Leathem Stearn, claiming to act on behalf of a limited liability company, contracted with Gyrographic Communications. The

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Leathem Stearn, claiming to act on behalf of a limited liability company, contracted with Gyrographic Communications. The agreement called for Gyrographic to provide advertising and marketing services for the limited liability company’s yachting business. In reality, the limited liability company never came into existence. Instead, a corporation, SmithStearn Yachts, Inc., was created. Later, the corporation sued Gyrographic, asserting that the company failed to provide its services in a timely and workmanlike manner. 


Gyrographic moved to dismiss the lawsuit on the grounds that SmithStearn Yachts had no standing to bring the claim because the contract was with the limited liability company and not the corporation. SmithStearn responded that Leathem Stearn acted as a promoter for the corporation and that the corporation assumed and ratified the contract after its creation. Although the corporation was formed after the execution of the agreement, it received the benefit of the services pursuant to the agreement. It also made payments to Gyrographic. Did the corporation have standing because it ratified the preincorporation contract? Explain.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Law for Business

ISBN: 978-1259722325

13th edition

Authors: A. James Barnes, Terry M. Dworkin, Eric L. Richards

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