Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/69

 CHAP. V.] PROMOTION OF A CORPORATION. [§76. contract by the corporation when organized will not free the promoter from his liability to the other contracting party with- out the consent of the latter, 1 because it cannot be presumed that a party contracting gives credit to a corporation not yet organized, and therefore not yet capable of being bound." Of course, it is competent for the promoter to stipulate that the contract shall not be binding unless the corporation is subse- quently organized ; but in this case the promoter simply makes a conditional contract. So, further, it might be agreed between the contracting parties that in no event should the promoter incur any personal liability, but that the contract should be binding only on the corporation to be subsequently formed. 2 In such case the promoter would not be liable ; the other party could at any time withdraw as long as his side of the contract remained executory, unless he had in the meanwhile received some valid consideration for his promise ; and as for the corpora- tion, ordinarily it would not be bound by the contract unless it adopted the same after its organization. 3 It is plain that any contract like the last would be of a very doubtful and condi- tional nature, and such as a court would never imply, or allow a jury to imply, unless all other interpretations were excluded by the terms of the contract itself. 1 " There must be two parties to a contract, and the rights and obliga- tions which it creates cannot be transferred by one of them to a third person who was not in a condi- tion to be bound by it at the time when it was made." Erie, C. J., in Kelner v. Baxter, L. R. 2 C. P. 174. It is plain that while a party may as- sign his rights under a contract, he may not thereby free himself from his liabilities ; but it might be infer- red from the words of the chief jus- tice that it was incompetent for a corporation to adopt any contract made on its behalf by one of its pro- moters prior to its organization, which seems unreasonable. Still, Scott v. Lord Ebury, 36 L. J. C. P. 161, holds that a corporation subse- quently formed cannot ratify the acts of a promoter so as to relieve him of his liability arising from them, because the corporation "was not in existence " when the liability was incurred. In this latter case, however, the court, who by agree- ment were allowed to draw inferen- ces of fact, considered that the con- tract was made on the credit of the promoters and that there was no evi- dence of a consent on the part of the other contracting party to substitute the liability of the corporation. 2 Landman v. Entwistle, 7 Exch. 632; see Higgins v. Hopkins, 3 Exch. 163; Rennie v. Clarke, 5 Exch. 292. 3 As to the responsibility of the corporation in regard to contracts of its promoters, see §§ 87-90. 49