Section B - Scenario 3
SCENARIO: 'Lunar Logistics Ltd' is a space-freight startup. Before the company is officially incorporated at Companies House, the founders (promoters) sign a £50,000 contract with 'RocketTech' to purchase fuel tanks. The contract is signed 'by John, on behalf of Lunar Logistics Ltd'. Two weeks later, the company is incorporated. The board of directors immediately passes a resolution stating that the company 'adopts and ratifies' the fuel tank contract.
QUESTION: Who was legally liable on the contract at the exact moment it was signed?
ACCA · Question 53 · The formation and constitution of business organisations
Section B - Scenario 3
SCENARIO: 'Lunar Logistics Ltd' is a space-freight startup. Before the company is officially incorporated at Companies House, the founders (promoters) sign a £50,000 contract with 'RocketTech' to purchase fuel tanks. The contract is signed 'by John, on behalf of Lunar Logistics Ltd'. Two weeks later, the company is incorporated. The board of directors immediately passes a resolution stating that the company 'adopts and ratifies' the fuel tank contract.
QUESTION: What is the legal effect of the board's resolution to 'adopt and ratify' the contract?
Answer options:
It successfully transfers liability from John to the company.
It makes the company jointly liable with John.
It has no legal effect; a company cannot ratify a pre-incorporation contract.
It is valid only if RocketTech agrees to the ratification.
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