Distinguish between 'preliminary contracts' and 'provisional contracts'.
Distinguish between 'preliminary contracts' and 'provisional contracts'.
Preliminary contracts: These contracts are signed by the promoters of a company with the third parties during the promotion of the company. These contracts are also called pre-incorporation contracts as they are created before the company is incorporated. Preliminary contracts are non-binding, as the company cannot ratify them. Therefore, these contracts are not enforceable unless fresh contracts are created on the same terms and conditions after the company comes into existence.
Provisional contracts: These contracts are signed after the incorporation of a company and before the commencement of business. They are different from preliminary contracts as they are enforceable automatically once the company obtains the certificate of commencement of business.
Preliminary contracts: These contracts are signed by the promoters of a company with the third parties during the promotion of the company. These contracts are also called pre-incorporation contracts as they are created before the company is incorporated. Preliminary contracts are non-binding, as the company cannot ratify them. Therefore, these contracts are not enforceable unless fresh contracts are created on the same terms and conditions after the company comes into existence.
Provisional contracts: These contracts are signed after the incorporation of a company and before the commencement of business. They are different from preliminary contracts as they are enforceable automatically once the company obtains the certificate of commencement of business.
