When a party has not properly incorporated a company, which doctrines could still allow enforcing a contract against it?

• A. De facto corporation, corporation by estoppel, or both
• B. Only de facto corporation
• C. Neither doctrine applies
• D. Only corporation by estoppel

Answer: (D)

When a party hasn’t properly formed a corporation, the law can still reach a contract through certain doctrines that treat the entity as if it were the real thing in specific circumstances. The important distinction is that de facto corporation only applies if there was a genuine, colorable commitment to comply with incorporation laws and actual organizing actions taken as a corporation. If those elements aren’t present, this doctrine won’t create corporate liability.

Corporation by estoppel, on the other hand, acts to prevent a party who dealt with what they believed was a corporation from denying corporate status to avoid obligations. If the other party treated the non-existent or defective corporate entity as a real company in the contract, they can be bound even though proper incorporation never occurred. This is why, in a situation where incorporation wasn’t properly done, the contract can still be enforced against the party through estoppel, making it the applicable doctrine here.

So, while de facto corporation requires specific affirmative steps and organization to exist, corporation by estoppel can apply based on the reliance and treatment of the entity as a corporation in the contract, which is why only corporation by estoppel fits this scenario.