the directors borrowed 3500 pounds without the consent of an annual general meeting from another director who took debentures. The plaintiff was also a director. It is then established that he has the knowledge about the internal irregularity that existed in the company. It was held by the
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Proved Tin & General Investment Co , the director of the company entered into a contract with Rama Corporation while acting on behalf of the company. A cheque was also taken from the Corporation. The articles of the company provided that the director may delegate his/her power. However, Rama Corporation did not have knowledge of this aspect. The articles and memorandum of the company was not known to the Corporation. It was later seen that the company had not enabled the delegation of power to the above mentioned director. It was held by the Courts that the plaintiff could not take the remedy of the indoor management since they did not have knowledge of the articles of the company and did not know that the power could be …show more content…
Turquand, no such exception to the rule existed since the third party acted on good faith and did not have any knowledge as to the irregularity. It also had complete knowledge of the articles of memorandum and association of the company, and forgery and negligence was not carried out on behalf of the Bank. Hence, the Bank can claim the loan, and hold the defendant liable. Even though the third party is given a benefit of convenience, this is not absolute in nature. It is subject to restrictions. Hence, we can say that Royal British Bank did not commit any of the above mentioned activities that would disallow the granting of the rule of Indoor
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