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Explain Ratification of a Pre-Incorporation Contract

Ratification of a pre-incorporation contract is a legal process that occurs when a corporation adopts a contract that was made before the corporation was officially formed. In short, it is a way for a corporation to validate a contract that was made before it even existed.

To understand the process of ratification, it is important to first understand what a pre-incorporation contract is. A pre-incorporation contract is a binding agreement made by one or more individuals on behalf of a corporation that has not yet been officially formed. This means that the contract is made before the corporation has obtained legal status and is able to enter into contracts on its own.

When a pre-incorporation contract is made, it is important to specify that it is being made on behalf of a future corporation. This is usually done through a provision in the contract that specifies that the parties to the contract intend to form a corporation and that the contract will become binding once the corporation is formed.

Once the corporation is formed, it has the option to ratify the pre-incorporation contract. Ratification essentially means that the corporation is adopting the terms of the pre-incorporation contract as its own. It is important to note that ratification does not make the contract retroactively binding on the corporation. Instead, it makes the contract binding from the moment of ratification forward.

The ratification process typically involves a vote by the corporation’s board of directors. The board will review the terms of the pre-incorporation contract and determine whether it is in the best interests of the corporation to adopt it. If the board approves the contract, it will pass a resolution to ratify the contract. This ratification is typically recorded in the corporation’s minutes.

It is important to follow the proper procedures for ratification of a pre-incorporation contract. Failure to do so can result in the contract being unenforceable or even lead to legal issues down the road. It is always best to consult with an attorney when dealing with pre-incorporation contracts and the ratification process.

In conclusion, ratification of a pre-incorporation contract is a legal process that allows a corporation to adopt a binding agreement made before it was formed. It is an important step in ensuring that the corporation is able to enter into contracts and conduct business as intended. Proper procedures should always be followed to ensure that the ratification process is completed correctly.

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