Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Applying the Doctrine of Incorporation by Estoppel in New York

By George Bundy Smith And Thomas J. Hall
May 01, 2016

Corporate existence can be critical to the capacity of corporate plaintiffs to bring claims, particularly when the claims are for breach of contract. In Rubenstein v. Mayo , 41 A.D.3d 826 (2d Dept. 2007), a case involving a commercial lease, it was held that since a nonexistent entity cannot acquire rights or assume liabilities, a corporation that has not yet been formed under New York law normally lacks capacity to enter into a contract. Consequently, breach of contract claims brought by corporate plaintiffs that were not fully formed at the time the contact was executed are vulnerable to dismissal under Civil Practice Law & Rules (CPLR) 3211(a)(3) on the ground of lack of capacity to sue. N.Y. C.P.L.R. 3211 (McKinney). Several Commercial Division cases make clear, however, that at times a non-existent corporation can be deemed to exist, and thus possess the legal capacity to contract and bring suit on that contract, pursuant to the common law doctrine of incorporation by estoppel. Supra, 41 A.D.3d 826.

Incorporation by Estoppel

The doctrine of incorporation by estoppel, sometimes called “corporation by estoppel,” provides that, if an opposing party has recognized an entity's corporate status and has dealt with it as such, and if those past dealings are not dependent on the entity's corporate status, the opposing party will be precluded from arguing that the entity lacks the capacity to bring suit on the grounds it was not a fully formed corporate entity at the time the contract was executed. 8 Fletcher Cyc. Corp. ' 3889. Thus, a party that has entered into a contract with what it believed was a properly formed entity may not thereafter avoid responsibility on the contract on the ground that the entity had not existed at the time the contract was made. Supra, 41 A.D.3d 826. Since estoppel is at bottom an equitable doctrine, concerns over fairness will often guide a court's determination of whether application of the doctrine is warranted in a particular case. Timberline Equip. Co. v. Davenport, 267 Or. 64, 71 (1973).

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.