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.

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.

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 Royal British Bank. v. Turquand case where the defendant was the official manager(liquidator) of the insolvent ‘Cameron’s Coalbrook Steam, Coal, and Swansea and London Railway Company’. The Company had borrowed from Bank's current a/c by giving a bond worth 2000 Pounds.

It was held that the company's Directors were authorized to enter into transactions of borrowing money provided they were allowed to do so by a company resolution. The resolution was passed and the Bank on verifying such resolution only did they lend such money to the company. The articles mentioned of the provision that the company ought to pass a resolution and Directors could not borrow more than amount specified in the resolution. 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. This is the 'Indoor management rule'.

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