Distinguish between preliminary contracts and provisional contracts



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.