What Is Pre Incorporation Contracts in Company Law


as follows: On the letterhead of a Leopold Newborne (London) Ltd., a contract was concluded for the sale of 2000 cans of canned ham to Sensolid Ltd. The contract was also signed “Yours faithfully, Leopold Newborne (London) Ltd” The promoter of the latter company was Mr. Leopold Newborne. The market collapsed and Sensolid made an effort to receive the shares, arguing that Leopold Newborne (London) Ltd did not exist at the time of signing the contract as it was not incorporated at that time; nor was the contract therein a contract that had not been entered into personally with Mr. Newborne and therefore could not be applied personally. Mr Newboren brought an unsuccessful action before the Court of First Instance and appealed unsuccessfully to the Court of Appeal. The court ruled that the contract was void because the company did not yet exist. Goddard CJ stated unequivocally that: “. even if it is possible, since the company did not exist at the time the contract was signed, there was never a contract, and Mr. Newborne cannot show up and say, “Well, that was my contract.” The fact is that he entered into a contract for a company that did not exist.

It therefore seems to me that the defendants can make use of their defence and that the appeal must be dismissed. In both cases, the common law principles for the pre-incorporation contract are established:  A pre-incorporation contract is void and unenforceable because an unincorporated corporation is unable to enter into the contract at all.  Secondly, the contract will be void, but it will also not bind the company, since it did not exist, but it would be personally binding on the organizer and the company could also benefit from its benefits. A pre-incorporation contract is an agreement entered into by a person at the request of a corporation or corporation that did not exist at the time such an agreement was signed. These agreements are entered into because preliminary contracts and expenses are incurred before an organization takes shape. An example of a pre-incorporation contract is a co-founder contract. The person signing the Agreement on behalf of the Company intends to bind the Company to the Agreement in the future when the Company is finally formed. To the extent that the apprenticeship, capacity, solvency or personal characteristics of such a party form an integral part of the contract, or if the contract provides that its interest is not assigned, its stakeholder or principal is not entitled to a specific performance of its part of the contract or to its performance by its stakeholder, or if its principal has been accepted by the other party; if the sponsors of a company have entered into a contract for the needs of the company before its incorporation and this contract is justified by the conditions of incorporation, then the company is. U/s 19(e), Except as otherwise provided in this Chapter, the specific performance of a contract may be performed against the Company if the promoters of a Company have entered into a contract for the purposes of the Company prior to its incorporation and such Agreement is justified by the conditions of incorporation. In Weavers Mills Ltd.c. Balkies Ammal [AIR 1969 Mad 462], the Madras High Court extended the scope of this principle by its decision. In this case, the developers had agreed to acquire certain properties for and on behalf of the company to be supported. With the foundation, the company took over the property and built structures there.

It was decided that even in the absence of a transfer of ownership by the developer to the company after its incorporation, ownership of the company could not be cancelled. Business agreements: If you are involved in business transactions and contracts with other companies, a pre-incorporation contract can protect your business from incorporation. For example, a contract may stipulate that a company-type limited liability is in effect even before formal incorporation documents are issued. In addition, the pre-incorporation agreement may stipulate that the legal authority of the individual business owners is transferred to the real company once the incorporation is complete. The parties enter into an agreement with the intention that the desired end result is the exchange of something of value, which is usually money, at least in most cases. The same final result is sought in a pre-foundation contract; However, this result is not possible if the contract does not include a special clause dealing with the pre-integration aspect. A pre-incorporation contract is a contract concluded between persons other than the registered company in question in relation to the company before incorporation. 1 Simply put, a pre-incorporation contract is created when an organiser acts with a third party on behalf of the non-established company. Therefore, any contract entered into before the incorporation of a registered company is called pre-incorporation or pre-contract. Article 13 of Law 179 defines the pre-incorporation contract as follows: If an organizer enters into a contract on behalf of a company to be incorporated, the organizer may be held personally liable for fulfilling the obligations of the company if, for any reason, the company is not incorporated or does not accept the contract. If the pre-incorporation agreement is concluded, the company does not exist and therefore cannot be a contracting party. The organiser must therefore be a contracting party and, according to the principles of agency law, the organiser is personally bound as a representative acting on behalf of a non-existent client.

A pre-incorporation contract is a contract entered into by a person acting on behalf of a company that does not exist. The person entering into the contract intends that the company will be bound by the provisions of the pre-incorporation agreement after the incorporation of the company. The discussion is divided into five parts. The first part explains the concept of “treaties before and after their incorporation”. The next part deals with the common law position on the pre-founding treaty. The discussion will focus on ghana`s position and the next part will focus on reforms and recommendations. The last part will be the conclusion. Under customary law, a contract does not bind a company before it is incorporated, even if the company claims to ratify it.

However, the Ghanaian legislator has allowed these contracts to be ratified by the registered company and thus assumes all the responsibilities and benefits. However, this is not the case if the company does not ratify the contract after incorporation. Non-ratification of the Treaty makes the Treaty only a moral obligation. In this discussion, I will try to discuss the concept of pre-founding treaties in both common law and Ghanaian law and make recommendations for reforms in this area of law. A pre-incorporation contract is conceived as a temporary agreement on legal agreements prior to the founding act itself. However, as the LawTeacher website notes, such agreements can lead to complications if not carefully drafted. The choice to enter into a pre- or pre-incorporation agreement rests with the parties involved in the training and whether the promoters believe that they and the future company would benefit from it. However, it is always a good idea to enter into a written agreement with the parties to clearly delineate the rights and obligations of each party. In addition, it helps resolve many disputes that could result in purely verbal or handshake agreements. At this time of the COVID-19 pandemic, where even the parties to written contracts are in place, an unwritten agreement prior to creation would add to the confusion between the parties and to a dispute that could have been avoided if they had reached a written agreement. .

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