Accounting Treatments for identifiable intangible assets
party.
However, there are exemptions which apply to promoters, companies and third parties, that could be involved in a contract. For example, it is argued by Ford et.al (2001, p.666) that if the promoters enter into a pre-registration contract whilst they are under the belief that the company is registered and had no knowledge of that company not being registered, then it would be very likely that the promoter had the intention of entering into the contract as an agent without incurring personal liability, which was illustrated in the case of Marblestone Industries. Ltd v Fairchild (1975) 1 NZLR 529 at 542. In some cases that involve writings which were completed by promoters, the courts would hold that the promoter did not sign the document as an agent, but just to originate the contractual execution of the company, given that they were under the belief that the company was not formed. A similar scenario arose in the case of Richardson v Landecker (1950) 50 SR (NSW) 250. The Promoter was not liable to the contract, because they did not act as an agent upon entering into the contract. As a result, in both these cases, the Promoters were not regarded as contractual agents in a transaction that is evidenced by a document.
Under the rules that govern the measure of damages for a breach of contract, the third party is entitled to recover an amount from the Promoter who is found to be acting as an agent for an unregistered company, to compensate them for not having an effective contract with them. As a result, if the principal is insolvent in the agreement, then only nominal damages will be paid to the third party. An example of this was portrayed in Hambrook(1982) 8 Adel LR at 125. Therefore, under enacted law, a pre-registration contract would not be effective to give the company any rights against the third party. This will particularly enable vendors to escape from an unprofitable bargain, unless they are bound to the promoters as Ford et.al (2001, p.666) . Therefore, Sections 131 and 132 largely depend to be performed on a company that is later incorporated and which can be easily identified as for whom the promoter had entered into the pre-registration contract. This means that the introduction of Sections 131 and 132 are different to the common law view of pre-registration contracts, in which they do not recognize an unincorporated company being in any position to enter into these type of contracts.
As a result, Sections 131 and 132 of the corporations act have been successful in changing the common law view of companies entering into contracts while they remain unincorporated. This is because that an unincorporated company cannot enter into any contracts or business transactions and therefore, the promoter would not be authorized to incur obligations on the behalf of that particular company. Furthermore, sufficient company description must be displayed at the time when a contract is entered [next page]