ACCA LW · Chapter 8 · Question 5 of 11
Under s51 Companies Act 2006, who is liable on a contract made on behalf of a company before it has been incorporated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The person who made the contract on the company's behalf, subject to any agreement to the contrary
Explanation
Section 51 provides that a contract purporting to be made by or on behalf of a company before incorporation has effect as a contract made with the person acting for the company, who is personally liable, subject to any agreement to the contrary. The company cannot ratify it after incorporation, although it may enter a new contract (novation) on the same terms.
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