Jane Wishes to Create a Corporation to Operate an Art

question 18

Essay

Jane wishes to create a corporation to operate an art gallery.She completes the articles of incorporation,and mails them to the appropriate state office.She then leases space,hires a receptionist,buys supplies,and contracts with artists to exhibit their artwork,all on behalf of her corporation.Sometime later,the state issues its certificate of incorporation.
A.Discuss the liability of Jane and the corporation with regard to the contracts Jane has made with third parties.
B.Based on the above fact situation,discuss whether a "novation" has occurred.

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Definitions:

Gross Investment

The total amount of money spent on new capital assets, such as buildings and machinery, without deducting for depreciation.

Capital Stock

Capital stock represents the sum of all physical and financial assets owned by a company or country, used to facilitate production and operations.

Depreciation

The method of allocating the cost of a tangible asset over its useful life, representing how much of an asset's value has been used up.

Gross Investment

The total amount of money spent on capital goods over a specific time period without accounting for depreciation.