Commercial Division Blog

Posted: April 8, 2017 / Categories Commercial, Contracts, Agency

Person Who Signed Agreement on Behalf of LLC Before LLC Was Formed Can Be Held Personally Liable

On April 6, 2017, the First Department issued a decision in Eastern Consolidated Properties, Inc. v. Waterbridge Capital LLC, 2017 NY Slip Op. 02731, holding that a person who signs an agreement on behalf of an LLC before the LLC is formed can be held personally liable under the agreement, explaining:

Supreme Court properly granted plaintiff's cross motion to add Schreiber as a party defendant. As a member of Waterbridge, Schreiber could not be held personally liable for an agreement made on Waterbridge's behalf. However, at the time of the oral agreement, WB Berry was not yet formed. To the extent that Schreiber acted on WB Berry's behalf before its formation, he is presumed personally liable as an agent of the nonexistent corporate principal.

(Internal quotations and citations omitted).