Kara Sears
A statutory contract is an agreement between two or more parties that creates obligations that can be enforced by law. It is created and governed by a specific law or statute, such as employment laws or landlord-tenant laws. In the context of company law, a statutory contract is formed by a company's constitution, which includes the Memorandum of Association and the Articles of Association. This contract binds the company and its members, creating a unique relationship between the members themselves and between each member and the company. While statutory rights are set by Parliament, contractual rights are outlined in an employment contract. These rights can overlap and sometimes aren't written down, but they are legally binding once agreed upon.
| Characteristics | Values |
|---|---|
| Definition | A statutory contract is an agreement between two or more parties that creates obligations that can be enforced by law. |
| Types of agreements | Can be a written document or a verbal agreement |
| Parties involved | Shareholders, members of a company, employers, employees, landlords, tenants |
| Rights | Contractual rights, statutory rights, implied rights, rights arising from custom and practice |
| Nature of rights | Statutory rights are set out by Parliament and cannot be overruled, undone or reduced by a contract, waiver or agreement. |
| Examples | Employment contracts, lease agreements, company constitutions |
| Alterations | A company can change the terms of the contract by a special resolution, which does not require the consent of all parties. |
| Disputes | Disputes can be resolved through legal action, grievance procedures, or negotiations with employers. |
| Compliance | The terms of the contract must comply with the requirements set forth in the law. |
| Interpretation | The interpretation and enforcement of statutory contracts vary across different jurisdictions, such as India and the UK. |
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What You'll Learn
Statutory rights and contractual rights
A statutory contract is an agreement between two or more parties that creates obligations that can be enforced by law. It can be a written document or a verbal agreement. In the context of company law, a statutory contract is a contract that is created and governed by a specific law or statute. It is an agreement between two or more parties that is legally enforceable. For example, a contract between an employer and an employee is governed by employment laws, and the terms of the contract must comply with the legal requirements.
Now, statutory rights and contractual rights are two distinct concepts in company law. Statutory rights are the non-negotiable minimum standards that apply to all employees, regardless of their employment contract. These rights are set by legislation and cannot be overruled, undone, or reduced by any contract, waiver, or agreement. They set the baseline of fairness and safety in the workplace, ensuring employees are treated with respect and dignity. Statutory rights cover a range of issues, including pay, working hours, discrimination, and redundancy payments.
On the other hand, contractual rights are the rights defined in an employment contract. These rights can vary depending on the terms of the specific contract and can be negotiated and personalised to the employment relationship. Contractual rights can offer more favourable terms than statutory rights. For example, while the statutory right to annual leave is 28 days, an employer may offer 35 days in the employment contract. Contractual rights can be express or implied. Express rights are those specifically stated in the contract, while implied rights are those that arise from industry standards, common practice in the company, or 'custom and practice'. For example, if a company regularly allows employees to finish early one day a week, this may become an implied contractual right.
In some cases, statutory and contractual rights may overlap. For instance, both types of rights may cover issues like holiday entitlement and notice periods. However, it's important to remember that statutory rights always take precedence in any dispute between the two. If an employer violates an employee's statutory or contractual rights, the employee has the right to refuse work, resign, or take legal action.
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Statutory contracts and common law contracts
A statutory contract is an agreement between two or more parties that creates obligations that can be enforced by law. It is created and governed by a specific law or statute. For example, a contract between an employer and an employee is governed by the employment laws of a particular state. The terms of the contract must comply with the requirements set forth in the law, and any disputes that arise may be resolved through legal action.
The Memorandum of Association and the Articles of Association describe a company's constitution and create a statutory contract between the members of the company themselves and between each member and the company. However, as per the sources, the s33 contract is a complex contract that is far from settled by precedent. It is an "odd sort of contract" where shareholders are bound by a strange set of rules, enforceable in breach on some occasions under very tight criteria and, on some occasions, not available at all.
On the other hand, common law contracts are governed by judge-made laws and private laws, i.e. the private agreement. Private law includes the terms of the agreement between the parties exchanging promises. This private law may override many rules established by state law. Common law controls apply to contracts and remain a key business safeguard. For example, common law establishes the right to terminate a contract in certain situations.
In the UK, English law for contracts can provide clarity and reduce legal risks. The UK follows a common law system where courts develop legal principles based on previous cases and apply statutory law. English court judges interpret contracts by examining their wording, industry standards, and past rulings. If a contract lacks clarity, a judge may imply certain terms.
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Statutory contracts and company constitutions
A statutory contract is an agreement between two or more parties that creates obligations that can be enforced by law. It is a type of contract that is created and governed by a specific law or statute. The Memorandum of Association and the Articles of Association describe a company's constitution and create a statutory contract between the company, its members, and between each member. This means that by subscribing, the shareholders enter into a contract between themselves and the company and between each individual shareholder.
Section 33 (1) of the Companies Act 2006 states that the provisions of a company's constitution bind the company and its members to the same extent as if there were covenants on the part of the company and of each member to preserve its provisions. However, as noted by Dignam and Lowry, it is an "odd sort of contract". This is because, while all shareholders are party to the agreement, the company can change the terms of the contract by way of a special resolution, without requiring the consent of all parties.
