Before This Corporation Was Formed, This Contract Knew It

In Section 4.13 of Bishop & Zucker on Nevada Corporations and Limited Liability Companies, we discuss who may be liable on pre-incorporation contracts. In Hotel Last Frontier Corp., v. Universal Match Co., 358 P.2d 896 (Nev. 1961), the Nevada Supreme Court held that a corporation could be held liable to a seller of matchbooks when it signed a purchase agreement purportedly on behalf of a yet-to-be formed corporation.

This Corporation, Unlike Richard II, Was Not Sent Before Its Time

Now, we have a federal court deciding whether a contract can be enforced by a corporation that was was still nascent when the contract was signed on its behalf. In De La Garza v. Clean Oil Innovations, Inc., 2013 U.S. Dist. LEXIS 41857 (S.D. Tex. March 20, 2013), Judge Melinda Harmon ruled that the corporation “has a ‘personal stake’ in a pre-incorporation agreement such that it can file suit to enforce it.” In her order, she distinguishes the Hotel Last Frontier case on the basis that the contracting party seeking to enforce the agreement in that case had not consented to a contract with the incipient corporation.

Judge Harmon also ruled that the corporation could enforce the contract even though it had been in default when the litigation was initiated.

Was Pair-O-Dice, Now In Paradise

The Hotel Last Frontier was located on the birthplace of the Las Vegas Strip. In 1930, Frank and Angelina Detra purchased land on the Los Angeles Highway (aka Highway 91) and opened a speakeasy named the “Pair-O-Dice”. It must have been pretty desolate locale as the club was several miles from downtown Las Vegas. Gambling wasn’t even legalized until a year later. After being sold twice, the new owner, R.E. Griffith, built the Hotel Last Frontier. Several years later, the Hotel Last Frontier was refurbished and became known as the “New Frontier Hotel”. That is the hotel that I remember from my days in Las Vegas. In November 2007, the hotel was demolished. Its former location is across the street from the Wynn Resorts Hotel in Paradise, Nevada (not the City of Las Vegas).

 

Topics:  Contract Formation, Enforcement, Hotels, Incorporation

Published In: Business Organization Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

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