Question

Contracts which entered into, by Agents or trustees on behalf of a prospective Company before it has come into existence are called _______________.

• A. Provisional Contracts
• B. Pre-Incorporation Contracts
• C. Both Provisional and Pre-Incorporation Contracts
• D. None of the above

Answer 1

The correct option is B Pre-Incorporation Contracts

As the name stands, these contracts are made before the formation of a company. For the formation of the company, the promoters are required to enter into various contracts with third parties e.g. purchasing some property or hiring the services of professions like lawyers, technicians, etc.

After the incorporation of the company such contracts are not attached to the company, as the company obtains legal entity status only after its incorporation.