Discuss the rules that govern pre-incorporation contracts in relation to company law

• This is a contract entered into persons purporting to act on behalf of the company before its incorporation (sec.16 (2) of the Companies Act.)

• A company comes into existence on the date of incorporation mentioned in the certificate of incorporation.

• Before the date of incorporation, the company does not exist and has no capacity to contract.
Kelner V Baxter
• The company is generally not liable on such contracts.

• A person who purports to contract as agent for a non-existent Principal is personally liable on the contract. Kelner v Baxter (1866).

• A contract purportedly entered into or with a non-existent person is void. Newborne v Sensolid (GB) Ltd.

• The company cannot ratify a pre-incorporation contract after its incorporation. Price v Kelsal (1957)
• Natal Land Co. Ltd v Pauline Collery Syndicate

• Nor can directors adopt or confirm a pre-incorporation contract after the company‟s incorporation.
• North Sydney Investments and others V Higgins and others

• A pre-incorporation contract is enforceable or against a company if after incorporation the company has entered into a new contract similar to the previous agreement.
• Mawogola Farmers and Growers Co. Ltd v Kayanja and others (1971)

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