Effect of Memorandum and

Articles [Section 36]

 Binding Effects
The binding effect of the memorandum and
articles can be summarized as follows:

• Members Bound To The Company

• Company Bound To Members
• Members Bound To Members
• Members and Company Bound To
Outsiders
Members Bound To The Company
• Members must abide by the provisions of
articles and memorandum
• A Company can sue them in case of any
breach
• Relevant Cases:
• Hickman Vs. Kent Sheep Breeders Association
(1915)
• Borland’s Trustee Vs. Steel Bros Co. Ltd (1901)
 Company Bound To Members
• Company bound to the body of members
as well as to individual members
• Can be sued against if it does not abide by
the articles and memorandum
• Relevant Case:
Woods Vs. Odessa Water Works (1889)
 Members Bound To Members
• No express contract between individual
members, hence no right to sue
• However, a member can sue another in his own
name only in following cases:
• Acts complained are illegal or ultravires the
company
• Wrongdoers are majority shareholders and
preventing an action against them
• Case: Jahangir R Modi Vs. Shamji Ladha (1866)
 Members And Company Bound To
Outsiders
• Outsider is an stranger to a contract, hence cannot
rely on articles and memorandum for action against
the company or members
• No Contractual right conferred upon him by articles
or memorandum
• No capacity to sue the company or members even if
articles confer a right upon him in any capacity
• Relevant Case:
• Eley Vs. Positive Life Assurance Co. Ltd. (1876)