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HGA Law: Being bound to a contract by the conduct of a corporation prior to incorporation
The Supreme Court of Canada recently clarified whether a corporation can be bound by the terms of a contract that was made before a company was incorporated. Generally, pre-incorporation contracts are not binding on the yet-to-be incorporated entity.
However, as decided by the Supreme Court in Owners, Strata Plan LMS 3905 v Crystal Square Parking Corp., 2020 SCC 29, the post-incorporation conduct of a corporation can, in effect, ratify a pre-incorporation contract by acting according to the terms of the contract. This can give rise to unexpected contractual obligations, and as such the directors and officers of a corporation must be mindful of this. To learn more about this, please contact a member of our team at HGA Law.
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