Enforceability of Pre-Incorporation Contracts (150 words):

Pre-incorporation contracts are agreements entered into by promoters on behalf of a company before it is legally formed. Under Indian law, these contracts are not automatically binding on the company once incorporated, as the company did not exist at the time of contracting and thus lacks legal capacity. The Specific Relief Act, 1963 (Section 15(h) and Section 19(e)) allows such contracts to be enforced by or against the company only if:

The contract is for the purposes of the company.
The company accepts and communicates its acceptance after incorporation.
However, promoters may be personally liable if the company does not ratify the contract post-incorporation, as the concept of ratification under the Indian Contract Act requires the principal (company) to be in existence at the time of the contract, which is not the case here. Therefore, enforceability depends on express adoption by the company and the terms of the agreement.

Pre-incorporation contracts are agreements made by promoters on behalf of a company that is yet to be incorporated. Under Indian law, such contracts are generally not enforceable against the company because a company, being a legal person, comes into existence only after incorporation. Since the company did not exist at the time the contract was made, it cannot be said to have been a party to the agreement, nor can it ratify the contract under Section 196 of the Indian Contract Act, 1872, which requires the principal to be in existence at the time of the original contract. As a result, promoters remain personally liable for such contracts unless there is a novation—where, after incorporation, the company enters into a fresh agreement adopting the terms of the earlier contract. Courts in India, following precedents like Kelner v. Baxter and Weavers Mills Ltd. v. Balkis Ammal, have consistently held that pre-incorporation contracts are not binding on the company unless duly adopted post-incorporation. Therefore, for such contracts to be enforceable against the company, they must be re-executed or explicitly accepted after incorporation, failing which the promoters bear the contractual liability.

Pre-incorporation contracts, agreements made on behalf of a company before its actual formation, are generally not enforceable against the company itself unless the company, after incorporation, adopts or ratifies the contract. Prior to adoption, promoters who enter into these contracts are personally liable.
Here's a more detailed explanation:
Enforceability against the Company:
No inherent enforceability:
A company, not yet in existence, cannot be a party to a contract, therefore, pre-incorporation contracts are not automatically binding on the company.
Adoption/Ratification:
After incorporation, the company can choose to adopt or ratify the contract.
Acceptance and Communication:
If the company accepts and communicates this acceptance to the other party, the contract becomes enforceable against the company as if it had been a party from the beginning.
Rights and Obligations:
Upon adoption, the company assumes all rights and obligations under the contract.
Enforceability against Promoters:
Personal Liability:
Promoters who enter into pre-incorporation contracts are generally personally liable for those contracts.
Exemptions:
Promoters can be exempted from liability if the third party explicitly agrees to exempt them or if the company, upon incorporation, assumes full responsibility for the contract.
Specific Relief Act:
The Specific Relief Act, 1963, provides remedies for breaches of these contracts.
Key Considerations:
Ratification is crucial:
For a company to be bound, it must ratify the pre-incorporation contract after incorporation.
Promoter's Liability:
Promoters should be aware of their potential personal liability and ensure they are protected through proper agreements or by having the company adopt the contract.
Third-Party Rights:
If the company does not adopt the contract, the third party can seek remedies against the promoters.

Pre-incorporation contracts are generally not enforceable against a company under Indian law because a company, not being in legal existence at the time of the contract, cannot be bound by or enforce such agreements. Under the Indian Contract Act, 1872, and supported by case law, a company cannot ratify contracts made before its incorporation. However, the promoters who enter into such contracts may be personally liable, unless a fresh contract is adopted by the company after incorporation with the consent of the other party.