Liability on a Lease Agreement for a Promoter and Corporation

Who is liable on the lease agreement for office space signed by Henry, a promoter, for Ajax Corp.?

1) Henry

2) Ajax

3) No one, since it was a tenancy at will

4) Both Henry and Ajax

Answer:

Final answer: In legal terms, both Henry and Ajax Corp. might be liable for the lease.

Henry, as a promoter, signed a five-year lease agreement for office space for a corporation, Ajax Corp., that had not yet been formed. Upon formation, Ajax moved into the office space, paid rent, and occupied it for six months before finding a cheaper location and moving out.

In this scenario, both Henry and Ajax Corp. could be liable on the lease. Initially, Henry would be liable as the promoter who signed the agreement before the corporation was formed. However, once Ajax Corp. adopted the lease by moving in, paying rent, and using the office space, Ajax Corp. also became liable on the lease.

Therefore, both Henry and Ajax could potentially be held liable depending on the jurisdiction and specific circumstances. It is crucial to consider whether Ajax formally assumed the lease and whether Henry was released from his obligations through novation or an agreement that transferred the liability to the corporation.

In many jurisdictions, promoters are typically responsible for pre-incorporation contracts unless there is a specific agreement or novation that relieves them of liability. Reviewing the lease agreement and any relevant documents can help determine the shift in liability from the promoter to the corporation in such situations.