Adjudication Rules for Apparent Agency Disputes (I) (Revised in May 2024)

Adjudication Rules for Apparent Agency Disputes (1)

Revised May 2024

01. Reference case: Retrial of a lease contract dispute between a highway engineering limited liability company in Jiangxi and a building materials leasing station in Xian County and He

[Summary of the trial]:

I. The subject of the contract is the civil subject who actually bears the rights and obligations of the contract, and only affixes the official seal on the contract, but does not enjoy the rights and obligations in the contract, and is not the subject of the contract.

II. In prima facie agency, the counterparty has reason to believe that the actor has the right to act as an agent, and there must be objective elements of the appearance of the right to act as an agent, such as a contract, an official seal, a seal, etc.

Case No.: :(2016) Gan Min Zai No. 111

02. Reference case: Daye Construction Engineering Co., Ltd. v. Hubei Ancient Construction Co., Ltd., Liu Moumou, Xiao Moumou Private Loan Dispute Case

[Summary of the trial]:

The actor should have considerable expectations of his or her own conduct, and the determination of apparent agency shall be determined in combination with various factors in the conclusion and performance of the contract, considering the transaction method and transaction content. In this case, as a construction company engaged in the construction industry, it should be clear that there is a relatively common situation of project subcontracting in the construction industry in mainland China and the existence of actual constructors. As the lender, it lent funds to the project department as a kind of thing, rather than building materials for specific things, and did not specify in the contract that it was a loan to the project department, but only pointed to specific individuals such as Liu, and it was difficult to show that it was lending funds to the project department, and the acts of Liu and others did not constitute an apparent agency.

[Case document number] :(2021) E 02 Min Zhong No. 2246

03. Reference case: Yang's fraud case

[Summary of the trial]:

I. Whether the actor constitutes an apparent agency directly affects the civil rights and obligations of all parties in the civil legal relationship, but does not affect the screening and characterization of the crime of fraud and the crime of embezzlement. To judge the nature of the perpetrator's possession or disposition of the victim's property, it is necessary to look at whether the property is in the possession and control of the perpetrator's unit. if so, then the nature of the perpetrator's conduct is embezzlement; If not, then the nature of the perpetrator's act is fraud.

II. Fabricating facts or concealing the truth refers to fabricating non-existent facts or concealing true circumstances to deceive the victim's trust, so that the victim "voluntarily" delivers property based on a misunderstanding and contrary to his true intentions. Whether or not the perpetrator has the authority to act as an agent or constitutes apparent agency does not fundamentally affect the establishment of the charges. Whether there is a causal relationship between the victim's disposition of property and the perpetrator's deception, and whether the disposition of property is based on a misunderstanding, is the key to determining whether the crime of fraud is established.

III. In practice, for the act of illegally taking possession of other people's property by using one's official status, it is necessary to screen and examine the role played by the one's official identity in the crime. As far as the crime of fraud and embezzlement is concerned, the essential means of the crime of fraud to illegally occupy other people's property is "fraud", and even if there is a role in promoting the criminal effect produced by the official status, it usually serves the core element of "fraud".

Case No.: :(2016) E Xing Zhong No. 244

04. The people's court did not support the claim that the principal only recognized the rights arising and rejected the corresponding obligations after the agent carried out the agency act - the securities repurchase dispute between the Wusheng Business Office of the Securities Department of the Wuhan Branch of the Chinese People's Insurance Company and the Wafangdian Rural Credit Cooperative Union

[Summary of the trial]:

According to Article 63 of the General Principles of the Civil Law, citizens and legal persons may carry out civil juristic acts through agents. The principal bears civil liability for the agent's agency acts. The people's court does not support the claim that the principal only recognizes the rights arising and rejects the corresponding obligations after the agent carries out the act of agency.

