A.If a promoter enters a corporation not yet formed into a KX with sb,
full disclose the non-existence of the corporation,
then the corporation was formed
but not ratify the contract and refuse to reform it:
Who will be liable?
1. Corporation will be not liable, because there is no contract without its ratification.
2. The promoter maybe liable.
(1) Whether the promoter will be liable depends on his intention.
(2) Firstly, we need to analyze the contract interpretation. If he says in the contract that he will liable for the contract, he will be liable.
(3) Then, if he does not say, the court will try to determine the parties’ intent. There are 4 presumption:
If other party is making a revocable offer to the non-existent corp., and the contract will be not formed until the corporation is formed and accept the contract. In this situation, the promoter will be not liable.
If the other party is making an irrevocable offer and keep it open until the corporation is formed, there is not contract and liability until the corporation accepts it.
In the third situation, they agree that before the corporation is formed the promoter is liable, but his liability will terminate once the corporation is formed. In this case, the promoter will be not liable.
At last, if the promoter remains secondarily liable even the corporation becomes a party, he will be liable.
(Robertson v. Levy)—Development of the doctrine
1. Under early common law, the defective corporation will be deemed to be a general partnership. Therefore those people who thought that they were invertors became general partners of the partnership and had unlimited liability. Thus, partnership principles would apply to determine whether the parties are partners.
As for the investors, they will be regarded as general partners who have personal liability. They are co-owner of a business for profit.
While the liability of offices is not clear, because they are not...