Constructive notice is the

legal fiction A legal fiction is a fact assumed or created by courts, which is then used in order to help reach a decision or to apply a legal rule. The concept is used almost exclusively in common law jurisdictions, particularly in England and Wales. Deve ...

The phrase "legal fiction" should not be construed to mean that the concept of constructive notice is legally invalid. that signifies that a person or

entity An entity is something that exists as itself, as a subject or as an object, actually or potentially, concretely or abstractly, physically or not. It need not be of material existence. In particular, abstractions and legal fictions are usually ...

should have known, as a reasonable person would have, of a legal action taken or to be taken, even if they have no actual knowledge of it.

Overview

The doctrine is generally construed with regards to legal notices published, either by posting them at a designated place in a courthouse, or publishing them in a newspaper designated for legal notices. Because both methods of publication are available to the general public (courthouses being open to all members of the general public, and newspapers readily available in public places such as libraries), the person to whom the notice is being issued (even if issued in a generic form, such as "To All Heirs of John Smith, a Resident of Orange County") is considered to have received notice even if they were not actually aware of it. Another use of constructive notice is in the recording of

deed In common law, a deed is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferring ...

mortgage A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any pu ...

lien A lien ( or ) is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the ''lienee'' and the pers ...

s, and similar documents in county registries in the United States. Since such documents are considered public information and can be accessed by any member of the public, such recordings are considered constructive notice of land conveyances or encumbrances having taken place. In companies law the doctrine of constructive notice is a

doctrine Doctrine (from la, doctrina, meaning "teaching, instruction") is a codification of beliefs or a body of teachings or instructions, taught principles or positions, as the essence of teachings in a given branch of knowledge or in a belief system ...

where all persons dealing with a company are deemed (or "construed") to have knowledge of the company's

articles of association In corporate governance, a company's articles of association (AoA, called articles of incorporation in some jurisdictions) is a document which, along with the memorandum of association (in cases where it exists) form the company's constituti ...

and memorandum of association. The doctrine of indoor management is an exception to this rule. The

New York City Housing Court The Civil Court of the City of New York is a civil court of the New York State Unified Court System in New York City that decides lawsuits involving claims for damages up to $25,000 and includes a small claims part (small claims court) for cases i ...

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 collapses when stepped on by a pedestrian. The landlord is reasonably expected to know that this is a safety hazard.

Indoor management

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 the case of ''

Royal British Bank v Turquand ''Royal British Bank v Turquand'' (1856) 6 E&B 327 is a UK company law case that held people transacting with companies are entitled to assume that internal company rules are complied with, even if they are not. This "indoor management rule" or ...

'', where the defendant was the liquidator of the insolvent Cameron's Coalbrook Steam, Coal and Swansea and Loughor Railway Company. The company had borrowed from

Royal British Bank The Royal British Bank was a British joint-stock bank, established under a Royal Charter in 1849, that collapsed in 1856. This caused a scandal. The circumstances were described by ''The Economist'' as "an extraordinary example of the little troubl ...

by giving a bond worth £2,000. The articles of the company stated that the directors could only borrow if authorised by a resolution of the company's general meeting, and could not borrow more than the amount specified in the resolution. The articles were registered with

Companies House Companies House is the executive agency of the company registrars of the United Kingdom, falling under the remit of the Department for Business, Energy and Industrial Strategy. All forms of companies (as permitted by the Companies Act) are i ...

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.

References

Notes

{{DEFAULTSORT:Constructive Notice Legal terminology