What type of contract is made by the promoter in the company's name before it exists, which is personally binding on the promoter?

A pre-incorporation contract is an agreement entered into by a promoter on behalf of a company before it has been officially incorporated. At this stage, the company does not exist as a legal entity, so the promoter acts on its behalf with the understanding that the company will assume the contract once it is formed. However, the promoter remains personally liable for the obligations of the contract, as there is no company in existence to take on that liability.

This type of contract is important because it allows for business operations to be initiated prior to the formal establishment of the company. Once incorporated, the company may adopt the contract, which can lead to a transfer of liability from the promoter to the company. This concept is fundamental in business law, as it recognizes the time-sensitive decisions and actions that need to take place when starting a new business.

Other options such as a business agreement, partnership contract, or shareholder agreement refer to different types of legal arrangements that involve existing entities where liability and obligations are typically shared or limited among the involved parties. They do not specifically address the unique circumstances surrounding a promoter's actions before the legal formation of a company.