The Supreme People's Court held that the above facts also once again showed that the Wusheng Business Office, the Fuling Treasury Debt Department and the Credit Union had reached an agreement on the transfer of 8 million yuan of principal and interest claims. With regard to the credit union's defense that the Wusheng Business Office did not transfer the original materials of the 8 million yuan principal and interest claims and denied that the claims had been transferred, the Supreme People's Court held that whether the original materials of the 8 million yuan principal and interest claims were handed over to the credit union was an act of performance of the agreement; The true intention of the agreement and the validity of the agreement cannot be denied by the subsequent performance of the agreement. In addition, the credit union believed that the above-mentioned settlement agreement signed between the Wusheng Business Office and the Fuling National Debt Department was malicious and harmed the interests of the credit union, and should be an invalid contract. The Supreme People's Court held that the Credit Union's agreement to transfer Wusheng Business Office's claim against the Fuling Treasury Debt Department was the result of weighing the pros and cons, so this court did not support the Credit Union's defense claim.

Case No.: :(2010) Min Ti Zi No. 200

Source of the case: Guiding Cases of the Supreme People's Court in Commercial Adjudication 7: Company and Finance Volume, China Legal Publishing House, 2013 edition

05. Not all of the business-related behaviors engaged in by the company's staff are automatically recognized as corporate acts, and the counterparty cannot naturally think that the act can require the company to bear all responsibilities - Zou and Chengdu Xinpeng Wood Co., Ltd. contract dispute civil second-instance civil judgment

[Summary of the trial]:

On the issue of whether a certain Peng company should return the deposit and compensation to Zou. Zou asserted that Zhao Jian and Yang Li, who were not involved in the case, were salesmen of a certain Peng company, and that they were acting as agents of a certain Peng company to conduct business with them, so Zou customized furniture from a certain Peng company and paid a deposit. In this regard, this court held that Zou did not adduce evidence to prove that Zhao Jian and Yang Li were staff members of a certain Peng company or that the two had the right to receive money on behalf of a certain Peng company, and that a certain Peng company also claimed that Zhao Jian and Yang Li were not its employees, and that the business of the two had nothing to do with a certain Peng company. Therefore, under the circumstance that the evidence involved in the case could not prove that Zhao Jian and Yang Li were authorized to act as an agent for a certain Peng company, Zou actually claimed that Zhao Jian and Yang Li's acts constituted apparent agency.

In this regard, our analysis is as follows:

First of all, Zou stated that Zhao Jian and Yang Li, who were not parties to the case, did not sign a written contract with him in the name of a certain Peng company, and Zou did not provide evidence to prove that Zhao Jian had indicated to him that he was collecting money on behalf of a certain Peng company when he received the deposit of 5,000 yuan involved in the case.

Second, Zou did not adduce evidence to prove that Yang Li and Zhao Jian had the right to act as an agent for a certain Peng company, and had a reasonable trust in Yang Li and Zhao Jian based on the appearance of such rights. At the same time, Zou had previous transactions with a certain Peng company, but the way in which Zou customized the furniture involved in the case and paid the deposit in this case was not consistent with the previous transaction model between Zou and a certain Peng company, and Zou did not provide evidence to prove that he had fulfilled a reasonable duty of care in his transactions with Yang Li and Zhao Jian, or that he was in good faith and had no negligence.

In summary, there is no admissible evidence in this case to prove that the legal consequences of Zhao Jian and Yang Li's acts can be attributed to a certain Peng company because they constitute apparent agency. Therefore, there is no factual and legal basis for Zou's lawsuit against a certain Peng company to return the deposit and compensation, and the first-instance judgment rejecting Zou's litigation claim is not improper, and this court upholds it.

Case Number: :(2021) Chuan 01 Min Zhong No. 23566

06. Case of dispute over sales contract between China Railway Materials Shenyang Co., Ltd. and Tianjin Changlu Salt Industry Corporation

[Summary of the trial]:

