Victorian Consolidated Legislation

Associations Incorporation Act 1981 - SECT 20

Ratification of contracts made before incorporation of association

20. Ratification of contracts made before incorporation of association



(1) In this section-

   (a)  a reference to a non-existent incorporated association purporting to
        enter into a contract shall be construed as a reference to-

   (i)  a person executing a contract in the name of an incorporated
        association, where no such incorporated association exists; or

   (ii) a person purporting to enter into a contract as agent or trustee for a
        proposed incorporated association;

   (b)  a reference to a person who purports to execute a contract on behalf
        of a non-existent incorporated association shall be construed as a
        reference to a person who executes a contract or purports to enter
        into a contract as mentioned in subparagraph (i) or (ii) of paragraph
        (a);



   (c)  a reference, in relation to the purported entry into a contract by a
        non-existent incorporated association, to the incorporation of the
        association shall be construed as a reference to-

   (i)  where a person has executed a contract in the name of an incorporated
        association and no such incorporated association exists-the
        incorporation of an association that, having regard to all the
        circumstances, is reasonably identifiable with the incorporated
        association in the name of which the person executed the contract; or

   (ii) where a person has purported to enter into a contract as agent or
        trustee for a proposed incorporated association-the incorporation of
        an association that, having regard to all the circumstances, is
        reasonably identifiable with the proposed incorporated association.

(2) Where-

   (a)  a non-existent incorporated association purports to enter into a
        contract; and

   (b)  the association is incorporated within a reasonable time after the
        contract is purported to be entered into-

the incorporated association may, within a reasonable time after it is
incorporated, ratify the contract.

(3) Where an incorporated association ratifies a contract as provided by
subsection (2), the incorporated association is bound by, and entitled to the
benefit of, that contract as if the association had been incorporated before
the contract was entered into and had been party to that contract.

(4) Where a non-existent incorporated association purports to enter into a
contract and-

   (a)  the association is not incorporated within a reasonable time after the
        contract is purported to be entered into; or

   (b)  the association is incorporated within such a reasonable time but does
        not ratify the contract within a reasonable time after the association
        is incorporated-

the other party or each of the other parties to the contract may, subject to
subsections (6) and (9), recover from the person or any one or more of the
persons who purported to execute the contract on behalf of the non-existent
incorporated association an amount of damages equivalent to the amount of
damages for which that party could have obtained a judgment against the
incorporated association if-

   (c)  where the association has not been incorporated as mentioned in
        paragraph (a)-the association had been incorporated and had ratified
        the contract as provided by subsection (2); or

   (d)  where the association has been incorporated as mentioned in paragraph
        (b)-the incorporated association had ratified the contract as provided
        by subsection (2)-

and the contract had been discharged by reason of a breach of the contract
constituted by the refusal or failure of the incorporated association to
perform any obligations under the contract.

(5) Where-

   (a)  proceedings are brought to recover damages under subsection (4) in
        relation to a contract purported to be entered into by a non-existent
        incorporated association; and

   (b)  the association has been incorporated-

the court in which the proceedings are brought may, if it thinks it just and
equitable to do so, make either or both of the following orders-

   (c)  an order directing the incorporated association to transfer or pay to
        any party to the contract who is named in the order, any property, or
        an amount not exceeding the value of any benefit, received by the
        incorporated association as a result of the contract;

   (d)  an order that the incorporated association pay the whole or a
        specified portion of any damages that, in those proceedings, the
        defendant has been, or is, found liable to pay.

(6) Where, in proceedings to recover damages under subsection (4) in relation
to a contract purported to be entered into by a non-existent incorporated
association, the court in which the proceedings are brought makes an order
under paragraph (c) of subsection (5), the court may refuse to award any
damages in the proceedings or may award an amount of damages that is less than
the amount that the court would have awarded if the order had not been made.

(7) Where-

   (a)  a non-existent incorporated association purports to enter into a
        contract;

   (b)  the association is incorporated and ratifies the contract as provided
        by subsection (2);

   (c)  the contract is discharged by a breach of the contract constituted by
        a refusal or failure of the incorporated association to perform all or
        any of its obligations under the contract; and

   (d)  the other party or any one or more of the other parties to the
        contract brings or bring proceedings against the incorporated
        association for damages for breach of the contract-

the court in which the proceedings are brought may, subject to subsection (9),
if it thinks it just and equitable to do so, order the person or any one or
more of the persons who purported to execute the contract on behalf of the
incorporated association to pay to the person or persons by whom the
proceedings are brought the whole or a specified portion of any damages that
the incorporated association has been, or is, found liable to pay to the
person or persons by whom the proceedings are brought.

(8) Where a person purports, whether alone or together with another person or
other persons, to execute a contract on behalf of a non-existent incorporated
association, the other party to the contract, or any of the other parties to
the contract, may, by writing signed by that party, consent to the
first-mentioned person being exempted from any liability in relation to the
contract.

(9) Where a person has, as provided by subsection (8), consented to another
person being exempted from liability in relation to a contract that the other
person purported to execute on behalf of a non-existent incorporated
association-

   (a)  notwithstanding subsection (4), that first-mentioned person is not
        entitled to recover damages from that other person in relation to that
        contract; and



   (b)  a court shall not, in proceedings under subsection (7), order that
        other person to pay to the first-mentioned person any damages, or any
        proportion of the damages, that the incorporated association has been,
        or may be, found liable to pay to that first-mentioned person.

(10) If-

   (a)  a non-existent incorporated association purports to enter into a
        contract;

   (b)  the association is incorporated; and

   (c)  the incorporated association and the other party or other parties to
        the contract enter into a contract in substitution for the
        first-mentioned contract-

any liabilities to which the person who purported to execute the
first-mentioned contract on behalf of the non-existent incorporated
association is subject under this section in relation to the first-mentioned
contract (including liabilities under an order made by a court under this
section) are, by force of this subsection, deemed to be discharged.

(11) Any rights or liabilities of a person under this section (including
rights or liabilities under an order made by a court under this section) in
relation to a contract are in substitution for any rights that the person
would have, or any liabilities to which the person would be subject, as the
case may be, apart from this section, in relation to the contract.

(12) Where-

   (a)  a person purports to enter into a contract as trustee for a proposed
        incorporated association; and

   (b)  the association is incorporated within a reasonable time after the
        person purports to enter into the contract but does not ratify the
        contract within a reasonable time after the association is
        incorporated-

then, notwithstanding any rule of law or equity, the trustee does not have any
right of indemnity against the incorporated association in respect of the
contract.

(13) For the purposes of this section, a contract may be ratified by an
incorporated association in the same manner as a contract may be made by an
incorporated association under section 19 and the provisions of section 19
have effect as if-

   (a)  the references in that section to making a contract were references to
        ratifying a contract; and

   (b)  the reference in subsection (3) of that section to a contract
        executed, or purporting to have been executed, under the common seal
        of an incorporated association were a reference to a contract
        ratified, or purporting to have been ratified, under the common seal
        of an incorporated association.