Henry, a Promoter, Signs a Five-Year Lease Agreement

Who is liable on the lease in this scenario?

After forming Ajax Corp, which party is responsible for the lease agreement?

Answer:

In the scenario described, the liability for the lease falls on Henry, the promoter who signed the lease agreement for office space on behalf of Ajax Corp, which had not yet been formed at the time of signing the lease.

A promoter is an individual who takes the initiative to form a corporation or other business entity and sets it up for future operations. Until the corporation is formed, the promoter is personally liable for any contracts or obligations entered into on behalf of the corporation. In this case, Henry signed the lease agreement for office space on behalf of Ajax Corp, which had not yet been formed. Therefore, he is personally liable for the lease agreement. Even though Ajax Corp eventually moved into the office space, paid rent, and occupied it for six months, the fact that it later moved out and found a cheaper location does not release Henry from his liability on the lease.