Promoter and Pre Incorporation of Contract

A person who intends to form a corporation will often enter into contracts on behalf of the corporation prior to incorporation. For example, the promoter of a candy store may enter into a store lease before starting the candy store business. If the Company does not comply with the lease agreement entered into by its Promoter, the question may arise as to whether the Company, the Promoter individually or both are liable for the breaches of the contract. Although the answer depends on the facts of the individual case, the promoter takes a significant risk by signing contracts before starting the business. Such contracts should be drafted with care to limit the risk of the proponent being held personally liable. The general rule in Massachusetts law is that a developer may be held personally liable for the breach of a pre-incorporation contract unless the circumstances show that the other party intended to consider only the company for performance. The liability of the newly incorporated company may be incurred on the basis of a foundation contract, in particular by accepting the benefits of the contract (e.g. B confectionery which operates its activities from the rented premises). However, the fact that the company becomes liable under the contract does not release the organizer from its individual liability. A developer who hopes to avoid personal liability for a pre-incorporation contract must prove that the other party knew that it was in fact entering into a contract with a company to be incorporated shortly and that it intended to hold only the company, and not the developer, liable under the contract.

Obtaining such evidence can be difficult. It is therefore advisable to include in such a pre-incorporation contract an explicit confirmation from the other contracting party that it understands that it is entering into a contract with the as yet unincorporated company and that it only verifies the performance of the company, and not of the project promoter. The inclusion of such a provision avoids misunderstandings and can save the proponent a lot of money and problems. A promoter is a person who creates the business and has a fiduciary relationship with the business. In almost all cases, it is the developer who enters into a contract on behalf of a corporation prior to its incorporation, and in many cases the court has had a lot of difficulty with the people who appear on the legal horizon in the process of incorporating a company called a developer. An important issue arising from this situation is the legal consequences that should arise when a promoter does business with a third party on behalf of a future business. The promoter is a person who starts the business, but there are a number of legal consequences regarding the promoter and the pre-incorporation contract. From the proponent`s point of view, it is very clear that he is neither the representative of the company nor does he carry out authorized work, but that he enters into a contract with a third party in the name of a non-existent principle. The position of a developer is very ambiguous and, in most cases, it is found that the company refuses to accept the pre-foundation contract. “Chuck`s communication and negotiation skills were honed and honed over time as he handled thousands of cases.” Do you know our legal options? Contact our estate planning lawyers today for an initial consultation. Our complementary combination of legal expertise is perfectly linked to all the areas in which we operate. From estate planning and decline to real estate and business law, we strive to use our wide range of skills for you.

Whether you`re making a will or trust, reviewing a loved one`s estate, buying or selling real estate, or starting a business, we can help. Sign up to receive emails with our latest legal updates! When you contact Hazelwood Law Firm for representation, our comprehensive legal team is committed to providing you with effective solutions that best suit your needs. We offer all our clients the personal attention and individual representation they deserve. We work tirelessly when you entrust us with your file, and even work at night and on weekends if necessary. “Charles` passion for defending and helping his clients has allowed him to build close relationships with many of them.” IO: Firm Structure, Purpose, Organization and eJournal Contract We pride ourselves on being a trusted and reliable legal team that provides advice and advocacy to residents of Northern and Central Virginia from our Burke and Innsbrook offices. .