ICANBusiness LawLaw of Agency2022

On 10th March 2023, Mr. Adeleke signed a supply contract with Fabrik Ltd for industrial equipment worth ₦20,000,000, explicitly purporting to act 'for and on behalf of Apex Haulage Ltd', a company that was only formally incorporated on 25th March 2023. On 5th April 2023, the Board of Directors of Apex Haulage Ltd passed a formal resolution to ratify the contract. What is the legal effect of this ratification under Nigerian company law (CAMA 2020)?

AThe ratification is invalid because at common law a principal must be in existence at the time the contract is made
BThe ratification is valid under Section 96 of CAMA 2020, and Apex Haulage Ltd becomes bound by and entitled to the benefit of the contract as if it had been in existence at the contract dateCORRECT
CThe contract remains permanently personal to Mr. Adeleke and cannot be adopted by the company under any circumstances
DThe ratification is valid only if approved by an order of the Federal High Court
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Why the answer is B, and why the others tempt you.
While common law rules (Kelner v Baxter) prevented ratification of pre-incorporation contracts because the principal was not in existence at the time of contracting, Section 96(1) of CAMA 2020 explicitly alters this rule in Nigeria. A company may ratify any contract entered into on its behalf prior to formation, whereupon the company becomes bound by and entitled to the benefit of the contract.
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