The Second Circuit Court of the Supreme People's Court held that Changlu Company and Jianping Company had been cooperating and trading for many years before this case, and the contract involved in the case was also signed through Jianping Company's first-hand handling. In the previous large-value transactions, Jianping Company also completed the transfer of the bills on its behalf, and in the subsequent tripartite transactions, Changlu Company did not claim that the bills involved in the case had never been received, even in the case of payment to Shenyang Company. Based on factors such as the conduct of the actor and himself before the performance of the agreement involved in the case, the process of signing the contract involved in the case, and the attitudes of all parties during the performance of the contract, it is sufficient to determine that the appearance of entrustment and agency has been formed between Changlu Company and Jianping Company. Based on the trust in the appearance, Jianping Company's act of receiving the bill of exchange constituted an apparent agency, and it should be deemed that Shenyang Company had completed payment to Changlu Company. The court of first instance's determination of apparent agency was only limited to the single transaction involved in the case and ignored the comprehensive analysis of the overall situation of the transactions before and after the parties, and finally concluded that the facts were unclear and the law was wrongly applied, and this court revoked the first-instance judgment and rejected Changlu Company's litigation claim in accordance with law.

Due to the complexity of civil and commercial transactions, it is often difficult to form an objective fixed standard for the composition of apparent agency in civil and commercial trials, and it is necessary to comprehensively consider various factors such as contract conclusion, contract performance, transaction mode, and transaction practice. In particular, in a continuous transaction, it is not possible to look at a certain transaction in isolation and ignore the characteristics of the behavior of the parties before and after the contract, and the expression of intention of the parties should be explored as much as possible, so as to form the judge's inner conviction and appropriately use discretion to make a determination. In this case, the existence of apparent agency was finally determined on the basis of restoring the facts of the case, which protected the legitimate rights and interests of the bona fide actor to the greatest extent, and reflected the good social effects of maintaining normal civil and commercial transaction relations and protecting integrity.

Case Number: :(2015) Min Er Zhong Zi No. 335

Case source: Typical Cases on the Fair Trial of Major Cross-Provincial Civil and Commercial and Administrative Cases issued by the Second Circuit Court of the Supreme People's Court

07. Determination of apparent agency behavior in construction contracts.

[Summary of the trial]:

I. Evidentiary elements of the apparent agency

To constitute apparent agency, first, there is the fact that the actor does not have the power of agency, exceeds the power of agency, or still carries out the act of agency after the power of agency is terminated; Second, the counterparty has reason to believe that the actor has the power of agency.

According to the rules of evidence, if the counterparty of a contract asserts that it constitutes an apparent agency, it shall bear the burden of proof, and it shall not only provide evidence to prove that there are objective and formal elements of the agency such as the contract and the official seal, but also prove that it believes in good faith and without fault that the actor has the power of agency.

II. The authenticity of the seal does not mean that the agreement is authentic

The authenticity of the seal can generally be presumed to be the authenticity of the agreement, but the authenticity of the agreement cannot be directly inferred based on the authenticity of the seal alone when there is evidence to deny or doubt the authenticity of the act of forming the agreement. The essence of the act of sealing is to show that the actor is engaged in an act of duty, and the premise of engaging in an act of duty is that the natural person not only needs to be a staff member of the company, but also needs to enjoy the right of representation or agency.

Case No.: :(2020) Lu Min Zai No. 409

08. The applicable boundaries of family agency and the judicial determination rules for the constitutive elements of apparent agency

[Summary of the trial]:

When family agency is not applicable to civil juristic acts carried out by one of the husband and wife, there is room for the application of systems such as apparent agency and no agency authority. In disputes arising from the unilateral disposition of one of the husband and wife, the facts of whether there is an appearance of agency may be examined in combination with factors such as authenticity, continuity, relevance, and legality. To examine whether the counterparty's reasonable reliance on the appearance of the power of agency constitutes good faith and no negligence, the counterparty's duty of care can be determined through the objective standard of a reasonable person, and then corrected according to the subjective standard, and whether the counterparty has fulfilled the duty of care commensurate with its ability to care, and then determine whether it constitutes good faith and no negligence.

【Case Study】:

One of the points of dispute in this case is whether Zhou's transfer of the house involved in the case to Jia on behalf of Wu and Zhou Jia has legal effect. In the case of disputes over the sale and purchase contract, the issue of how to deal with the sale of the house by one of the husband and wife is often involved. Generally speaking, the house is a relatively important part of the joint property of the husband and wife, and it involves the residence rights of both husband and wife, and the courts at all levels are more cautious in handling such disputes. In view of the fact that such cases may involve the analysis of legal issues such as lack of authority, apparent agency, and bona fide acquisition, as well as the application of the law to family agency, some courts have differences on the judgment of the validity of the contract, the determination of the type of agency, and the balance of interests between the other spouse and the buyer, and the phenomenon of "different judgments in the same case" still exists. This article sorts out, refines and summarizes the trial ideas and adjudication rules of family agency and apparent agency based on the facts of the case.

