S Foundries Limited v Shirlaw [1940]

Company
altered articles so as to introduce new method of sacking directors.
Used
new method to dismiss MD, in breach of his service contract.
House
of Lords allowed MD damages for unfair dismissal.
Acknowledged
that company cannot forgo its statutory right to alter its articles.
Has
power to alter articles and act on provisions of altered articles.
But so to act may nevertheless be breach of contract if it is contrary to
stipulation in a contract validly made before the alteration.
[Invalidity
principle does not apply to previously negotiated contract here because term is
not broken when company alters its
articles – only broken when it acts on
altered article.]