Contract Law Essay Example | Topics and Well Written Essays - 2500 words - 4

Contract Law - Essay Example Pre-incorporation contracts are those contracts which are entered by the founders of a company before its existence or before its incorporation. As the company is not in existence, the company cannot be sued or can initiate legal action, may not purchase or own assets in its own name before its incorporation. Thus, promoters will be acting as the agents of the company to be incorporated while entering into a pre-incorporation contract. However, there arises a question how one can make principal and agent’s relationship when the company itself is not in existence. Thus, despite the fact that the claim by a promoter is acting on behalf of the prospective company, the promoters and not the proposed company will be held personally accountable for all contracts entered into by them on behalf of the prospective company1. The legal status of the pre-incorporation contracts under English common law is that it is illegal and cannot be approved or ratified or adopted the advantages of the contract which has been entered into on its behalf before its incorporation. Any outsiders who enter into a pre-incorporation contract witness an aggregate negative impact under English common law as it is either enforceable in court or it can be ratified .Thus , outsiders have to witness a risky scenario where they enter into pre-incorporation contract with a company yet to be incorporated. In Kelner case, 2 it was held that the supplier of goods to a non-existence company could not sue it for the recovery of the outstanding for the supply of products as the company could not make a valid contract before its incorporation as it was not a legal person then. In Natal Land case3 , a pre-incorporation of contract was entered between the agents of the appellant namely Rycroft with one Mrs de Carrey where she was given a ri ght to demand for a lease of the coal -mining privileges on the plaintiff’s property. It was held by the court