Solicitors Qualifying Examination (SQE) Stage 1 Functioning Legal Knowledge (FLK) 1 Practice Test

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In pre-incorporation contracts, who bears liability?

Neither is liable

The signatory is personally liable

Before a company exists, there is no separate legal entity to bind by contract. The person who signs a contract on behalf of the future company does so personally, so they are liable on that contract. After incorporation, the company could become liable only if it adopts or ratifies the contract (often via novation), but that doesn’t automatically transfer liability from the signer. So, on pre-incorporation contracts, the signatory is personally liable.

The company is liable from signing

Both are liable

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