Frank, acting as a promoter for Garleen Co., a corporation not yet in existence, makes a contract with Towne Supplies. When Garleen Co. is formed, it may:
A) adopt the contract, but Frank would not be released from potential liability on the contract.
B) in all states, ratify the contract, thereby releasing Frank from potential liability.
C) adopt the contract, thereby making it retroactive.
D) ratify all or part of Frank's contract.

Question

Quizplus · Accepted Answer

CA corporation, once formed, can adopt a contract made by a promoter on its behalf, but this does not automatically release the promoter from liability unless specifically agreed upon by all parties involved. Adoption of the contract by the corporation can make the contract as if the corporation were a party to it from the beginning (retroactive effect), but this does not inherently release the promoter from potential liability.

Frank, Acting as a Promoter for Garleen Co