Question

Helen is a promoter who, prior to forming Bayne Corp., contracted to purchase tile-manufacturing machinery from Owen Machinery Inc. The contract was negotiated and entered into in the name of Bayne Corp. Subsequently, a certificate of incorporation was issued to Bayne Corp. Which of the following statements is true of this scenario?A.>Only Bayne Corp. is liable for the contract with Owen Machinery Inc. as it received its certificate of incorporation.

B. Helen would be liable for the contract with Owen Machinery Inc.
C. If the board of directors of Bayne Corp. issues a suitable resolution, Helen would be relieved from all liability for the contract with Owen Machinery Inc.
D. Since Bayne Corp. was not in existence at the time the contract was negotiated, the contract is void.

Answer 1

B) Helen would be liable for the contract with Owen Machinery Inc.

Step-by-step explanation:

A corporation is a legal entity, something similar to a person but without physical existence. But the birthday of the corporation is its incorporation date, since it is "born" that day.

Helen signed a contract on behalf of Bayne Corp. before it existed, so it is like getting a social security number before you are born, it is simply impossible. Since she signed a contract on Bayne behalf before Bayne even existed, she is personally liable for the contract.

In case of something going wrong and Owen Machinery suing Bayne, and the court ruling that it was a de facto or by estoppel corporation, the corporate veil will surely be lifted in this case, so no matter which sequence of events take place, the result will be the same ⇒ Helen is liable.