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There are various types of pre-incorporation contracts that can be made by a company ing to their need before incorporation, such as a lease agreement, employment agreement, founder's agreement, shareholder agreement, etc.

Under the strict principles of contract law, the promoter is solely liable for the breach of contract. The reason behind is that the promoter is party who enters into the contract, and not the company. The rule of privity of contract keeps away the company from pre-incorporation contract.

Ingly, the company is not bound by a pre-incorporation contract because it does not have a separate legal existence until its incorporation; nor can it appoint an agent before its incorporation.

Ratification of the pre-incorporated contracts The promoters can follow either of the methods stated below for such acceptance or ratification: 1. Accept the contracts by passing a contract acceptance resolution and the action of promoter for incorporating the company and related matters.

Promoters are generally held personally liable for pre-incorporation contract. If a company does not ratify or adopt a pre-incorporation contract under the Specific Relief Act, then the common law principle would be applicable and the promoter will be liable for breach of contract.

The promoter is considered to be liable to fulfil the obligations of the corporation. It happens in case the corporation is not formed or does not adopt the contract. At the time of the signing the pre-incorporation contract, the corporation does not exist and thus, cannot be part of the contract.