What must occur for a corporation to become liable on a promoter's pre-incorporation contract?

For a corporation to become liable on a promoter's pre-incorporation contract, it must adopt the contract. This is because, upon formation, a corporation is a separate legal entity from its promoters, and thus it does not automatically assume liabilities incurred by promoters before the corporation's existence.

The process of adoption requires the board of directors to formally agree to the contract once the corporation is incorporated. By adopting the contract, the corporation takes on the responsibility and obligations set forth in that agreement. This allows the corporation to benefit from the contract while also being held accountable for its obligations under the law.

Incorporation alone, without further action, does not create liability for the contracts made by promoters. While formal registration of the corporation is essential for its legal recognition, it is the adoption of specific contracts by the board that establishes liability. Novation, which involves replacing one party in a contract with another, is not necessary for all contracts and would not apply if the corporation chooses to adopt the original contract. Shareholder approval may be relevant in certain transactions, but it is not a prerequisite for the corporation to adopt a pre-incorporation contract.