The Liability of James and Sandra on the Lease Contract with Peter

James Jones and Sandra Smith have decided to open a sporting goods store as co-owners. On September 1, they met to discuss how to begin the business.
James told Sandra that a friend of his, Peter Property, had offered to lease a great store location for $1,000/month, but Peter needed an answer by the next day because he had another potential lessee. Sandra told James, “That sounds great. You go ahead and take care of it.”
Sandra then told James, “My friend Laura Lawyer, who’s an attorney, says we probably should incorporate the business.” James and Sandra immediately called Laura and Laura told them she would be happy to do the work for free. Laura said, “I’ll have the articles of incorporation to you in two days and I’ll file them as soon as you approve them. Once I do that, you’ll have a corporation.” They told her to go ahead and to call the corporation Sports, Inc.
The next day (September 2), James met Peter and signed a contract to lease the store space for $1,000/month. He signed the contract: “Sports, Inc., by James Jones.” Before signing, James told Peter the corporation was not yet formed. Peter said, “That’s O.K. Don’t worry about it.”
On September 4, James and Sandra received the articles of incorporation from Laura. They told Laura to file the articles and she did so that same day, in a state that has adopted the latest version of the Revised Model Business Corporation Act.
The articles named James and Sandra as the initial directors of the corporation. On September 5, James and Sandra held an initial directors’ meeting. They authorized the sale of stock to themselves for $5,000 each and adopted a resolution approving and accepting corporate liability on the lease contract.
Discuss whether James and/or Sandra are personally liable on the lease contract with Peter. (Do not discuss veil-piercing.)

Sample Answer

The Liability of James and Sandra on the Lease Contract with Peter

In the scenario presented, James and Sandra have embarked on establishing a sporting goods store as co-owners and have taken significant steps towards incorporating the business. However, a crucial question arises regarding their personal liability on the lease contract with Peter for the store location. To determine the liability of James and Sandra, we must consider the legal implications of their actions and decisions.

Formation of the Corporation

Upon receiving advice from Laura Lawyer, James and Sandra decided to incorporate their business and proceeded with the necessary steps. They received the articles of incorporation and authorized Laura to file them, resulting in the formation of Sports, Inc. It is essential to note that once the corporation is properly formed and registered, it becomes a separate legal entity distinct from its owners.

Signing of the Lease Contract

James signed the lease contract with Peter on September 2, identifying himself as “Sports, Inc., by James Jones.” Importantly, he disclosed to Peter that the corporation was not yet formed at the time of signing. Peter acknowledged this information and proceeded with the contract, indicating his acceptance of the situation.

Corporate Liability

Subsequently, during the initial directors’ meeting, James and Sandra approved and accepted corporate liability on the lease contract with Peter. By adopting a resolution to this effect, they effectively bound Sports, Inc. to the terms of the lease agreement. As a result, any liabilities arising from the lease contract would generally be attributed to the corporation rather than its individual owners.

Conclusion

In conclusion, based on the actions taken by James and Sandra in forming Sports, Inc. and authorizing corporate liability on the lease contract with Peter, it is unlikely that they would be personally liable for any obligations under the lease agreement. As long as they conducted themselves in accordance with legal requirements and did not engage in fraudulent or unlawful activities, their liability should be limited to the assets of the corporation.

Therefore, James and Sandra can proceed with confidence in their business endeavors, knowing that their personal assets are shielded from potential liabilities arising from the lease contract with Peter, thanks to the corporate structure they have established.

This question has been answered.

Get Answer

Subject:
Type:
Pages/Words:
	Single spaced
	approx 275 words per page
Urgency:
Level:
Currency:
Total Cost:

No More Worries!

Paper Formatting

No Lateness!

AEW Guarantees

The Liability of James and Sandra on the Lease Contract with Peter

Sample Answer

This question has been answered.

Compute Cost of Paper

Our Services

Why Choose Us