(1) Frame premise: whether to exclude the application of the family agency system

On the surface, the issue involved in this type of case is the dispute between the validity of the house sale contract and the ownership of the house, but the essence is how to balance the interests of the co-owner and the counterparty of the house, or more abstractly, how to make a delicate balance between the security of the transaction and the security of the quiet ownership. This type of case involves marriage and family relations, and only when the civil juristic acts carried out by one of the husband and wife do not apply to daily family agency, can there be room for the application of the system of apparent agency and no agency authority, so the court needs to first determine whether it constitutes family agency when hearing this type of case.

Article 1060 of the Civil Code stipulates that "civil juristic acts carried out by one of the husband and wife for the needs of family life shall be effective against both husband and wife, unless otherwise agreed between one of the husband and wife and the counterparty." Restrictions between husband and wife on the civil juristic acts that one party may carry out must not be used against a bona fide third party. "The main purpose of the system is to facilitate economic exchanges and marriage and family life, protect the legitimate rights and interests of husband and wife and their counterparts, and maintain the security of social transactions. In jurisprudence, there has been controversy as to whether the legal nature of family agency is "agency".

(1) Definition of legal nature

The typical view is that family agency is a kind of "special agency", which arises based on the special identity rights and interests of both husband and wife, and does not need to be established by express expression. Another view is that this is a special kind of "representation", that is, the act of one of the spouses is regarded as an "expression of common will of the husband and wife". There is also an opinion that family agency is a "special function" unique to the family field. We believe that the family agency system was created in response to the needs of facilitating family life and maintaining the security of transactions, and it is more convincing to identify it as a special agency. From the perspective of system interpretation, the provisions on family agency are located in the Marriage and Family Section, which is independent of the provisions of the agency system in the General Provisions. Typical features of the system are:

(1) Self-determination of behavior

Each spouse can decide to act on his or her own initiative without the consent of the spouse.

(2) Failure to implement the principle of prominence

One of the spouses acts as an agent in his or her own name and not in the name of both spouses.

(3) Effectiveness radiates to both sides

The act of one of the perpetrators does not have legal effects only on the other party, but on both spouses.

(4) The legal effect of abuse of rights is different from that of internal and external

Where one of the spouses abuses the power of agency in family matters to harm the interests of the other party, the actor bears responsibility within the husband and wife, and must not confront a bona fide third party. From the perspective of purpose interpretation, one of the husband and wife "represents" the husband and wife in the form of atypical agency to carry out civil legal acts, which is in line with real transaction habits, helps to improve transaction efficiency, facilitates marriage and family life, and promotes family life to obtain benefits.

(2) Determination of applicable rules

After the implementation of the Civil Code, there has been no unified understanding between the theoretical and practical circles on the legal application of Article 1060 of the family agency norms. There is no obvious disagreement that family representation can be applied to burden-bearing acts, but there is some controversy as to whether it can be applied to dispositional acts.

We believe that, in principle, the burdensome behavior applicable to family agency should exclude transactions that are not obviously related to satisfying the daily life of the family and have the risk of abuse, and should be carefully and strictly grasped when applying to the disposition. In this case, in this type of dispute case, family agency should be strictly applied: in the context of the family's more individualized and diversified living needs, the specific scope of daily family affairs can be comprehensively determined by the legal nature of the specific matter, the family's daily management habits, and the actual economic situation of the family, etc., and it is not appropriate to set a unified standard.

From the nature of the agency, the identity act does not apply to family agency. Identity acts are usually disposition acts related to identity relationships, and do not involve the daily needs of the family, so there is no room for family agency. However, family agency is applicable to acts that have both status and property attributes, such as the payment of child support.

