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The doctrine of indoor management has occupied vital place in a company’s functioning but a number of…

The doctrine of indoor management lets a bona fide outsider assume that the company complied with its internal procedures when an officer acts within apparent authority. If…

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The doctrine of indoor management has occupied vital place in a company’s functioning but a number of decisions have made it subject to several exceptions. Point out which of the following is not an exception to the doctrine.

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Answer and explanation

Correct answer C

The doctrine of indoor management lets a bona fide outsider assume that the company complied with its internal procedures when an officer acts within apparent authority. If the articles permit the delegation, a missing internal approval may be an irregularity the outsider need not investigate. The doctrine does not cure forgery or assist someone with actual notice of the irregularity or faced with circumstances that call for inquiry.

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Option A

An outsider who knows of the irregularity cannot claim the benefit of assuming regularity.

Option B

Suspicious circumstances can put the outsider on inquiry and defeat reliance on the rule.

Option C

A bona fide outsider dealing with an apparently authorized officer can ordinarily assume a permitted delegation was duly made.

Option D

A forgery is not an internal procedural irregularity that the doctrine can cure.

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