Ratifying Pre-Incorporation Contracts: How a New Ontario Corporation Adopts Them

Founders are often in a hurry. A lease gets signed, a supplier agreement gets negotiated, an equipment order goes in — all before the paperwork to actually incorporate the company is finished. It feels efficient at the time. Legally, it raises an awkward question: who’s bound by a contract signed on behalf of a corporation that doesn’t exist yet?

This article explains how pre-incorporation contract ratification works in Ontario, who’s on the hook before that happens, and how founders can protect themselves in the meantime.

The Problem: You Can’t Contract on Behalf of Something That Doesn’t Exist Yet

A corporation becomes a legal person only once it’s actually incorporated. Before that moment, there’s no entity capable of being a party to a contract — so a contract signed "on behalf of" a not-yet-formed corporation can’t legally bind an entity that isn’t there to be bound.

That doesn’t make the contract meaningless. It just means the legal question shifts to who is actually responsible for it in the meantime.

Who Is Liable Before the Corporation Exists

As a general rule, the individual who signs a contract in the name of a corporation that hasn’t been incorporated yet — often called a promoter — is personally bound by that contract, unless the agreement itself says otherwise. The other party is generally dealing with a real person, not a future company, whether or not that was the intention.

This is a meaningful risk for founders who sign leases or supplier commitments assuming the corporation will simply "take over" once it’s formed. Until something formal happens, the founder is the one on the hook.

How the Corporation Later Adopts the Contract

Both the OBCA and the CBCA include statutory mechanisms that let a newly formed corporation adopt — or ratify — a contract that was made in its name before it existed. This typically happens through a clear, express act after incorporation, most commonly a board resolution specifically acknowledging and adopting the contract in question.

Once a pre-incorporation contract is properly adopted, the corporation generally becomes bound by it as though it had been a party from the beginning, and depending on the circumstances, the promoter’s personal liability may come to an end.

What Adoption Changes — and What It Doesn’t

A few things worth being precise about:

• Adoption isn’t automatic. Simply operating under the contract after incorporation — paying invoices, using the leased space — may not, on its own, be enough to constitute a clear adoption. A deliberate step, like a board resolution, is the safer route.
• The other party’s rights aren’t always fully cut off. Whether the promoter is released from liability once the corporation adopts the contract can depend on the specific wording of the contract and the circumstances — it isn’t a guaranteed clean exit for the person who signed originally.
• Timing matters. The sooner after incorporation the adoption happens, the less room there is for disputes about who was actually bound during the gap.

Best Practice for Founders Signing Before Incorporation

• [ ] Where possible, incorporate first and sign significant contracts afterward
• [ ] If you must sign early, state clearly in the contract that it’s being signed on behalf of a corporation to be formed
• [ ] Pass a specific board resolution adopting each pre-incorporation contract as soon as the corporation exists
• [ ] Confirm the other party understands and accepts the corporation as the contracting party going forward
• [ ] Keep the adoption resolution in the minute book alongside the original contract

Frequently asked questions