Q.7:- Distinguish between ‘preliminary contracts’ and ‘provisional contracts’.
Answer:-
| 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. |