## Facts

- Garry J. Fox sought a tax opinion and accounting services from Coopers & Lybrand on November 3, 1981.
- Fox stated he was acting for a corporation he was in the process of forming, G. Fox and Partners, Inc., and Coopers accepted the engagement knowing the corporation did not yet exist.
- The corporation was incorporated on December 4, 1981.
- Coopers completed the work by mid-December and billed “Mr. Garry Fox, Fox and Partners, Inc.” for $10,827.
- The fee was not paid, and Coopers sued Fox individually for breach of express and implied contract based on promoter liability.
- The parties stipulated Coopers performed the work, and Coopers presented uncontroverted testimony that the fee was fair and reasonable.

## Issues

1. Whether a promoter is personally liable for a contract made on behalf of a not-yet-formed corporation absent an express or implied agreement that the other party will look solely to the corporation for payment.
2. Whether the promoter bears the burden to prove an agreement releasing him from personal liability on a pre-incorporation contract.

## Decision

- The Colorado Court of Appeals reversed the judgment for Fox and remanded with directions to enter judgment for Coopers for the unpaid fee.
- The court held Fox was a promoter and personally liable on the pre-incorporation contract.
- The court rejected Fox’s agency theory because a person cannot act as an agent for a nonexistent principal.
- The court held the trial court misallocated the burden of proof by requiring Coopers to prove an agreement obligating Fox individually; Fox bore the burden to prove an agreement releasing him from liability.
- Because no express or implied agreement releasing Fox was shown, promoter liability applied.

## Legal Principles

- A person who contracts on behalf of a corporation not yet in existence is treated as a promoter rather than an agent.
- One cannot act as an agent of a nonexistent principal.
- Promoters are personally liable on pre-incorporation contracts unless an express or implied agreement provides that the other contracting party will look solely to the corporation for performance.
- The promoter bears the burden of proving any express or implied agreement that releases the promoter from personal liability.

## Conclusion

The court held that a promoter who contracts for a corporation before it exists is personally liable by default, and the promoter must prove an express or implied agreement shifting liability exclusively to the corporation; absent such proof, judgment must be entered against the promoter for the unpaid contract amount.


Coopers & Lybrand v. Fox, 758 P.2d 683 (Colo. Ct. App. 1988)