What are the effect of pre-incorporation contract?
The company cannot be sued on the preliminary Contracts even though when it comes into existence and takes the benefit thereof. The company cannot be sued for those expenses, which are incurred before its incorporation because it was not in existence when the expenses were actually incurred.
What do you mean by pre-incorporation contract discuss with effect of pre-incorporation contract under company law?
A pre-incorporation contract is an agreement that is made by a person at the behest of a company or corporation that does not exist at the time of signing such agreement. These agreements are entered into as there are preliminary contracts and expenses incurred before an organization takes form.
What is pre-incorporation of a contract?
A pre-incorporation contract refers to a contract where one party of the contract is a company that is yet to be incorporated. The key issue in this case is whether either Lead Balloon or Jeremy will be bound by the pre-incorporation contract.
Why should a company enter into pre-incorporation contract?
Pre-incorporation Contract The promoter is obligated to bring the company in the legal existence and to ensure its successful running,; and in order to accomplish his obligation he may enter into some contract on behalf of prospective company. These types of contract are called ‘Pre-incorporation Contract’.
What is the legal status of a contract made by a company before its incorporation?
Legal status of pre-incorporation contracts under English Common Law is invalid or illegal. It is not enforceable by law. The reason is because there is no company in existence before its incorporation. The rule is that the company only exists when it is registered.
How many promoters can a company have?
1. If there is more than one promoter in a company then the promoter can claim against another promoter for the damages and compensation paid by him. 2. If any untrue statement is given in the prospectus and for the secret profits then the promoters will be held liable severally and jointly as well.