Pre-Incorporation Contracts in Ontario: Who's Liable Before the Corporation Exists?

Plenty of new businesses sign their first lease, supplier agreement, or equipment purchase before the paperwork to incorporate has even been filed. It feels efficient — the corporate name is chosen, incorporation is "in progress," so why wait? The problem is that a corporation that doesn't exist yet cannot legally sign anything, which raises an uncomfortable question: if you sign "on behalf of" a company that isn't incorporated yet, who is actually bound by that contract?

This situation is common enough that Ontario and federal corporate law have specific rules for it. Understanding them before you sign — not after a landlord or supplier comes looking for payment — can save you from taking on personal liability you never intended.

This article explains what a pre-incorporation contract is, who is on the hook for it, and how a newly formed corporation can, and sometimes cannot, take over that obligation later.

What Is a Pre-Incorporation Contract?

A pre-incorporation contract is any agreement signed in the name of, or on behalf of, a corporation before that corporation has actually come into legal existence — meaning before articles of incorporation have been filed and a certificate of incorporation issued, whether under the Ontario Business Corporations Act (OBCA) or the federal Canada Business Corporations Act (CBCA).

Until that certificate is issued, the corporation is not a legal person. It cannot own property, hold a bank account, or enter into a binding contract, because a party to a contract has to actually exist. Someone who signs "ABC Inc." on a lease before ABC Inc. is incorporated is, legally speaking, signing on behalf of something that isn't there yet.

This comes up constantly in practice: a founder signs a commercial lease to lock in a location, places a purchase order for equipment, or signs a services agreement with a supplier — all while incorporation is still "in progress."

Who Is Personally Liable Before the Corporation Exists?

The general rule under both the OBCA and the CBCA is straightforward and important to internalize: a person who signs a contract in the name of, or on behalf of, a corporation before it is incorporated is personally bound by that contract, and can personally enforce it, unless the contract expressly says otherwise.

In practice, this means:

• The individual founder — not the future corporation — is the one a landlord, supplier, or lender can sue if the deal falls apart before incorporation is complete.
• This personal exposure exists regardless of how the signature block is worded (for example, "John Smith, on behalf of ABC Inc., a corporation to be incorporated") unless the other side has agreed to something different in the contract itself.
• It applies even if incorporation happens shortly afterward — the contract was still signed before the corporation existed.

This rule exists to protect the other contracting party. Without it, a business could sign favourable deals "as" a not-yet-existing corporation, then simply never incorporate, leaving the other side with no one to sue.

Can the Corporation "Adopt" the Contract After Incorporation?

Yes — this is the part that gives founders a way out of open-ended personal exposure. Both the OBCA and the CBCA allow a corporation, once it exists, to formally adopt a pre-incorporation contract. Once validly adopted:

• The corporation becomes bound by the contract and entitled to its benefits, generally as if it had been a party from the start.
• Depending on how the adoption is documented and what the contract says, the original signing individual may be released from personal liability going forward — but this is not automatic just because the corporation later starts operating under the deal.

Adoption typically needs to be clear and deliberate — a board resolution or written confirmation that the corporation is taking on the specific contract — rather than assumed from the corporation simply operating out of the leased space or using the equipment.

Protecting Yourself When Signing Before Incorporation

If timing pressure means you need to sign something before your incorporation paperwork is filed, a few habits reduce your exposure:

• [ ] Get incorporation filed as early as realistically possible, rather than treating it as an afterthought.
• [ ] Ask the other party whether they're willing to make the contract conditional on incorporation and formal adoption by the new corporation.
• [ ] Have the corporation pass a clear resolution adopting the contract promptly once it exists, rather than letting the issue drift.
• [ ] Keep the paper trail: the original contract, the adoption resolution, and any amendment confirming the change — these all matter if a dispute arises later.
• [ ] Don't assume that simply "operating as" the new corporation automatically transfers a contract signed beforehand.

Frequently asked questions