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APPELLANT CASE WAS BASED ON THE POST-INCORPORATION CONTRACT

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The facts averred in the statement of claim which are deemed to be true for the purpose of the objection taken in limine show that the appellant and the 1st respondent company entered into a new contract in the terms of the preincorporation contract after the 1st respondent company had been incorporated. In the circumstance, the rule of company law that a company is not bound by a preincorporation agreement entered into by its promoters and that the company cannot ratify such agreement after its incorporation is inapplicable to the facts of the case as pleaded in the statement of claim. As the appellant alleged that his claim was founded on the post-incorporation agreement whereas the respondents said the claim was based on the preincorporation contract, the dispute cannot be resolved in limine. The issue can only be determined upon the hearing of the case on the merits.

— Bello, JSC. Edokpolo v. Sem-Edo & Ors. (1984) – SC.89/1983

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CAMA ALLOWS COMPANIES TO RATIFY PRE-INCORPORATION CONTRACT

The intention of the legislature in enacting sections 72(i), 624(i), and 626 of CAMA is quite clear. It is relevant to re-emphasis that the rule of construction of statute is to adhere to the ordinary meaning of the words used according to the intent of the legislature. The provisions of sections 624(1) and 626 make it abundantly clear that existing companies who wish to ratify pre-incorporation contract agreements could do so because the Act (CAMA) applied to them. In section 650(i), the interpretation of words used in part A of CAMA, “Company or existing company means: a company formed and registered under this Act or, as the case may be, formed and registered in Nigeria before and in existence on the commencement of this Act”.

— U. Mohammed, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994

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A COMPANY’S LEGAL PERSONALITY DIES AT THE DEATH OF THE COMPANY

A company is a legal person with legal capacity to sue or be sued. That legal personality and capacity continues until the company dies a legal death in the process, and as a result of winding up and dissolution.

– Oputa, JSC. Intercontractors v. National Provident (1988)

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AT COMMON LAW, PRE-INCORPORATION CONTRACT IS NULL – HOWEVER

At common law a company before its incorporation has no capacity to contract. Consequently, nobody can contract for it as Agent nor can a pre-incorporation contract be ratified by the company after its incorporation -Transbridge Co. Ltd. v. Survey International Co. Ltd. (1986) 17 NSCC 1084; (1986) 4 NWLR (Pt. 37) 576; Edokpolo & Co. Ltd. v. Sem-EdoWire Industries Ltd. & Ors. (1984) 7 SC 119; Sparks Electrics (Nig.) Ltd. v. Ponmile (1986) 2 NWLR 579; Enahoro v.I.B.WA. Ltd. (1971) 1 NCLR 180; Kelner v. Baxter (1867) LR 2CP 174; Natal Land and Colonisation Co. v. Pauline Syndicate (1904) AC 120. The rationale for this rule was stated at page 183 of the report by Erle, C.J. in Kelner v. Baxter in these words: “………………….as there was no company in existence at the time, the agreement would be wholly inoperative unless it were held to be binding on the defendants personally. The cases referred to in the course of the argument fully bear out the proposition that, where a contract is signed by one who professes to be signing ‘as agent’, but who has no principal existing at the time, and the contract would be altogether inoperative unless binding upon the person who signed it, he is bound thereby: and a stranger cannot by a subsequent ratification relieve him from that responsibility. When the company came afterwards into existence it was a totally new creature, having rights and obligations from that time, but no rights or obligations by reason of anything which might have been done before.” The company can, however, after its incorporation, enter into a new contract to put into effect the terms of the pre-incorporation contract – Touche v. Metropolitan Railway Warehousing Co. (1871) 6 Ch. App 671; Howard v. Patent Ivory Manufacturing Co. (1888) 38 Ch D 156.

— Ogundare, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994

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TESTIFY: ANY OFFICIAL CAN TESTIFY FOR A COMPANY

It is not necessary that it is only that person who carried out the function on behalf of the company that must testify. Not at all, as any official of the company well equipped with the transaction and or related documents would suffice to testify. – Peter-Odili JSC. Chemiron v. Stabilini (2018)

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RATIONALE FOR PRE-INCORPORATION CONTRACT NOT BINDING AT COMMON LAW

At Common Law, a pre-incorporation contract was not binding on the company because there was no principal on behalf of whom an agent could have contracted. The company was not permitted to ratify or adopt it, and it could not, after incorporation, enforce the contract, nor sue, e.g. for damages for breach of contract – Natal Land etc Co. Ltd. v. Pauline Colliery Syndicate Ltd. (1904) AC 120. These common law rules were a source of considerable inconvenience for the promotion of business.

— U. Mohammed, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994

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ILLEGAL TO BUY CHATTEL/COMMODITY SIMPLY TO PUT THE OTHER JUST IN FUNDS ONLY

This reasoning assumes, as I understand it, that if the transaction under consideration is genuinely regarded by the parties as a sound commercial transaction negotiated at arm’s length and capable of justification on purely commercial grounds, it cannot offend against s.54 [Companies Act 1948]. This is, I think, a broader proposition than the proposition which the judge treated as having been accepted by counsel for Belmont. If A Ltd buys from B a chattel or a commodity, like a ship or merchandise, which A Ltd genuinely wants to acquire for its own purposes, and does so having no other purpose in view, the fact that B thereafter employs the proceeds of the sale in buying shares in A Ltd should not, I would suppose, be held to offend against the section; but the position may be different if A Ltd makes the purchase in order to put B in funds to buy shares in A Ltd. If A Ltd buys something from B without regard to its own commercial interests, the sole purpose of the transaction being to put B in funds to acquire shares in A Ltd, this would, in my opinion, clearly contravene the section, even if the price paid was a fair price for what is bought, and a fortiori that would be so if the sale to A Ltd was at an inflated price. The sole purpose would be to enable (ie to assist) B to pay for the shares. If A Ltd buys something from B at a fair price, which A Ltd could readily realise on a resale if it wished to do so, but the purpose, or one of the purposes, of the transaction is to put B in funds to acquire shares of A Ltd, the fact that the price was fair might not, I think, prevent the transaction from contravening the section, if it would otherwise do so, though A Ltd could very probably recover no damages in civil proceedings, for it would have suffered no damage. If the transaction is of a kind which A Ltd could in its own commercial interests legitimately enter into, and the transaction is genuinely entered into by A Ltd in its own commercial interests and not merely as a means of assisting B financially to buy shares of A Ltd, the circumstance that A Ltd enters into the transaction with B, partly with the object of putting B in funds to acquire its own shares or with the knowledge of B’s intended use of the proceeds of sale, might, I think, involve no contravention of the section, but I do not wish to express a concluded opinion on that point.

— Buckley LJ. Belmont v Williams [1980] 1 ALL ER 393

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