Rice is a promoter of a corporation to be known as Dex Corp.On January 1,1985,Rice signed a nine-month contract with Roe,a CPA,which provided that Roe would perform certain accounting services for Dex.Rice did not disclose to Roe that Dex had not been formed.Prior to the incorporation of Dex on February 1,1985,Roe rendered accounting services pursuant to the contract.After rendering accounting services for an additional period of six months pursuant to the contract,Roe was discharged without cause by the board of directors of Dex.In the absence of any agreements to the contrary,who will be liable to Roe for breach of contract?

Question

Quizplus · Accepted Answer

When a promoter is liable on a preincorporation contract,the promoter is released from liability on the contract when the corporation and the other party to the contract agree to release the promoter from liability.Since Rice had not been released from liability by Dex or Roe and since Dex had adopted the contract made by Rice (by availing itself of Roe's accounting services),both Rice and Dex will be liable to Roe for breach of contract.

Rice Is a Promoter of a Corporation to Be Known