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Buckley on the Law and Practice under the Companies Acts, 3rd Ed. 1879, is cited as "Buckley."

Dart's Vendors and Purchasers, 5th Ed., 1876, is cited as "Dart, V. P.” Law Reports. The Chancery Appeal cases and the Equity cases are cited as "Ch." and "Eq." simply.

Law Reports New Series. In citing these reports the notation Div. (e.g., 1 C. Div.) denotes a decision of the Court of Appeal, while the decision of the Courts of first instance are referred to as 1 C. D., 2 Q. B. D. and the like.

Lindley on the Law of Partnership, 3rd Ed., 1873, is generally cited as "Lindley."

Pemberton on Judgments and Decrees, 1st Ed.

Seton on Decrees, 4th Ed., 1877–1880.

Pollock's Principles of Contract at Law and in Equity, 2nd Edit. 1878, is

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The Companies Act, 1862 (25 & 26 Vict. c. 89) is sometimes cited as Act of 1862" and "the Act."


The Companies Act, 1867 (30 & 31 Vict. c. 131) is sometimes cited as "the Act of 1867."

The Companies Acts, 1862 and 1867 are sometimes cited as "the Acts of 1862 and 1867."

The Joint Stock Companies Arrangement Act, 1870 (33 & 34 Vict. c. 104) is sometimes cited as "the Act of 1870."

The Companies Act, 1877, is sometimes cited as "the Act of 1877."





BEFORE commencing business, a company, in most cases, adopts, Preliminary or enters into a "preliminary contract" for the purchase of a specific usual. property, e.g., a mine, a patent, a business, a concession, or an estate, and the majority of the following forms of agreement are precedents of such contracts. Where there is to be a preliminary contract, one or other of the following plans is usually adopted :—

PLAN 1.-Before the incorporation of the company, the promoters Plan 1. procure the owner of the property to enter into an agreement with some person, on behalf of the intended company, for the sale of the property to the company upon certain terms and conditions. The memorandum and articles of association of the company are settled, with the concurrence of the vendor and of the promoters, contemporaneously with this agreement. In the articles is inserted a clause referring to the agreement [see infra, Form 71], and authorising the directors to adopt and carry it into effect. The memorandum and articles are then registered, and the registrar issues his certificate, whereupon the company becomes incorporated. Shortly after the incorporation the directors hold a meeting at which the preliminary agreement is taken into consideration, and a resolution passed for its adoption. Notice of the adoption is subsequently given to the vendor, and in due course the agreement is carried into effect. Sometimes the adoption is effected by means of a brief supplemental Supplemental agreement, to which the vendor, the agent, or trustee, and the sometimes company are parties, whereby the original agreement is rendered executed. binding on the company. [See form of such agreement, infra, p. 33.] And sometimes the articles contain a clause purporting to adopt the agreement. [See infra, Form 72.]


PLAN 2.-Before the incorporation of the company an agreement, Plan 2. expressed to be made between the vendor and the company, for the sale of the property to the company, is, with the privity of the vendor and the promoters, prepared. The memorandum and articles are at


Plan 3.

Reasons why Plan 1 preferred.

Best course.

Personal liability of

person contracting on behalf of a company not yet formed.

Agreement should be framed so that his liability

the same time prepared and settled with the like privity. In the articles is inserted a clause referring to the agreement and authorising or requiring the directors forthwith to affix the seal of the company thereto, or declaring that the company shall forthwith execute the agreement. The memorandum and articles are then registered, and the registrar issues his certificate. At the first meeting of the directors the agreement is taken into consideration, and a resolution passed for its adoption. The vendor is informed of the resolution, and a day appointed for completion, when the agreement is executed and in due course carried into effect.

PLAN 3.-This plan only differs from Plan 2 in one respect, namely, that the articles do not expressly refer to the agreement, but authorise the directors to purchase the property on such terms and conditions as they think fit. These general powers are quite as effectual as an authority to adopt or enter into a specific agreement. Overend & Gurney Co. v. Gibb, L. R. 5 H. L. 480. Where however, as sometimes happens, it is very difficult so to express the objects of the company as certainly to authorise the contemplated agreement, it is better to adopt Plan 1 or 2.

