Some Difficult Aspects of Pre-Incorporation Contracts in South African Law and Other Jurisdictions

摘要

It is trite that under the general principles of agency law, an agent may not contract on behalf of a non-existent principal and that the principal, once it comes into existence, may not ratify such a contract. In recognition of the importance of pre-incorporation contracts in commercial practice, a statutory exception is made in many jurisdictions in respect of companies that are yet to be formed. This article discusses the new South African approach to pre-incorporation contracts under the new Companies Act 71 of 2008, its difficulties and likely problems. The focus is on the ratification by companies of pre-incorporation contracts and the liability of the agent in the event of non-ratification. A comparative approach is adopted, that takes into account inter alia Australian, New Zealand, Canadian and UK law. Aspects of the stipulatio alteri, or contract for the benefit of the third party, are also discussed.