[113 NJSuper Page 51] Plaintiff K. & J. Clayton Holding Corp. (K & J), a corporation of the State of New York, seeks specific performance of a contract for the purchase of real estate pursuant to an agreement entered into in its name as buyer, but executed prior to its incorporation. Defendant "seller" contends that there was no binding contract because (a) plaintiff was not in existence at the time the agreement was executed, and (b) "lack of mutuality" at that time deprives the agreement of enforceability.
The facts have been stipulated and the parties file cross-motions for summary judgment.
In August 1969 defendant Keuffel & Esser Company (K & E) signed an agreement to sell certain property owned by it in Hoboken, New Jersey, for a purchase price of $750,000. The agreement was signed in plaintiff's name as buyer "by Benjamin Cohen, President." A check in the amount of $10,000 was received by K & E at or prior to the execution of the written agreement, $640,000 was to be paid upon delivery of the deed, and the remaining $100,000 was to be secured by a bond and purchase money mortgage of the premises. The instrument further provided for a lease back to K & E. At the time said instrument was executed no certificate of incorporation had been filed for plaintiff. A certificate was subsequently filed with the New York Secretary of State on October 31, 1969.
The agreement provided for a closing date of November 3, 1969. On that date the president of K & E wrote a letter to the attorney for K & J, stating that it had been discovered that incorporation papers had not been filed by K & J and that K & E considered that the purported written agreement was a nullity. Specifically, it was stated that "any contract for the sale of property purportedly entered into by a nonexistent New York corporation under the name of K&J Clayton Holding Corp. * * * with Keuffel & Esser Company for the purchase from K&E of K&E's premises in Hoboken, New Jersey never existed and the contract is a complete nullity." A certified check returning the deposit of $10,000 was enclosed with the said letter.
Under date of November 18, 1969 K & E received a letter, dated November 13, 1969, from the attorney for K & J. It stated that K & J was ready, willing and able to close the title, that K & J would be present at the offices of K & E in Morristown, New Jersey, at 10 A.M., December 1, 1969, for the purpose of closing title and that time was of the essence. Representatives of K & E, K & J and Archie Schwartz Company, a broker, together with their attorneys and a
representative of American Title Insurance Company, met at the K & E offices on December 1, 1969. K & J's attorney stated that his client was ready, willing and able to close pursuant to the terms of the agreement. He offered a treasurer's check of the Trade Bank and Trust Company of New York City in the amount of $650,000 in payment of the cash provision of the agreement and offered to fulfill all the terms of the agreement on its part to be performed. A representative reiterated K & E's contention that there was no valid and existing agreement between K & E and K & J for the reason stated in its letter of November 3, 1969, and that K & E refused to close title. Defendant asserts no other reason for claiming the contract a nullity and does not claim any defect in the notice or tender made by plaintiff.
The fact is that there were two parties to this contract at the time of its execution. The agreement was signed on behalf of the buyer by the purported president of the embryonic or proposed corporation. As such he was a "promoter." Whether or not the corporation were later to "adopt" the contract, a promoter could be held liable thereon. See Note, "Promoters' Contracts: A Statutory Solution," 15 Rutg. L. Rev. 566, 573 (1961); 1 Fletcher, Cyclopedia of Corporations , § 215. Thus, defendant was not without a fellow contracting party against whom it could have enforced the agreement.
In the context of a promoter having executed the contract, the corporation later coming into existence, the corporation is entitled to all the rights thereunder as well as assuming full liability therefor. 1 Fletcher, op. cit. , § 214, at 836-837. Even though the embryo corporation was not able to contract, yet it could adopt a contract made for its benefit. Ibid. , §§ 207, 208. Having adopted the contract, the corporation may then sue for its enforcement. Cf. African Methodist Episcopal Church v. Conover , 27 N.J. Eq. 157 (Ch. 1876); Builders Duntile Co. v. W.E. Dunn Mfg. Co. , 229 Ky. 569, 17 S.W. 2d 715 (Ct. App. 1928), 1 Fletcher, op. cit. § 214; 2 Williston on Contracts (3 d ed.), § 306 at
431, n. 18. One mode of adopting the contract is the institution of suit thereon by the corporation. Note, 15 Rutg. L. Rev. 566, at 572. Among the remedies available on such a suit is specific performance. 1 Fletcher, op. cit., supra , § 214 at 838, n. 46.
However, defendant persists in the assertion of "lack of mutuality." That concept has been the object of repeated judicial attempts to inter it. As stated ...