Ratified - pre-incorporation contract, Business Law and Ethics

Ratified - pre-incorporation contract:

If the agreement is a written one and it shows that the proposed company was the contracting party the promoters will not be allowed to enforce it in the event of its breach by the other party. This was explained in Newborne v Sensolid (Great Britain) Ltd (25) in which the judge, after observing the way in which the agreement was signed, stated:

"It is a case in which the company is contracting and the company's contract is authenticated by the signature of one of the directors. The only person who had any contract here was the company and Mr Newborne's signature merely confirmed the company's signature".

Mr Newborne, the promoter, could not be allowed to come forward and say, "Well, it is my contract". He could not therefore sue for its breach.

As the company was not in existence when the contract was signed, the legal position is that there never was a contract and the signed document was legally a  nullity.

A pre-incorporation contract cannot be ratified by the company after its registration. This is demonstrated by the facts of, and the decision in, Natal Land Co Ltd v Pauline Colliery Syndicate Ltd (25). Although the court's reasoning is not explicit the rule appears to be a consequence of the common law rule that ratification has retrospective effect. If the company were allowed to ratify the contract it would mean that it contracted on the date the contract was formed. This in effect would mean that the company contracted before it was formed. This is impossible in practice and the aforesaid rule also renders it legally impossible. If the company wishes to revive the abortive contract it must make a fresh offer and, if the offer is accepted by the other party, a contract will come into existence from the moment of the acceptance.

Posted Date: 1/12/2013 2:17:36 AM | Location : United States







Related Discussions:- Ratified - pre-incorporation contract, Assignment Help, Ask Question on Ratified - pre-incorporation contract, Get Answer, Expert's Help, Ratified - pre-incorporation contract Discussions

Write discussion on Ratified - pre-incorporation contract
Your posts are moderated
Related Questions
Court of Appeal - Establishment and Composition Establishment Therefore the Court of Appeal was established on date 28th October in year 1977 through Section 64(1) of t

Proceedings for Compulsory Liquidation: When the petition is presented to the court a copy is delivered to the company in case it objects, and it is advertised so that other

Golden rule: Conversely the so-called 'golden' rule will be utilized through the court in order to avoid arriving on an absurd decision under the literal rule of construction.

QUESTION 1 The Financial Services Commission (FSC) is the licensing authority for businesses operating in the Global Business sector. By referring to the Global Business Catego

Q. International law is a law or not? It is debatable whether international law is a law or not. Law is defined as rules established by a governing authority to institute and m

Self-Confidence: Entrepreneurs are self-confident and tackle problems immediately with confidence and are persistent in the pursuit of their objectives. Most are at their best in

1. Joe is walking down the street and Sue comes up behind Joe, aims a gun at him, but stops just before shooting. Joe did not know Sue was coming up behind him.

Explain about the tort of negligence. A form of civil wrong where a contract doesn’t exist among the two parties and this is not a crime where punishment is the major goal to t

Supervisory Jurisdiction and Admiralty Jurisdiction Supervisory Jurisdiction However the High Court has jurisdiction under S.65 (2) of the Constitution to supervise a n

Question 1: What are the duties of the holder of a Tourist Enterprise Licence, as provided by the Tourism Authority Act? Question 2: What are the relevant consideration