CASES SUMMARY (PART 4)

V. Promoter’s contracts

Campos, Vol. 1, Chapter V – pages 241-281

A. Liability of corporation for promoter’s contracts

Mc Arthur v Times Printing – Campos, pages 242-244

Times Printing was not yet organized at the time the contract was made and could not be liable
if it was not a party to it. However, the SC held that if a corporation adopts or accepts benefits
with knowledge of the contract, such need not be by express resolution. Here, the acts and
acquiescence of the corporate officers show that it had adopted the contracts as its own.

Cagayan Fishing Dev. Co. v Sandiko, GR L-43350, 23 December 1937

Cagayan Fishing was not yet in existence when Tabora sold to it his lands. It was not even a de
facto corp at the time, thus not being in legal existence it does not yet possess juridical capacity
to enter into contracts. The Tabora contract was entered into not only between him and a non-
existent corporation, but between him as owner and the same Tabora, his wife and others, as
mere promoters of the corporation. They could not have acted as agents for a projected
corporation since that which had no legal existence could have no agent.

A corporation, until organized, has no life and therefore no faculties. The SC refused to extend
the doctrine of ratification which would result in the commission of injustice or fraud to third
parties.

B. Corporate rights under promoter’s contracts

Builders’ Duntile Co. v Dunn Manufacturing, Campos, pages 253-255

GR: A corporation has the power to adopt a contract of its promoters, and one of the effects of
this adoption is that the contract becomes that of the corporation.

Exception: But the power to adopt must only be limited to such contracts as the corporation itself
can make or is authorized to make

Rizal Light and Ice Co. v Public Service Comm., L-20993, 25 SCRA 285 (1968)

The Commission agrees, that it was a de facto corporation at the time the franchise was granted
and, as such, it was not incapacitated to enter into any contract or to apply for and accept a
franchise. Not having been incapacitated, Morong Electric maintains that the franchise granted
to it is valid and the approval or disapproval thereof can be properly determined by the
Commission.

C. Personal liability of promoter on pre-incorporation contracts

D. Fiduciary relationship between corporation and promoter