Pre-incorporation contract
Under Companies Act 2006 section 51, a contract purporting to be made by or for a company before it is formed generally takes effect as a contract with the person acting for it, who is personally liable, subject to agreement to the contrary. The future company is not automatically bound merely because it is later incorporated. The parties can make a fresh agreement or novation after incorporation, subject to its terms.
Worked example
Mira signs a lease for a company still being formed. Unless the contract provides otherwise, section 51 can make Mira personally liable. Incorporating the company later does not, by itself, transfer that obligation to the company.
Common mistake
Assuming incorporation automatically ratifies the earlier contract and releases the promoter.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | LW (GLO) | Direct | September 2026–June 2027 |