contract-law fraud commerce
What is the legal status of companies collecting &quot;pre-order&quot; sales?
<p>I thought that most states made it illegal to sell products that do not exist.</p>

<p>Nevertheless, there seem to a lot of "crowd-funded" companies who sell their products as "pre-orders" meaning they are using your money to capitalize their company and they promise to ship the product to you at some undefined time in the future.</p>

<p>Is this legal?</p>

<p>Not all preorders are fraud.</p>

<p>For fraud, generally you want to show that someone:
(1) falsely represented some material fact, (2) knew it was false, (3) intended for the victim to rely on it; and then the victim (4) reasonably relied on it and (5) was injured.</p>

<p>It's probably the case that some crowdsourced ventures are deceptive, but preorder is a fairly common practice---phones and video games, for example.  However, an example that's closer to your question is aviation, where aircraft preorders are frequently funded to incentivize particular features or timelines.</p>

<p>Whether it's allowable to do a <em>funded</em> preorder generally comes down to a question of contracting terms.  Law is generally pretty deferential to contracts.  For example, the Kickstarter <a href="https://www.kickstarter.com/terms-of-use?ref=footer" rel="nofollow">Terms of Use</a> make it clear that you enter into a contract, not with Kickstarter, but with the project sponsor.  The terms of this contract will govern recovery when things go awry.</p>
