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On December 6, 1978, an agreement was entered into between Southern (P) and Camcraft (D) for P to purchase a 156-foot supply vessel for a price of $1,350,000. The agreement provided for an anticipated delivery date, authority for D to begin purchasing components and stated that a definite set of specifications and a Vessel Construction Contract would be written in the near future. The agreement was signed by the president of D, and the president of P. A Vessel Construction Contract was executed, and it was stated in the documents that P was a corporation organized under the laws of Texas. The contract recited that P was a citizen of the U.S. within the meaning of the Shipping Act of 1916 and that provisions of said act restricting transfer of ownership are applicable. Ten months later P informed D that they were incorporated under the Cayman Islands. D signed a written acceptance and agreement to the letter on February 22, 1980. D subsequently defaulted on its obligations under the contract and P sued for specific performance and damages. D defended on the grounds that P was not a corporation at the time the contract was entered into. The trial judge ruled for D and P appealed.

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