Pre registration contracts Essay example -- essays research papers

The common equity view of pre-registration comes was that the federation did not exist for legal purposes until it had been formally incorporated (registered). This common law view resulted in telephoners macrocosm unable to image a binding center until they had been registered.However given the delays which can be encountered in the registration process, the promoter of a company may propensity to enter into induces for the company prior to its incorporation . An example of this may be a promoter wanting to ensure a company bequeath have stock on hand so it will be ready to operate when its registered. He might order stock and property the contract in the unregistered companys name. Since a company did not exist before registration it could not sign a contract itself or appoint an agent to sign on its behalf. thusly promoters could not be seen as the companys agent. Circumstances much(prenominal) as this are problematic and raise difficult questions as to the enforceab ility of the contract and the availability of damages for its breech. At common law, a company was too incapable of signing a pre-registration contract after it was registered. This was because under the law of authorisation , ratification has a retrospective effect and the contract was regarded as being do at the time it was entered into by the agent when the company was not in existence .A company could only be held credible for a pre-registration contract if it entered into a new contract with the same basis as the pre-registration contract after it was registered. This is called novation.Seeing as though a company would not be held apt(predicate) on a pre-registered contract, the courts treasure that innocent third parties could be prejudiced. Accordingly the courts were prepared on do to infer an intension by the promoter to assume personal financial obligation on the contract An important case is Kelner v Baxter (1866) where the promoters who had write the contract on behalf of an unformed company were held to be personally liable. In this feature case the promoters of an unformed company agreed to purchase stock and signed an agreement, which stated on behalf of the Gravesend Royal Hotel Alexandra Hotel Company Limited. A difficultly had arisen as since the company had not yet been for... ...is case an accountant who was one of the companies four promoters entered into a contract on behalf of a unformed company. The company failed to ratify the contract and the supplier attempted to sue all four promoters. The ultimate Court of New South Wales found that only the account was liable since he was the only person who had signed the contract. The court also made it aware that the accountant has a separate right to claim against the some other promoters if he acted as their agent in regards to the contract.While the promoter is generally liable in these destiny, the company does have a potential alternate liability. Hence where the company is registered but does not ratify the pre-registration contract indoors the prescribed time, the court may do anything it considers appropriate in the circumstances. The courts powers include the option of ordering the company to rectify the unfairness . The courts are able to this by ordering the company to pay for part or all of the damages for which the promoter is liable, transferring property received under the contract to a party to the contract or paying an amount to a party to the contract.