From the perspective of the scope of property, the disposition acts applicable to routine family agency should be limited to the disposition of the joint property of the husband and wife, and the family agency rules should not be applied to the disposition of the non-joint property of the husband and wife. Generally speaking, the rule does not apply to the disposal of property of greater value, such as immovable property, on the grounds that it is not for the purpose of satisfying the normative "due to the needs of family life". In practice, many courts have held that the disposition of the joint property of a husband and wife with a relatively large value constitutes a lack of right to dispose of it, and it is also based on this reason.

In terms of time frame, the emotional foundation of both parties is shaken during the period of separation, and family agency is not applicable in most cases for matters engaged in by one party. It should be noted that the family agency rules shall apply to matters that are not necessary for the husband and wife to live together, but are required for the common life of the family, such as the fulfillment of the legal obligation to raise children.

In this case, the house involved in the case was a property of relatively large value, Zhou's sale of the house was not for the purpose of satisfying the needs of family life, and Jia did not provide effective evidence to prove that Wu himself was present or made an expression of intent to agree to the sale of the house involved in the case when the house was sold, so the family agency rules do not apply to such matters as the disposal of the property involved in the case.

(2) Precise determination: Accurately identify the appearance elements of diversified and objective agency rights

Article 172 of the Civil Code stipulates that "if the actor does not have the power of agency, exceeds the power of agency, or after the power of agency is terminated, but still carries out the act of agency, and the counterparty has reason to believe that the actor has the power of agency, the act of agency is valid". From the perspective of the system of agency system, apparent agency is a special type in the category of non-authorized agency, and the apparent agency system is an abnormal exception rule added to the non-authorized agency system. In judicial practice, in the case of marriage and family, it is easy to confuse apparent agency with family agency and agency without authority, and the court should prudently determine the constitutive elements of apparent agency.

The difficulty of screening in practice lies in the fact that, objectively, the appearance of the actor's power of agency as expressed to the counterparty, and the subjective counterpart's belief in the appearance of the agency, as well as the subjective counterpart's belief in the appearance of the agency, require the adjudicator to form a subjective judgment and inner conviction of the apparent agency transaction pattern and the objective facts of the case, and also require the adjudicator to make a delicate weighing of the interests between the actor, the agent and the counterparty. Therefore, it is helpful to accurately identify the apparent agency, properly handle the internal and external relationships in the agency, fairly distribute the responsibilities and risks in the case of the apparent agency, and prevent the application of the apparent agency system from sliding to expand and restrict.

There are mainly differences between the "trichotomy" and the "dichotomy" in the classification of apparent agents in the theoretical circles, while there are various viewpoints on the constituent elements, such as "single element theory", "double important element theory" and "compromise element theory". Compared with the different views in the theoretical circles, the general judicial theory holds that, in addition to meeting the basic requirements of non-dispute, the composition of apparent agency not only requires that the agent's act of non-authorized agency objectively form the appearance of agency, but also requires the counterpart to believe in subjective good faith and without negligence that the actor has the power of agency. Since civil agency involves three types of legal acts, namely, the basic relationship, the authorization relationship, and the agency act, there are no fixed standards and elements for judging the subjective and objective elements of apparent agency in trial practice.

The fact of the appearance of the agency is the core constituent element of the apparent agency, and it is also the objective basis and premise for the establishment of the apparent agency. The examination of whether the act of agency has the appearance of agency power can be carried out from the following elements:

(1) Authenticity

The appearance facts of the agency power must be authentic, objective and recognizable. The appearance of agency is an objective and visible fact, which is not generated by the subjective assumption and self-speculation of the counterpart, and needs to be presented by relying on an objective carrier with clear direction. The carrier that characterizes the appearance of the right must be objectively real, that is, the real objective carrier promotes the unreal agent to be presented in a "real" state, so as to obtain the reasonable trust of the counterpart. For example, the actor presents to the counterpart facts such as a statement of circumstances or a statement of circumstances issued by the principal.

(2) Sustainability

The apparent facts of the power of attorney need to be stable and sustainable. The fact that the actor has the appearance of agency power needs to be consistent, uniform and stable, and this state does not need to continue until the stage of performance of the basic legal relationship, but the minimum requirement should continue until the stage of conclusion of the basic legal relationship.

