# Section 10 – Binding Force of MOA and AOA
## The statutory contract
Once registered, the MOA and AOA bind the company and its members as if each member had personally signed them and agreed to observe every clause.
This creates what is known as the 'statutory contract' — a unique relationship that is part contract, part constitutional document.
## The four-way binding analysis
| Relationship | Bound by MOA/AOA? |
|---|---|
| (a) Company → Members | YES — company is bound to its members |
| (b) Members → Company | YES — members are bound to the company |
| (c) Members → Members | NORMALLY NO — but YES when acting through the company (and per the Rayfield exception) |
| (d) Company / Members → Outsiders | NO — MOA/AOA do not bind the company to outsiders |
## Members' monetary obligations
All monies payable by a member to the company under the MOA or AOA are a debt due from the member to the company — recoverable as such (e.g., unpaid calls on shares).
## The three illustrative cases
### (a) Member ↔ Company → Borland's Trustee v Steel Bros & Co Ltd
The AOA said that on a member's bankruptcy his shares would be sold at a price fixed by the directors. Borland's trustee in bankruptcy argued he was not bound and could sell at true value. Held: the AOA contract is an original incident of the shares; having bought on those terms, the trustee must observe them.
### (b) Company ↔ Member → Wood v Odessa Waterworks Co
The AOA said directors could 'declare a dividend to be paid to members'. The company proposed to issue debenture bonds in lieu of cash. A member sought to restrain this. Held: 'paid' prima facie means paid in cash; the AOA bound the company to pay cash dividend, and debentures were not 'payment in cash'.
### (c) Member ↔ Member → Rayfield v Hands
Clause 11 of the AOA required a member intending to transfer his shares to inform the directors, who 'will take the said shares equally between them at a fair value'. The directors, who were also members, refused, arguing the article could not bind them in their capacity as directors. Held: treating them as members, the directors were compelled to buy Rayfield's shares at fair value — a rare instance where the AOA was held to bind members inter se.
> Take-away: members generally are not bound to each other by the AOA, except where the clause clearly contemplates a member-to-member obligation.