i) A company comes into existence on the date of incorporation. Before such date it does not exist and hence has no capacity to contract and cannot have agents. It was so held in Kelner v Baxter (1866).
- Whereas a company may benefit from contracts entered into before its incorporation it cannot, as a general rule be held liable on them. Such a contract cannot be ratified. It was so held in Natal Land Co. v Pauline CollierySyndicate as well as in Price v Kelsal, nor can directors of the company purport to adopt or affirm the contract after the company?s incorporation. It was so held in North Sydney Investments and another v Higgins and another. Such contracts can only be entered by or against the company if the company after incorporation enters into a new contract similar to the previous agreement. It was so held in Howard v Patent Ivory Co. Ltd
- In this case “Micromine Limited” has no enforceable rights on the contracts and cannot sue or be sued on them hence it is free from liability.
(ii) The contract may expressly provide that any amount or sum spent by Shem s recoverable from the company when incorporated. Problem however arises since the company is not privy to the contract and Shem cannot contract as the agent of the company. The articles of the company generally provide for the recovery of such expenses e.g. Article 80 of Table A. However such an Article is unenforceable by virtue of section 22 (1) of the Companies Act. Arguably therefore no provision in the contract can adequately protect Shem.
marto answered the question on February 6, 2019 at 08:42
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