In the context of employment law, statutory rights are set out by Parliament and are guaranteed by law. These rights include a wide range of issues such as pay, working hours, and discrimination. Statutory rights cannot be overruled, undone, or reduced in any way by a contract, waiver, or agreement, and they set the minimum level of entitlement or protection that employees should be granted by their employer. Contractual rights, on the other hand, are set out in the employment contract and can be implied by industry standards or common practice in the company.
It is important to note that contractual rights and statutory rights can sometimes overlap. For example, an employee may have a contractual holiday entitlement that is more generous than the statutory minimum. In the case of a dispute, employees should first try to resolve the issue with their employer, and if unsuccessful, they may need to take formal action, such as raising a grievance or pursuing legal action.
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Statutory rights in employment law
A statutory contract is an agreement between two or more parties that creates obligations that can be enforced by law. It can be a written document or a verbal agreement. In the context of company law, a statutory contract is formed by a company's Memorandum of Association and Articles of Association, which together describe the company's constitution. This creates a statutory contract between the company's members and between each member and the company.
Now, turning to the topic of statutory rights in employment law, there are several examples of how these rights are protected and enforced by law. Firstly, whistleblower protections are provided by most labor and public safety laws, ensuring that employees who report violations of the law by their employers are protected. Remedies for violations can include job reinstatement and payment of back wages. Additionally, certain individuals who have served in the armed forces have reemployment rights with their previous employer. This includes reservists and National Guard members. The law also regulates the use of lie detectors and polygraph tests on employees, with strict limitations in place.
Another example of statutory rights in employment law relates to wage garnishment, which is regulated by the Consumer Credit Protection Act. This act ensures that employers follow specific guidelines when garnishing an employee's wages. Furthermore, employees in the transportation industry have protected rights, particularly in the mass transit sector. When federal funds are used to acquire, improve, or operate a transit system, the Department of Labor must approve employee protection arrangements before the release of funds. This process may fall under the Worker Adjustment and Retraining Notification Act (WARN), which provides early warning to employees about potential layoffs or plant closings.
In terms of federal contracts and grants, recipients are subject to specific wage, hour, benefits, safety, and health standards. For instance, the Davis-Bacon Act requires federal government construction project contractors to pay prevailing wages and benefits to their employees. Similarly, the McNamara-O'Hara Service Contract Act sets wage rates and labor standards for contractors providing services to the federal government. The Walsh-Healey Public Contracts Act also mandates minimum wage and labor standards for contractors supplying materials and supplies to the federal government.
Additionally, federal contractors and subcontractors, as well as federally assisted construction contractors, are required to provide equal employment opportunities. This is enforced by the Office of Federal Contract Compliance Programs. The Migrant and Seasonal Agricultural Worker Protection Act is another piece of legislation that regulates the employment activities of agricultural employers, farm labor contractors, and associations using migrant and seasonal agricultural workers. This act includes wage protections, housing and transportation safety standards, and disclosure requirements.
Lastly, it is important to note that statutory employees, such as full-time traveling salespeople, have specific tax considerations. While federal income tax is not withheld from their wages, Social Security and Medicare taxes may be withheld if certain conditions are met.
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Statutory contracts and shareholders
A statutory contract is an agreement between two or more parties that creates obligations that can be enforced by law. It is created and governed by a specific law or statute. For example, a contract between an employer and an employee is governed by the employment laws of a particular state.
In the context of company law, a statutory contract is formed between the members of the company and between each member and the company. This is outlined in the Memorandum of Association and the Articles of Association, which together describe the company's constitution. According to S33 (1) CA 2006, the provisions of a company's constitution bind the company and its members to the same extent as if there were covenants to preserve its provisions.
Shareholders of a company are typically party to a shareholders' agreement, which outlines shareholders' rights and obligations and describes how the company should be operated. This agreement includes information on the management of the company, privileges, and protection of shareholders. It also covers the fair and legitimate pricing of shares, particularly when sold, and any restrictions on transferring shares.
The shareholders' agreement is intended to ensure that shareholders are treated fairly and that their rights are protected. It provides safeguards for minority shareholders and allows shareholders to decide on future shareholders. This agreement is separate from the company's bylaws, which form the legal backbone of the business.
While a shareholders' agreement is optional, it is usually compulsory for all shareholders to sign such an agreement, as well as the memorandum of association. This agreement can enhance the rights of both majority and minority shareholders through mutual consent. It is important to note that a shareholders' agreement should not contain any elements of fraud, misrepresentation, or contravention of any statutory federal or state law.
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Frequently asked questions
A statutory contract is an agreement between two or more parties that creates obligations that can be enforced by law. It can be a written document or a verbal agreement.
A statutory contract is formed when the terms of the contract comply with the requirements set forth in the law. For example, a contract between an employer and an employee is governed by the employment laws of a particular state.
A statutory right is a right that is guaranteed by law and set out by the state's parliament. It serves as the basis of an employment relationship and protects employees from unfair treatment. On the other hand, a contractual right is an entitlement set out in the terms of the employment contract, which can vary depending on the contract's terms.
