Who can bind an incorporated association is the question a landlord, a bank or a contractor asks first. The Act answers with a three-tier rule borrowed from the Companies Act, plus special provisions for the public officer and for contracts made before the association existed.
A contract that between natural persons would have to be in writing under seal may be made on the association’s behalf in writing under its common seal. A contract that would have to be in writing and signed may be made in writing signed by “a person acting under its authority, express or implied”. A contract that would be valid if made orally may be made orally by such a person. A contract so made “is a contract so made effective in law and binds the incorporated association and its successors and all other parties”.
The common seal
The Schedule to the Associations Incorporation Act 2023 requires the rules to provide for the custody and use of the seal, and section 16(5) allows “Inc.” on it. The seal is used for deeds: a transfer of land, a mortgage, a lease exceeding the statutory period, a deed of trust. The rules will typically require it to be affixed in the presence of two committee members, or one committee member and the public officer, who sign. A document sealed otherwise than as the rules require is still valid against an outsider under section 90, but the officers who misused the seal answer to the association.
Persons acting under authority
Most contracts are not deeds. They bind the association if made by “a person acting under its authority, express or implied”. Express authority comes from the rules, a committee resolution or a written delegation. Implied authority comes from the position the person holds: a treasurer has implied authority to buy stationery, a manager to order stock, a chairman to engage a lawyer. The other party is protected by section 91, which says nobody is taken to know the rules merely because they are on the register, and by section 90, which preserves the validity of a transaction despite the absence of authority in the rules or a failure to follow them. What the outsider cannot rely on is a person who plainly had no authority at all, or a contract known to be outside the objects.
The public officer’s authority to contract
Section 57(1)(b) provides that a public officer may “enter into contracts on behalf of the incorporated association but only if such authority has been granted by the committee to the public officer on the application to incorporate or on a notice of power to enter contracts filed with the Registrar on the prescribed form”. The authority is therefore a matter of public record, and section 56(1)(d) requires a notice of any change of authority to bind the association to be filed. The committee may withdraw it at any time by filing a notice of termination (section 57(2)). A person dealing with a public officer can check the register to see whether the authority exists. See the public officer.
The name on the document
Section 19 requires the association’s name to be clearly stated on every document that evidences or creates a legal obligation, and makes every person who issued or signed a document that misstates the name personally liable if the association defaults, unless the other party knew who was contracting or it would be unjust to impose liability. Sign as “[Name] Inc.”, and sign “for and on behalf of” it. See the name.
Contracts made before incorporation
An association about to incorporate often needs to sign a lease or a funding agreement first. Section 92 defines a pre-incorporation contract as one purporting to be made by the proposed association, or made by a person on its behalf in contemplation of incorporation, and allows the association to ratify it “within such period as may be specified in the contract, or where no period is specified, then within one month after the incorporation”. Ratification is done in the way section 36 allows and makes the contract as valid as if the association had been a party from the start. An unratified contract cannot be enforced by the association (section 92(5)).
Section 93 implies into every pre-incorporation contract, unless it says otherwise, a warranty by the person who made it that the association will use reasonable efforts to incorporate and will ratify within the specified or a reasonable time, but no warranty that incorporation is guaranteed. If the warranty is broken the signer is liable in damages measured as if the contract had been ratified and then cancelled (section 93(2)), and that liability is discharged if the association later enters a contract in the same terms (section 93(3)). Under section 94 a party to an unratified contract may ask the National Court to order return of property, other relief, or validation of the contract.
Say in the contract that it is made on behalf of “[Name] Inc. (proposed)”, state the period for incorporation and ratification, exclude the section 93 warranty if the other side will agree, and diarise ratification for the committee’s first meeting after the certificate issues.
Sources
- Associations Incorporation Act 2023 — ss 16(5), 19, 36, 56(1)(d), 57, 90, 91, 92, 93, 94, Schedule item 13
- Companies Act 1997 — ss 152–155 (method of contracting and pre-incorporation contracts, on which these sections are modelled)
Before relying on anything here, read the current text of the Associations Incorporation Act 2023 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.