Southern-Gulf Marine Co. No. 9, Inc. v. Camcraft, Inc.

Court of Appeal of Louisiana, Third Circuit · 1982 · Corporations

410 So. 2d 1181 (1982)

Updated August 1, 2026

Corporationspre-incorporation contractscorporation by estoppelpre-incorporation contractde facto corporationcontract enforcementcorporate existenceassignment

Facts

On December 6, 1978, the parties signed a letter of agreement obligating "Southern-Gulf Marine Co. No. 9, Inc., a company to be formed" to purchase a vessel from Camcraft. On May 30, 1979, Camcraft and Southern-Gulf executed a vessel construction contract identifying Southern-Gulf as a Texas corporation, with mutual promises and default provisions, and Camcraft began construction. On February 21, 1980, D. W. Barrett informed Camcraft that Southern-Gulf had actually been incorporated in the Cayman Islands on February 15, 1980, that the board had ratified and adopted the prior agreements, and Camcraft's president signed an acceptance the next day. After Camcraft defaulted, plaintiff sued, and Camcraft argued there was no cause of action because plaintiff was not incorporated when the contract was executed and later incorporated in a different jurisdiction than represented.

Issue

May a party that contracted with and dealt with an entity as a corporation avoid the contract by denying that entity's corporate existence at the time of contracting? Also, may the defendant avoid the contract solely because the entity later incorporated in the Cayman Islands rather than in Texas, where the defendant accepted that later status and no substantial contractual right appears affected?

Rule

As a rule, one who contracts with and treats an entity as a corporation, incurring obligations in its favor, is estopped from denying its corporate existence when the obligations are sought to be enforced, unless the other party's lack or change of corporate status affects the contracting party's substantial rights. A party should not be permitted to escape liability by raising an objection to the obligee's antecedent incapacity after having acknowledged and dealt with it as a corporation.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In New Orleans, Bay Lantern Fabricators signed a supply contract with "River Delta Logistics, Inc., a company to be formed." The contract identified River Delta as a corporation, and Bay Lantern accepted deposits, exchanged invoices with River Delta under the corporate name, and began manufacturing custom equipment. After market prices rose, Bay Lantern refused delivery and argued no contract existed because River Delta had not yet filed articles of incorporation when the agreement was signed.

If River Delta sues to enforce the contract, what is the strongest argument against Bay Lantern's defense?

Explanation. The majority rule is that one who contracts with and acknowledges an entity as a corporation, incurring obligations in its favor, is estopped from later denying its corporate existence when sued on the contract, unless the other entity's status affected the denying party's substantial rights. Here Bay Lantern dealt with River Delta as a corporation and began performance; the later attempt to avoid the bargain merely because incorporation had not yet occurred should fail. (Derived from Southern-Gulf Marine Co. No. 9, Inc. v. Camcraft, Inc. (1982).)