Pre incorporation contracts

First things first, there should be an offer, acceptance and a valid consideration as pre-requisite to form a contract. And one thing you should be clear with is, company get it's legal existence only after its incorporation till that it cannot enter in to contracts. Meanwhile, promoter acts on behalf of company in fiduciary relation(as a parent to child to be born) All contracts which are entered by promoter should be with in the scope of objects clause of memorandum of association.if not, promoter will be personally liable. If third party doesn't want to make a contract with the company he can anytime rescind the contract after company's incorporation. However, fresh contracts will be entered into by company after incorporation as it has legal existence now on the name of company. So third party has option to rescind when forming a fresh contract with company(with its name).

VIJAYA SARADHI MAGANTI

CA Inter

★ 850

26-Aug-20 14:36

Yes iknow this promoter is personally liable not only for ultra vire act but also if company does not adopts his preincorporation contract . Actually my question is Promoter enters into a contract with third party for purchase of property And now after incorporation company communicates with third party but third party refuses to sold .In this case between Promoter and third party What will happen . (Pre incorporation contract) 2.What is communication In preincorporation contract

Thread Starter

Zeeyan KOKA

CA Foundation

★ 3K+

26-Aug-20 14:44

In your example company can specifically enforce the contract if it is within the objects clause of company Provided that the company has accepted the contract after incorporation and has communicated such acceptance to the other party to the contract. For this you can verify sec 15(h) of specific relief act 1963 Hope it helps!!!

VIJAYA SARADHI MAGANTI

CA Inter

★ 850

26-Aug-20 15:00

If third party refuses after acceptance company can claim damages.

VIJAYA SARADHI MAGANTI

CA Inter

★ 850

26-Aug-20 15:02

See sir what i am trying to say is If promoter enters into contract with third party Before Incorporation of company and contract if warrented by terms of incorporation . Now after incorporation .Let, s assume what may happen. A meeting will be called and decision will be taken regarding preincorporation contract .If company decided to Adopt It for this company will have to communicate it with 3rd party . Over here When company Communicates with Third party over Adoption .An option is available to third party not to accept comany, s acceptance .If third PARTY REJECTS COMPANY S COMMUNICATION CO .IS NOT LIABLE .BUT WHAT ABOUT PROMOTER BECAUSE HE ENTERED INTO FOR COMPANY . 2.PLEASE TELL ME ALSO COMMUNICATION PROCESS IN CASE IF COMPANY WANTS TO ADOPT WHAT SHE HAS TO DO ?

Thread Starter

Zeeyan KOKA

CA Foundation

★ 3K+

26-Aug-20 15:13

Novation of existing contract by change of parties to contract with consent of all the parties. If third party, promoter and company accepts to change the contracting parties of sale of land then he will be liable to company. If third party refuses to sell land to the company then third party is liable to sell land to promoter. Promoter can purchase the land on his name and transfer it to company However all these conditions will made clear In the agreement when it is made

VIJAYA SARADHI MAGANTI

CA Inter

★ 850

26-Aug-20 15:38

Thankyou sir

Thread Starter

Zeeyan KOKA

CA Foundation

★ 3K+

26-Aug-20 15:39