Pre incorporation contract

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saman

student

61 Points Posted on 17 June 2012

Pls help me on d quesn below a co. was in d proces of incorporatn.promoters of the co signed an agreement 4 d purchase of certain furniture 4 d company n payment was 2 be made 2 d suplier by d company after incorporatn.shortly,after incorporation d company went into liquidation n d debt cud nt b paid by d company 2 d suplier.as a result suplier sued d promoter of d co 4 d recovery of money.Examine whethr promoters can b held liable 4 payment undr folowing situations: 1.whn d co. had already adoptd d contract aftr incorporatn. 2.whn d co. makes a fresh contract wid d suplier in terms of pre-incorporation contract.

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Guest

the two cases u have given

1.whn d co. had already adoptd d contract aftr incorporatn. 2.whn d co. makes a fresh contract wid d suplier in terms of pre-incorporation contract. ,, suggest that the pre incorporation contracts have been undertaken by the company..

answer: the relation between promoters and company is principal-agent relationship.the general rule is "an agent is not personally liable for the acts made by him on behalf of the principal". so if u go by this rule the promoters are not personally liable ..

but there are some provisions in special relief act 1963..u/s 15{h} specific performance of a contract can be asked

1 by any party to the contract

2.from the represtative of the principal or from the principal himself .

so because of this rule the company and even the promoters are liable for the contract . since the company does not exist the representative .i.e. the promoters are personally liable in both the cases...