Question
John is the promoter of Wheelies Corp., an automotive wheel manufacturing business. To escape personal liability on preincorporation contracts, John planned to make only nonbinding
John is the promoter of Wheelies Corp., an automotive wheel manufacturing business. To escape personal liability on preincorporation contracts, John planned to make only nonbinding preincorporation contracts. He made one such contract in March 2011 with his friend David for supplying Wheelies with auto parts. After getting payment for the contract, David refused to make the supply. Wheelies has not been incorporated yet. Is David liable?
a. Yes, David is liable to both John and Wheelies.
b. No, David is not liable because Wheelies has not been formed yet.
c. Yes, David is liable to Wheelies but not to John.
d. No, David is not liable because John is not liable on the contract.
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