(3) Relevance

There must be a correlation between the appearance of the right and the underlying legal act. The fact of the appearance of the right caused by the actor needs to be related and corresponding to the basic legal relationship that the counterparty intends to conclude with the principal, that is, the actor intends to conclude the basic legal relationship with the counterpart through the fact of creating the appearance of the agency, and this basic legal relationship is also intended by the counterparty.

(4) Legality

The appearance of the power of attorney must be legal. The fact that the appearance of rights generated by the actor's acts such as private fabrication, theft, or fraudulent acquisition of the official seal or power of attorney should not become the appearance of the agency, mainly because the act not only does not meet the requirements of legal norms, but also lacks the expression of intent of the principal to conclude a basic legal relationship.

In this case, the signature on the power of attorney issued by Zhou was not signed by Wu and Zhou Jia, and Wu's ID card retained by the intermediary agency was forged. Without the authorization of Wu and Zhou Jia, Zhou signed a house sale contract on behalf of Wu and Zhou Jia, and did not form the appearance of agency with authenticity, continuity, relevance and legitimacy.

03. Double examination: the review standard of good faith and no fault when the counterparty reasonably trusts the appearance of the power of agency

The counterparty's good faith and no fault are necessary elements of apparent agency; If the counterparty is negligent, it is not protected by the apparent agency system. In the field of civil law, there is a dispute between the relationship between good faith and no fault.

It has been argued that the distinction between good faith and non-negligence is to be understood as mere factual ignorance, and negligence is judged separately. Another view is that there is no fault in absorbing in good faith, and that ignorance is good faith unless it is due to negligence. There is also a view that the absorption of good faith without negligence is usually defined from the perspective of whether the counterparty is at fault in the transaction.

The above three main viewpoints are analyzed from different perspectives, only the difference in the perspective of discussion, there is no distinction between superior and inferior, and the judgment of good faith or malice of the relative party is essentially a judgment of whether there is fault or not. As for the standard of good faith and no fault when the counterparty reasonably trusts the appearance of the power of agency, it can be judged by the rational person standard that combines the subjective and objective standards, that is, whether the counterparty has fulfilled the duty of prudent review needs to meet the subjective and objective care standards of ordinary reasonable persons.

(1) Objective standards

The objective criterion (measurement criterion) emphasizes the level of care or caution that an ordinary rational person equivalent to the counterpart as a whole should achieve under the same or similar circumstances. There is no uniform standard in judicial practice as to what level of care or prudence should be achieved. In the course of hearing such cases, the court may, in accordance with the legal normative requirements and basic moral requirements of the principles of good faith and the principles of public order and good customs, extract the greatest common divisor of the level of IQ, emotional intelligence, knowledge and experience of the vast majority of the counterparts as the objective standard for rational persons.

When judging whether the counterparty's reasonable reliance on the actor meets the objective rational standard, the court needs to embed the ordinary rational person into the specific situation of the case, determine whether the rational person will have reasonable trust in the appearance of the agency right, and then determine whether the trust of the parties in the case is reasonable.

(2) Subjective standards

After the objective criteria are basically framed, they are corrected according to the subjective criteria, and the differences between different counterparts and the objective standards are appropriately adjusted based on the asymmetry of information possession and the differences in risk management and control capabilities.

The so-called subjective standard (correction standard) refers to the duty of due diligence that the counterparty needs to fulfill in accordance with the knowledge, experience, ability, and prudence it has acquired. The stronger the attention ability of a relative person, the higher the standard of attention that should be achieved. This standard focuses on appropriately respecting the individual differences of counterparts, and avoids that using too high standards may harshly criticize counterparts with relatively weak attention ability, while adopting too low standards may indulge counterparts with relatively high attention ability.

However, respecting individual differences does not mean ignoring relatively reasonable objective standards, and adjudicators still need to comprehensively apply the two standards in the review of specific cases, and on the basis of ascertaining objective facts, explore the parties' intentions as much as possible, so as to form inner convictions and appropriately use the adjudication power to make determinations.

