Pre Incorporation Contract Law and Legal Definition
A pre incorporation contract is one which is purportedly made by or on behalf of a corporation at a time when the corporation has not yet been incorporated. Because the corporation named in the promoter's contract has not been formed at the time the contract is made, the corporation when formed is not bound by the contract. However, adoption of the contract is anticipated by the parties to the contract. If the corporation in fact adopts the contract, then it will assume those rights and liabilities set out in the contract.
When a promoter enters into a contract on behalf of a corporation to be formed, the promoter may be considered personally liable to meet the obligations of the corporation if for some reason the corporation is not formed or does not adopt the contract. When the pre-incorporation contract is made, the corporation is not in existence and therefore cannot be a party to the contract. The promoter thus must be a party to the contract, and, under agency law principles, the promoter will be personally bound as an agent acting on behalf of a non-existent principal.
