Q.7:- Distinguish between ‘preliminary contracts’ and ‘provisional contracts’.
|S. N.||Preliminary Contracts||Provisional Contracts|
|1.||Contracts signed by promoters with third parties before the incorporation of company.||Contracts signed after incorporation but before commencement of business.|
|2.||These are not legally binding on the company and cannot be ratified after incorporation.||These become enforceable only after the company gets the certificate of Commencement of Business.|
|3.||These contracts are the liabilities of promoters.||These contracts are the responsibilities of the company.|
|4.||Both private and public company have right to undertake these contracts.||They can only be undertaken by public company.|