In this case, according to the general rule of thumb, as a buyer of a house, a buyer should have a higher duty of care. Mr. Jia has been engaged in cost consulting and real estate development, and he has a higher ability to prudently review than ordinary reasonable people, and should have a higher duty of care in law.

In the course of the housing transaction involved in the case, Jia had seen the house division agreement at the signing site, knowing that Zhou was not the real owner of the house involved in the case, and he did not review whether the signature on the power of attorney issued by Zhou was signed by Wu and Zhou Jia or whether Zhou enjoyed agency authority, and signed the house sale contract involved in the case with Zhou only on the basis of the letter of commitment issued by Zhou, and failed to fulfill the duty of care, and he was grossly negligent, which did not constitute a situation of good faith and no negligence.

Case Number: :(2022) Hu 01 Min Zhong No. 3249

[Case source]: 2022 Outstanding Case Analysis Excellence Award of the National Court System

09. The agent failed to fulfill the agency obligation of a good agent, and the third party also knew that there were major flaws in the agent's agency behavior, and the agency act had no legal effect on the principal-PetroChina Hubei Sales Branch and Shiyan Chedu Dayang Petrochemical Co., Ltd. and Shiyan Nanhai Petrochemical Co., Ltd. Lease contract validity confirmation dispute retrial

[Summary of the trial]:

If the agent fails to faithfully protect the interests of the principal and fulfill the agency obligation of a good agent, the agency behavior violates the principle of good faith and deviates from the basic purpose of the civil law agency system. The third party also clearly knows that there are major defects in the agent's agency act, and if the agent and the third party urge the principal to perform the contract signed between the agent and the third party, and the principal clearly states that the contract is not recognized, the agency act will not have legal effect on the principal.

The Supreme People's Court held in the retrial that the focus of the dispute between the parties in this case was whether the lease contract for the Ganghe Village gas station signed by the agent Nanhai Petrochemical Company in the name of the agent PetroChina Hubei Company and Chedu Company had legal effect on PetroChina Hubei Company. (omitted) Nanhai Petrochemical Company, as an agent, failed to faithfully safeguard the interests of the principal and fulfilled its agency obligation as a good agent, and the agency behavior violated the basic principle of good faith and deviated from the basic purpose of the agency system under the civil law. The third party, Chedu Company, should have been aware of the material flaws in Nanhai Petrochemical's agency act. After Chedu and Nanhai Petrochemical Company urged PetroChina Hubei Company to perform the Lease Contract, PetroChina Hubei Company made it clear that it did not recognize the contract, and claimed that the contract was invalid on the grounds that Nanhai Petrochemical Company and Chedu Company had concealed facts and harmed their interests. The Lease Contract signed by Nanhai Petrochemical Company on behalf of PetroChina Hubei Company and Chedu Company is not an expression of the true intention of the agent PetroChina Hubei Company, and the contract has no legal effect on PetroChina Hubei Company. The original judgment found that the contract was valid and improper, and corrected it. The first-instance judgment found that the contract was invalid and upheld.

Case source: Trial Supervision Guidance, 2011, Vol. 4 (No. 38), People's Court Press, 2012.

10. Determination of the validity of the contract when the record seal in the construction project contract is inconsistent with the actual use of the seal——Qinghai Jianyuan Labor Service Co., Ltd. v. Sichuan Yuechi County Shiya Jian'an Corporation et al., a construction project contract dispute

[Summary of the trial]:

I. The seal is not a record seal, but it can constitute an apparent agency

Although the official seal in the labor subcontract is inconsistent with the public security record of Shiya Head Office, the official seal number is the same, and it is difficult to distinguish it with the naked eye, Yao Jirui signed the contract in the name of Shiya Head Office with the appearance of the right to act as an agent, and required Jianyuan Labor Service Company to review whether the official seal signed by the contract is consistent with the official seal of the public security record. Jianyuan Labor Service Company has reason to believe that Yao Jirui signed the labor subcontract on behalf of Shiya Head Office, and Jianyuan Labor Service Company has actually completed the labor subcontract, and the two parties have formed a de facto labor subcontract relationship for construction projects

II. The seal is not a record seal, and the existence of multiple seals is not excluded

Even if the official seal is inconsistent with the official seal on record, it cannot be ruled out that Shiya has multiple seals, and combined with the fact that the account paid Wang Hongxun, it can also prove that Jianyuan Labor Service Company has actually performed the labor subcontract with Shiya Head Office.

