As it is necessary for clubs and class associations to enter into contracts with third parties from time to time this section looks at the general legal principles involved.
The club itself cannot to be held to be party to a contract with a non-member for two reasons, firstly, because the club as an unincorporated association does not have its own legal identity and, secondly, because it is not possible to make a contract to bind all persons who from time to time are members of the association.
A member is only bound by a contract made on behalf of the club if he expressly or impliedly authorised the formation of the contract, it is sufficient that the member was present at the meeting in which the contract was negotiated. A member cannot be held liable for the contract merely because he is a member of the club and unless the rules of the club expressly so provide, the committee has no authority to legally bind a member in contract to a non-member, such as pledging the credit of the members by borrowing on debentures, or by ordering work to be done or goods to be supplied to the club.
Where the club rules have authorised a contract, such as the provision for the secretary of an association to enter into specific contracts, all of the members have been found liable for that contract as co-principals of the secretary. A member may make himself liable to the contract by ratifying a contract made by another member.
Extent of authority to enter into contracts:
Unless otherwise provided in the club rules, the committee's mandate is to manage the accumulated funds of the club. Accordingly, the power of the secretary, treasurer, other club officials and committee members to bind the members must be clearly set out in the rules, as there is no implied authority flowing from the elected status.
Members of the committee or trustees of an unincorporated club will be personally liable for contracts with non-members which they enter into in their own names, unless the non-member contracting party has specifically agreed to rely solely on the club funds for payment. A co-committee member will not be liable for a contract entered into by the other club official, unless he expressly or impliedly authorised the contract. The member entering into a contract on behalf of the club does not have a right of indemnity against the members of the club unless expressly provided for in the club rules.
When authority is given to a particular member to contract on behalf of all the members, the authority is restricted to the funds of the association and there is no implied power to pledge the credit of all the members. If there are insufficient funds, then the committee should call a meeting of the general membership and ask for increased subscriptions.
Contractual liability for employees:
The club rules should identify who should be responsible for engaging and supervising employees; usually this responsibility is delegated to the general committee as part of the duties for the daily management of the club. In the absence of such a rule, then the actual member who engages the employee will be responsible for their contract of employment and supervision of their work.
Liability may also be incurred by committee members for the acts of employees appointed by them, in the carrying out of contracts made by the committee. Similarly, a committee member who has authorised an employee to give an order to a supplier, can be personally liable for payment under that order.
For further information on this please see also the section on 'Your Staff - Employment Contracts'.
Limiting liability under a contract:
It is possible to restrict liability under a contract to the funds of the unincorporated club by inserting a term to that effect in the contract. Such a clause should be included whenever possible in order to protect the committee members, or whoever else would be liable. The term should be clearly stated and expressly included, as it is not satisfactory to merely hand a copy of the club's rules to the non-member contracting party as a means of limiting liability to the assets of the club.
Remedy for non-member contracting party:
If a creditor wishes to enforce payment under a contract by legal action, he cannot commence proceedings against the club but must seek out an individual member or members of the committee as defendants. Where goods have been ordered specifically for an individual member, then that individual member will be personally liable for the contract.
It is advisable that the contracting non-member is provided with a copy of the clubs rules before concluding negotiations for the contract. A seller may also consider it advisable to include a retention of title clause in any contract for the sale of goods to an unincorporated association.
An unincorporated club has no capacity to own property and the manner in which club property is to be owned should be expressly identified in the rules. Any property, whether owned outright, leased or rented must be done by an individual or individuals on behalf of the club. There are four ways in which property may be owned for the club:
All the members own the property jointly and severally, or are joint tenants. This manner of holding property is not suitable for clubs as members may come and go from year to year.
For further information concerning this topic, please see our Safeguarding section in the RYA Website.
If you require further assistance please do not hesitate to contact the Legal Team Tel: 023 8060 4223 Email: firstname.lastname@example.org