NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

                                        

                                                                 

COMPANY LAW

TOPIC : “PRE-INCORPORATION CONTRACTS”

SEMESTER - V

SUBMITTED BY:                                                               SUBMITTED TO:

Kriti Agarwal       2019BALLB76                    Prof. Padma Singh

                                                            
 SYNOPSIS

INTRODUCTION

The promoter is obligated to bring the company in the legal existence and to ensure its
successful running and in order to accomplish his obligation he may enter into some
contract on behalf of prospective company. These types of contract are called ‘Pre-
incorporation Contract’. The legal status of a pre-incorporation contract is not easy to
assess. Going by the definition of the contract, there have to be at least two
parties/persons who enter into contract with each other. So, the general principle is that
if one of the parties to the contract is not in existence at the time of entering into the
contract then no contract will there. Hence, the company can’t enter into a contract
before it comes into existence, and it comes into existence only after its registration.
Thus it is said that the pre-incorporation contract is entered into by the promoters on
behalf of the company. But under section 230 of the Indian Contract Act 6, an agent
cannot personally enforce contracts entered into by him on behalf of his principal, nor
is he personally bound by them if he specifies clearly, at the time of making the
contract, that he is only acting as an agent and he is not personally liable under the
contract. So if this principle is applied, the contract becomes in fructuous as neither of
the parties is liable under the contract. This will further be analyzed with respect to
Specific Relief Act.

 STATEMENT OF PROBLEM 
This research project primarily focuses on analysing the types of pre-incorporation contracts
entered into by the Company and who enters on behalf of the Company. What are the further
liabilities, if any, that are associated with such contracts. Can a Company itself into a contract
even before its legal existence.

HYPOTHESIS 
The Pre-incorporation Contracts are entered into by the Promoters on behalf of the company
and in case of any breach in the future, the company compensates the promoters. It also
depends upon the Article of Association the company if it has such a provision regarding
compensation of the Promoters for expenses and liabilities.
RESEARCH QUESTIONS
1. What are the types of pre-incorporation contracts entered into by the Promoters of a
Company?
2. Who takes the liability of such contracts, is it the Company itself or the Promoters?
3. How can a Company enter into a contract before coming into existence?
4. What is the role and liability of the Promoters?

OBJECTIVES OF STUDY 
1. To study the Pre incorporation Contracts entered by a Company.
2. To study the role of the Promoters before the Company becomes a legal entity.
3. To analyse the role and liabilities of the Promoters with respect to such Contracts.
4. To study the final relationship that exists between the company and the promoter.

RESEARCH METHODOLOGY
The methodology adopted for this project is doctrinal and analytical.

TENTATIVE CHAPTERIZATION
 
1. Introduction
2. Legal Status of Pre-incorporation Contracts
3. Role of Promoter
4. Liability of Promoter
5. Relationship between the Promoter and the Company
6. Conclusion and Suggestions

REVIEW OF LITERATURE 

BIBLIOGRAPHY