A pre-incorporation contract is a contract purported to made by or on behalf of a company which has not been formed.

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INTRODUCTION

A pre-incorporation contract is a contract purported to made by or on behalf of a company which has not been formed. It is the intention of this essay to examine how the courts have decided on promoter's liability in relation to pre-incorporation contract.

As stated above, a pre-incorporation contract is one which is attempted to be made on behalf of a company which is not yet formed. The problem with these contracts is who exactly is liable under them. The question to be asked is, is the company liable or is it the promoter who incurs liability.

At common law, a number of rules were established. The first one is that until the company is formed it has no legal existence. A company comes into being from the date on its certificate of incorporation (s13 Companies' Act 1985 and Re Jubilee Cotton Mills1). Prior to this a pre-incorporation contract cannot be enforce by or against the company, for it is not possible to contract with a non-existent person.

This is illustrated by the leading case of Kelner v Baxter2. In this case Baxter and two other promoters agreed to buy some wines and