Who can enforce the articles of association - Essay Example

This sort of contract (statutory contract) has certain features distinct from an ordinary contract. These features were explained by the Court of Appeal in Bratton Seymore Service Co Ltd v Oxborough. These features include: i. Origin. The contract being a statutory one originates from the statute instead of an agreement between the parties. By virtue of the fact that it is statutory, it cannot be invalidated on grounds of misrepresentation, mistake, undue influence or duress. iii. Ammendment. The contract can only be amended by a special majority.

This means that only a minimum of three-quarters of the members are required to vote in favor of the resolution. This is encapsulated under Sec. 21. With the contracts characterized by the above features the question of enforcement becomes a major issue mainly because of the last feature- Rights. Not all members of the company have the right to enforce rights contained in the articles. So this raises the question- who has such rights? The enforcement of statutory contracts has been the subject of constant academic debates due to contradictory case law.

This will be illustrated by two cases. The following two cases illustrate the complexities that arise when a member tries to enforce a company’s articles. In this case, the articles contained a clause stating that a certain member would be appointed as the company’s solicitor. This member was not appointed as such and proceeded to unsuccessfully sue the company for breach. The court held that the member could not sue simply because there was no contractual relationship between a member as solicitor and the company.

The company’s articles of association contained a clause stating that ‘no resolution of directors on certain matters would be valid if either of two named managing directors voted against the resolution’. The plaintiff was one of the managing directors and he voted against this resolution but the company