The Warehouse Lease Signed Before Incorporation
On 1 March 2025, Tunde and Ada, two entrepreneurs, signed a three-year lease for a warehouse in Apapa at ₦2.5 million per month for a company they intended to call Bluewave Logistics Ltd. The company was not yet registered. The lease described the tenant as 'Bluewave Logistics Ltd (in formation)' and was signed by Tunde and Ada 'for and on behalf of the company in formation'. They paid the ₦7.5 million deposit from their personal accounts. Bluewave was incorporated on 20 March 2025. At its first board meeting on 5 April, the directors resolved to 'adopt the Apapa lease' and the company moved in, paying rent for April and May from its corporate account. In June, Bluewave defaulted; the landlord sues Tunde and Ada personally for the remaining rent. They argue the company ratified the lease and that the corporate veil protects them. The landlord also alleges the company is a sham because Tunde and Ada are the only shareholders and directors.
1. Advise the landlord on whether Tunde and Ada are personally liable on the pre-incorporation lease, and whether Bluewave's conduct amounted to ratification.
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Because Bluewave did not exist on 1 March 2025, Tunde and Ada contracted as agents for a non-existent principal. At common law (Kelner v Baxter), a person who signs for a company not yet formed is personally liable unless the contract clearly shows a contrary intention. CAMA 2020 allows a company to ratify a pre-incorporation contract after incorporation, and ratification can be inferred from conduct. Here there is strong evidence of ratification: the board resolved to adopt the lease, the company took possession, and it paid April and May rent from its own account. That makes Bluewave bound as if it had been a party from the start.
But ratification does not automatically release the promoters. Unless the landlord agreed to substitute Bluewave for Tunde and Ada by novation, or expressly released them, the landlord may sue both the company and the promoters. The words 'for and on behalf of the company in formation' are not a clear exclusion of personal liability. Tunde and Ada should therefore expect personal liability for the unpaid rent, though they may have a right of indemnity against Bluewave if the company ratified. The landlord should sue Bluewave and join the promoters in the alternative.
2. Can the landlord lift the corporate veil to recover from Tunde and Ada on the ground that Bluewave is a sham? What facts would a court consider?
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The corporate veil is not lifted merely because Tunde and Ada are the only shareholders and directors. Salomon v Salomon establishes that a company is a separate legal person, and the court will not treat it as a sham just because it is a small family company. The landlord must show something more: that the company was used as a cloak or sham to evade a legal obligation, that it was an agent or mere facade for the promoters, that assets were diverted, or that injustice would result. Undergapitalisation alone is usually not enough in Nigeria, though it is a factor.
Here the landlord has no evidence yet that Bluewave was formed to avoid the lease or that Tunde and Ada stripped its assets. The fact that they signed the lease before incorporation is not fraud. The veil claim is therefore weak. The landlord's better route is the pre-incorporation contract claim. If, however, the landlord can show that the company paid their personal expenses or transferred its receivables to them, it may ask the court to lift the veil and attach those assets.