Pre registration contracts Essay example -- essays research papers

The common natural law view of pre-registration dumbfounds was that the telephoner did non exist for legal purposes until it had been formally incorporated (registered). This common law view resulted in beau mondes beingness unable to inscribe a binding melt off until they had been registered.However given the delays which can be encountered in the registration process, the promoter of a company may press to enter into lets for the company prior to its incorporation . An example of this may be a promoter wanting to ensure a company pass on have stock on hand so it will be ready to operate when its registered. He might order stock and reduce the contract in the unregistered companys name. Since a company did not exist before registration it could not sign a contract itself or appoint an agent to sign on its behalf. whence promoters could not be seen as the companys agent. Circumstances such as this atomic number 18 problematic and raise difficult questions as to the enf orceability of the contract and the availability of damages for its breech. At common law, a company was overly incapable of signing a pre-registration contract after it was registered. This was because under the law of mission , ratification has a retrospective effect and the contract was regarded as being do at the time it was entered into by the agent when the company was not in existence .A company could only be held apt(p) for a pre-registration contract if it entered into a new contract with the same wrong as the pre-registration contract after it was registered. This is called novation.Seeing as though a company would not be held liable(p) on a pre-registered contract, the courts recognise that innocent third parties could be prejudiced. Accordingly the courts were prepared on cause to infer an intension by the promoter to assume personal liability on the contract An important case is Kelner v Baxter (1866) where the promoters who had gestural the contract on behalf of an unformed company were held to be personally liable. In this special case the promoters of an unformed company agreed to purchase stock and signed an agreement, which stated on behalf of the Gravesend Royal Hotel Alexandra Hotel Company Limited. A difficultly had arisen as since the company had not yet been for... ...is case an accountant who was one of the companies four-spot promoters entered into a contract on behalf of a unformed company. The company failed to ratify the contract and the supplier attempted to sue all four promoters. The self-governing Court of New South Wales found that only the account was liable since he was the only person who had signed the contract. The court also made it aware that the accountant has a separate right to claim against the different promoters if he acted as their agent in regards to the contract.While the promoter is mainly liable in these portion, the company does have a potential supplemental liability. Hence where the compan y is registered but does not ratify the pre-registration contract at heart the prescribed time, the court may do anything it considers appropriate in the circumstances. The courts powers include the option of ordering the company to rectify the unfairness . The courts are able to this by ordering the company to pay for part or all of the damages for which the promoter is liable, transferring property received under the contract to a party to the contract or paying an amount to a party to the contract.