ICANBusiness LawLaw of Contract: Formation2025

Prior to the incorporation of Zenith Logistics Ltd, Mr. Tunde entered into a written contract in his own name 'for and on behalf of Zenith Logistics Ltd' to lease a commercial warehouse from Lekki Properties Plc at ₦10,000,000 per annum. Two months after Zenith Logistics Ltd was incorporated, the company passed a board resolution ratifying the contract. What is the legal position of the contract under Section 96 of the Companies and Allied Matters Act (CAMA) 2020?

AThe contract remains void ab initio because a non-existent principal cannot authorise an agent
BZenith Logistics Ltd is bound by the contract and entitled to its benefits as if it had been in existence at the date of the contractCORRECT
CMr. Tunde remains exclusively liable on the contract because pre-incorporation contracts cannot be ratified by a corporate entity
DThe lease agreement is voidable at the option of Lekki Properties Plc within 14 days of ratification
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Why the answer is B, and why the others tempt you.
Section 96(1) of CAMA 2020 alters the common law rule (Kelner v Baxter) by explicitly providing that any contract or transaction purporting to be entered into by a company prior to its formation or by any person on behalf of the company may subsequently be ratified by the company after incorporation. Upon ratification, the company becomes bound and entitled to the benefits as if it were in existence when the contract was made.
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