Allocation of risks in a pre-incorporation contract
by Sandy Sabapathy
International Journal of Private Law (IJPL), Vol. 2, No. 2, 2009

Abstract: A pre-incorporation contract is formed prior to the incorporation of a company. A company has the capacity to enter into a contract only when it has been formally incorporated and has acquired the status of separate legal entity. Thus, a pre-incorporation contract is entered into by a promoter on behalf of a proposed company and the contractor. The purpose of this paper is four-fold. First, to state, that there are three main risks in a pre-incorporation contract. Second, to discuss the rules which have been applied by the courts to allocate these risks. Third, to consider briefly so as to how pre-incorporation contracts are dealt with in the USA. Finally, to examine and evaluate the legal position of pre-incorporation contracts in UK, Hong Kong and China and that whether these risks have been allocated efficiently in the said jurisdictions.

Online publication date: Thu, 01-Jan-2009

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