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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Solution

Preliminary contracts are signed between the promoters and the third party during the promotion of a company. As they are signed before the incorporation of a company, they are not regarded as binding on the company. The company cannot ratify these contracts and are not forced to honour them.

Hence, the correct answer is option (d).

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Similar questions

A company can ratify preliminary contracts after incorporation.

A company can commence business after incorporation.

Preliminary Contracts are signed

(a) before the incorporation

(b) after incorporation but before capital subscription

(d) after commencement of business

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