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Applying the Doctrine of Incorporation by Estoppel in New York

By George Bundy Smith And Thomas J. Hall

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

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