The Promise of Certainty in the Law of Pre-Incorporation Contracts

Abstract

In practice, most pre-incorporation contracts cause no difficulty for the parties who intend to benefit directly from them. In the normal course of events, once the corporation is incorporated, both the corporation and the third party perform on the contract: However, when the corporation does not come into existence, or comes into existence but refuses to adopt a contract, difficult legal issues arise in relation to the rights and liabilities of the parties? In these situations, the following questions must be -resolved : To what extent is the promoter liable on,the contract? To what extent is the corporation liable on the contract? When, if at all, is the promoter relieved from liability? The policy issue, of course, is whether the promoter or the third party must bear the risk of loss.

Keywords: pre-incorporation contracts, contracts, corporation liable, promoter, promoter liability