Susan is planning to incorporate a new landscaping company,"Evergreen and Growin'." She has held herself out as an agent for Evergreen and has contracted to buy a truck,tools,fertilizer,and seed and also has entered into a lease on behalf of Evergreen for an office.When she fails to get the loan from the bank,she cannot start the business,so she cancels all the contracts.What are the consequences?
A) Susan can cancel all the contracts with no personal liability if she told them she was acting as an agent and expressly warranted that she would not be responsible.
B) Susan may be held personally liable on the contracts because she misrepresented to third parties that she had authority to make contracts on behalf of a non-existent corporation.
C) Since the company never existed,she gave no implied warranty.
D) Susan will be held liable for the contracts only if she ever gets the loan.

Question

Quizplus · Accepted Answer

Susan may be held personally liable on the contracts because she misrepresented to third parties that she had authority to make contracts on behalf of a non-existent corporation. As an individual, she cannot bind a corporation that does not yet exist. She may be held liable for breach of contract and may need to pay damages to the other parties involved. Expressly warranting that she would not be responsible will not protect her from liability in this situation.

Susan Is Planning to Incorporate a New Landscaping Company,"Evergreen and Growin