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A provisional...

Question

A provisional contract is signed by promoters before the incorporation of the company.

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Solution

The statement is FALSE.
This is because the provisional contract is signed after the incorporation of a company and before the commencement of business.

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Q. Tick the correct answer.
A provisional contract is signed by promoter before the incorporation of the company.

Preliminary Contracts are signed

(a) before the incorporation

(b) after incorporation but before capital subscription

(c) after incorporation but before commencement of business

(d) after commencement of business

Q. Mr. X is a promoter of a company. Before the company is fully incorporated, he enters into a contract on its behalf with a third party. Under the common law, would a valid contract exist and, if so, who would be the parties to the contract?

A company can ratify preliminary contracts after incorporation.

Preliminary Contracts are

(a) binding the company

(b) binding on the company, if ratified after incorporation

(c) binding on the company after the incorporation

(d) not binding on the company

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Standard XI Business Studies

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