The following are some of the reasons why Plan 1 is very commonly preferred: (a) Before going to the expense of forming the company, the promoters may desire to have the vendor bound to sell on specified terms. This reason does not apply where the vendor is the promoter, or where the promoters are in a position to dictate to him. (b) The promoters may desire absolutely to bind the company to acquire the property upon the terms arranged by them before its incorporation. With a view thereto, the terms are embodied in a contract as in Plan 1, and in the articles a clause is inserted adopting the contract, and directing the directors to carry it into effect. Although it is probable, that, notwithstanding such a clause, the directors might, if they thought fit, decline to act on the contract [infra, note to Form 72], yet in practice they usually regard the clause as depriving them of all discretion.

Whenever there is no particular reason for adopting Plan 1, it is expedient to adopt Plan 2 or 3, for by the adoption of either of those plans, the company becomes bound in due course without any appearance of the contract having been forced on it, and without the necessity for dealing with the questions considered in the notes to Forms 8 and 72 infra.

Where, as in Plan 1, a person purports to contract as agent for a company not yet formed, he is, in the absence of a provision in the contract to the contrary, personally liable on the contract. Kelner v. Barter, L. R. 2 C. P. 174.

Nor is he relieved from liability by the subsequent adoption of the contract by the company. Scott v. Lord Ebury, L. R. 2 C. P. 255.

It is, however, seldom or never the intention of the parties that the agent should be so liable, and accordingly, the agreement is so framed that his liability will be merely nominal. This is effected as follows:


The agent agrees that the company shall purchase the property; a should be future day is fixed for the completion of the purchase; it is provided merely that upon the adoption of the agreement by the company, the liability of the agent shall cease, and that if the company does not adopt the agreement before a certain day (prior to the day fixed for completion), the agent may at any time afterwards rescind it. The effect of these provisions is, that if the company adopts the agreement, the agent is freed from liability, and if the company does not adopt it in due course, the agent, before the time fixed for completion, rescinds the agreement, and thereby terminates his liability before he has had to do anything under the agreement.

relieve him

A proviso thus limiting the liability of the so-called agent is valid; Proviso limiting liability of but, not uncommonly, it is provided that he shall incur no personal agent valid; responsibility whatever. Such a proviso ought never to be inserted secus, if purporting to where, at the date of the agreement, the company, on behalf of which the agent purports to contract, has not yet been formed, for though from all liability. the liability of a party to a contract may be limited, i.e., the contract may provide that it shall cease in a certain event or at a certain time, yet to provide that there shall be no personal liability, is inconsistent with there being a contract, and accordingly such a proviso is treated as repugnant and void, the result being that the party is personally bound to perform the contract. See Furnivall v. Coombes, 5 M. & Gr. 736, and Williams v. Hathaway, 6 C. D. 544.


When a company is started to acquire a specific property, and the Power to capital is to be raised by public subscription, it is not unusual so to frame the agreement for the purchase of the property, that if within a fixed period a certain number of shares are not taken, the company can rescind. The object of course is, that if the company should fail in raising the funds necessary to enable it to commence business, it may be able to get rid of the agreement. Sometimes a similar power is given to the vendor, for he may not be willing to sell to a company which has not the means to develop a property for which he is probably to be paid partly in shares; or his own right to sell may be contingent on a certain number of shares being taken up.

As to filing agreements providing for the issue of paid-up shares, Filing consection 25 of the Act of 1867, provides that

Every share in any company shall be deemed to have been issued, and to be held, subject to the payment of the whole amount thereof in cash, unless the same shall have been otherwise determined by a contract duly made in writing and filed with the registrar of joint stock companies at or before the issue of such shares.

Accordingly, whenever an agreement provides for the issue of paid-up or partly paid-up shares as the consideration or part of the consideration for property or rights sold or services rendered to the company, the agreement should be duly filed pursuant to the above section before the shares are allotted, otherwise the allottee will be

tracts as to

issue of paid

up shares.

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