Sam is a promoter acting on behalf of a corporation that has not yet been fully incorporated. Under the Revised Model Business Corporation Act, if Sam acts on behalf of the yet-to-be-formed corporation, who is liable in the event of a breach of contract?

Question

Shelton

Business

26 July, 05:01

Sam is a promoter acting on behalf of a corporation that has not yet been fully incorporated. Under the Revised Model Business Corporation Act, if Sam acts on behalf of the yet-to-be-formed corporation, who is liable in the event of a breach of contract?

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Answers (1)

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Ferrell · Answer 1

The corporation becomes liable once formed, and Sam will be shielded from liability.

Explanation:

Before the revised model business corporation, liabity of any contract entered to or on behalf of a yet to be formed corporation will be borne by the person or agent and not by the yet to be formed corporation.

As a result of the above mention, it has become extremely difficult for persons or agents acting on behalf of an unincorporated business thereby making them suffer for the liability of the yet to be formed corporation.

Since the revised model business corporation act has been amended, the interest of persons or agents entering into contracts on behalf of a yet to be formed corporation is now being protected as the corporation (after being formed) will now be held liable for any breach of contract and not the agent.