Question

Esther and Salim are promoters for Kale Inc. Prior to its incorporation, Esther negotiated several preincorporation contracts with Ian, an investor. She signed each contract in the name of Kale Inc. Kale subsequently was incorporated, but the Kale Board of Directors refused to adopt the contracts. Ian later sues Kale, Esther, and Salim on the contracts. Which of the following statements is true of this case?

a. Only Kale and Esther are liable as Esther, a promoter of Kale, negotiated several preincorporation contracts with Ian.
b. Esther is solely liable as she signed each contract in the name of Kale Inc.
c. Kale, Esther, and Salim are liable as they are sued by Ian.
d. Esther and Salim are liable as they are promoters of Kale Inc.

Answer 1

D

Step-by-step explanation:

Esther and Salim are liable as they are promoters of Kale Inc.

The reason being that promoters most ot the time are held liable on contracts they make on behalf of corporations that are not yet formed. If the corporation has never been formed, or if it fails to adopt the promoter's preincorporation agreement, the promoter is liable. This law is kmown or is a popular agency law that any agent who makes a contract for a principallt that is not yet in existance is personally liable for it. If more than one promoter was involved in this contract making , they are all liable under a joint enterprise theory.

Answer 2

Option- D

• Esther and Salim are liable as they are promoters of Kale Inc, is the true statement of the provided options.