Kent incorporated provincially. The corporation worked with small businesses in developing graphs and charts from their data for presentation to bankers, partners, shareholders, etc. If Kent, as promoter and agent of the company, had bought the necessary equipment from Ace Computers Ltd. prior to incorporation, which of the following would be true?

Question

Quizplus · Accepted Answer

If Kent had included a provision in the contract with Ace exempting himself from personal liability, he may have been able to protect himself from being personally liable for the contract if the corporation was unable to fulfill it. At common law, pre-incorporation contracts are not binding on the corporation until it comes into existence, and even then the corporation may only ratify the contract if it was made with the intention that the corporation be bound. Kent's liability on the contract would not be limited to his investment in the corporation unless he had taken steps to protect himself. Some jurisdictions have enacted statutory provisions preventing a corporation from ratifying pre-incorporation contracts, but it is not clear from the information provided whether Kent's jurisdiction is one of them.

Kent Incorporated Provincially