Osvaldo was attempting to promote a corporation to be named Xavier, Inc In that capacity, Osvaldo signed a lease in the name of Xavier and ordered furniture in the company's name. The corporation was in fact formed and the board of directors, knowing of

Question

the actions of Osvaldo, moved into the space Osvaldo had leased. Upon delivery and inspection of the furniture Osvaldo ordered, numerous defects were discovered, and the furniture was accordingly rejected and returned to the seller. The corporation was not successful, and as a result, the rent was not paid. Osvaldo was sued for the unpaid rent and for breach of contract concerning the furniture. The corporation was sued on the same grounds. Decide the cases against Osvaldo and Xavier, Inc

Answer 1

?Osvaldo is liable for the lease because a promoter is personally liable for contracts made on behalf of the corporation before its existence, unless the agreement or the circumstances clearly indicate that the promoter should not be liable. Although Osvaldo would be personally liable for the furniture had the other party adequately performed, Osvaldo is not liable on the contract since the other party breached (This answer assumes that the seller has no right to "cure" the defective delivery under the provisions of the Uniform Commercial Code; for example, the time period for delivery has expired, and the furniture seller cannot establish that he made the defective delivery with the reasonable assumption that it would be acceptable to the buyer.) The corporation, Xavier, is liable on the space rental because the actions of the board of directors clearly demonstrate that they adopted the lease contract. There is no corporate liability for the furniture because that contract was expressly and rightfully rejected.