Beauty, phineas and samson are three friends who wish to start their own publishing company. while driving one sunday afternoon, samson comes across the perfect office building. he wishes to purchase this building on behalf of the proposed company. advise samson on the requirements that would need to be adhered to in terms of the companies act 71 of 2008 in order to conclude a valid and binding contract on the company’s behalf before its incorporation.
Question: Beauty, phineas and samson are three friends who wish to start their own publishing company. while driving one sunday afternoon, samson comes across the perfect office building. he wishes to purchase this building on behalf of the proposed company. advise samson on the requirements that would need to be adhered to in terms of the companies act 71 of 2008 in order to conclude a valid and binding contract on the company’s behalf before its incorporation.
For Samson to conclude a valid and binding contract on behalf of the proposed company before its incorporation, he must adhere to the following requirements in terms of the Companies Act 71 of 2008:
- He must clearly disclose to the other party to the contract that he is acting on behalf of a proposed company and that the company is not yet incorporated.
- He must obtain the other party's written consent to the contract being concluded on behalf of the proposed company.
- The contract must be ratified by the company within 3 months of its incorporation.
If Samson fails to adhere to any of these requirements, the contract will not be binding on the company.
In addition to the above requirements, Samson should also take the following steps to protect himself and the proposed company:
- He should obtain a signed copy of the contract from the other party.
- He should keep a copy of the contract in a safe place.
- He should inform the other party of the proposed company's name and incorporation date as soon as possible.
Once the company is incorporated, Samson should immediately submit the contract to the board of directors for ratification. The board of directors can ratify the contract by passing a resolution to that effect. The resolution must be signed by all of the directors present at the meeting.
If the board of directors does not ratify the contract within 3 months of the company's incorporation, the contract will not be binding on the company. However, Samson may still be personally liable on the contract.
It is important to note that the law of pre-incorporation contracts is complex and there are a number of factors that can affect the validity and enforceability of such contracts. It is therefore advisable for Samson to seek legal advice before entering into any contracts on behalf of the proposed company.
Here are some additional tips for Samson:
- He should make sure that the contract is in writing and that it is clear and unambiguous.
- He should have the contract reviewed by a lawyer before signing it.
- He should not make any representations or warranties on behalf of the proposed company that he is not authorized to make.
- He should keep the other party to the contract informed of the status of the company's incorporation.
By following these tips, Samson can help to ensure that the contract is valid and binding on the company once it is incorporated.
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