A "promoter" of a corporation corporation is a person who brings about the organization of a corporation. In everyday parlance, the promoter is the entrepreneur who has an idea for a business and begins working toward building the business prior to actually creating a corporation.
The issue of "promoter liability" for preincorporation contracts is a significant one in corporate law. When the promoter enters into a contract on behalf of a corporation that does not yet exist, the promoter will generally be personally liable on the contract. The idea is that a contract requires two parties, and because the corporation did not exist, the only other possible party is the promoter.
The analysis breaks down into two broad categories. In the first category, both the promoter and the counterparty know there is no corporation. In such a case, the promoter will generally be liable on the contract, assuming there is a contract at all. the corporation, when it comes into existence, is not liable on the contract by virtue of the promoter's acting on its behalf. The corporation may, however, become liable by adopting the contract after the corporation comes into existince. The corporation may "adopt" the contract, a concept very similar to ratification, either expressly in words such as in a board resolution or impliedly by accepting benefits under the contract with knowledge of its terms. In such a case, both the promoter and the corporation will be liable.
Note that technically under agency law the corporation cannot technically ratify the contract because the corporation was not in existence when the contract was made. (Rest. 3d. Agency, Section 4.04, cmt. c). Although the corporation's adoption of the contract would make the corporation liable on the contract, in general the corporation's adoption of the contract will not release the promoter from the contract, which release would require a novation.
The promoter may be able to escape liability for a preincorporation contract by arguing that the parties did not intend the promoter to be liable. If the counterparty was looking only to the corporation and not to the promoter for performance under the contract, then the promoter may escape liability. In such a case, the "contract" may be interpreted as merely an offer to the corporation (i.e., not a binding contract with the promoter) that may be adopted by the corporation.
In the second category of cases, the promoter and the third party both believed the corporation was in existence. In such cases, if the promoter entered into the contract expressly on behalf of the corporation he or she may be able to rely on de facto corporation or corporation by estoppel.