Fortress Ltd Coursework Example | Topics and Well Written Essays - 1500 words

Fortress Ltd - Coursework Example A promoter of a company is an individual who â€Å"undertakes to form a company with reference to a given project and to see it going, and who takes the necessary steps to accomplish that purpose (Twycross v Grant 1877, 469). On the facts, Adam undertook to form Fortress Ltd. for the express purpose of securing a security services project for the Olympic games. All indications are that Adam intends to supervise the project and to ensure that it is accomplished. The mere fact that he is securing the loan for the proposed company’s project substantiates his supervision of the project. Moreover, since the term promoter is essentially a business term, whether or not a person is a promoter is question of fact (Whaley Bridge Calico Printing Co. v Green 1880, 109). On the facts of the case for discussion and pursuant to common law, Adam is for all intents a purposes a promoter. In general a company cannot be held liable for the breach of a contract that was concluded prior to the co mpany’s incorporation (Kelner v Baxter1886 174). In cases where the contract was formed prior to the formation of the company, the person or promoters acting for the proposed company prior to its incorporation are generally liable in a personal capacity (Kelner v Baxter1886 174). ... This was particularly so when Section 36 (C) of the Companies Act 1985 overruled the decision in Kelner v Baxter and essentially codified the decision in Phonogram Ltd. v Lane (1982). Section 36(C) which was further amended by Section 51 of the Companies Act 2006 provided that pre-incorporation contracts would have effect provided there were no agreements otherwise. In the absence of an agreement excluding liability, both the company and the promoter acting as agent would be liable for breach of the contract in a personal capacity (Companies Act 1985, Section 36(C)(1)). Section 36(C) (1) however, did not clear up the confusion as there was some confusion as to whether or not it was necessary for the wronged party to know that the company had not yet been incorporated (Bourne 2011, p. 48). For instance it was decided in (Cotronic (UK) Ltd. v Dexonie 1991,721) that it must be shown that the defendant was purporting to act on behalf of a proposed company. In another case it held that li ability as mutually exclusive in that both the third party acting on behalf of the proposed company and the other contracting party were equally liable for breach of the contract (Braymist Ltd. v Wise Finance Co. Ltd. 2002, 273). In other words, there was no definitive rule of law determining when and if a promoter could be liable for a breach of a pre-incorporation contract. There were instances where a promoter could be liable only if it was clear that the other contracting party did not know that the company was incorporated at the time of entering an agreement. In other instances, liability was assigned to the promoter automatically (Savirimuthu 2003, 203). As the law currently stands, Section 51(1) of the Companies Act 2006 will apply to determine