III. The criminal involvement of private engraving of seals does not affect the validity of the contract

With regard to the fact that Yao Jirui was not authorized by Shiya Corporation and privately engraved the official seal of Shiya Corporation, which does not belong to the same legal relationship as this case, and does not affect the determination of the actual performance of the labor subcontract of the construction project between Jianyuan Labor Service Company and Shiya Corporation, this court also did not approve Shiya Corporation's application to request that the trial of this case be suspended because the public security bureau of Yuechi County, Sichuan Province had filed a criminal case for the act of privately engraving the official seal.

Case Number: :(2020) Qing 26 Min Zhong No. 39

11. Does the loan contract signed by the company's middle-level management personnel in the name of the company in the office by forging the company's seal constitute apparent agency? -- Retrial of a private lending dispute between Zeng and Shanghai Chengtou Raw Water Co., Ltd

[Summary of the trial]:

The Supreme People's Court held that, according to the facts of this case, from May 2009 to September 2014, Wang served as the director of the Diversified Operations Integration Office of Chengtou Raw Water Company, mainly responsible for handling the suspension and cancellation of diversified business enterprises and the daily leasing and management of real estate on Jinwan Road, and at the same time served as the legal representative of Raw Water Environmental Protection Company. Before the signing of the Loan Contract, Wang wanted to borrow money from Zeng in the name of the Raw Water Environmental Protection Company and mortgaged the real estate of the Chengtou Raw Water Company, and then when Zeng required the borrower and the mortgagor to be consistent, Wang finally signed the Loan Contract with Zeng on January 22, 2014, with the Chengtou Raw Water Company as the borrower and mortgagor and the Raw Water Environmental Protection Company as the guarantor. The contract stipulated that Chengtou Raw Water Company would borrow 45 million yuan from Zeng for business needs, with an interest rate of 2.2% per month, and provide mortgage for five houses located at No. 458 Jinwan Road, Pudong New Area, Shanghai; Chengtou Raw Water Company required Zeng to pay 15 million yuan of the loan to Zhiguang Small Loan Company, and the remaining 30 million yuan to Wang's account; The raw water environmental protection company provides joint and several guarantees. After the conclusion of the Loan Contract, the house involved in the case was registered as a mortgage, Zeng paid 15 million yuan to Zhiguang Small Loan Company, 30 million yuan to Wang, and Wang paid 5.94 million yuan to the payee designated by Zeng after receiving 30 million yuan. After the loan expired, Wang repaid 11 million yuan to Zeng.

On September 19, 2016, the Shanghai Pudong New Area People's Court rendered the (2015) Pu Xing Chu Zi No. 4498 Criminal Judgment, sentencing Wang to 17 years imprisonment for the crimes of embezzlement and fraud. According to the facts ascertained in the criminal judgment, the official seals of Chengtou Raw Water Company and Raw Water Environmental Protection Company in the Loan Contract, as well as the private seals of all directors on the Resolution of the Board of Directors of Chengtou Raw Water Company, and the official seals of Puhua Water Company on the Shareholders' Resolution of Raw Water Environmental Protection Company were all privately engraved and forged by Wang. The above-mentioned "Resolution of the Board of Directors" and "Resolution of Shareholders" were printed by Wang in his office on the spot, and in front of Zeng and other people present, all official seals and private seals were stamped on the spot and handed over to Zeng. Accordingly, the "Loan Contract" in this case was signed between Wang, the director of the Chengtou Raw Water Company's Multi-operation Integration Office, privately engraved the company's official seal and Zeng, and Wang's act was an act without authority. According to Articles 48 and 49 of the Contract Law of the People's Republic of China, since Chengtou Raw Water Company refused to recognize Wang's act of signing the Loan Contract in the name of the company, it is necessary to determine whether Wang's above-mentioned acts have legal effect on Chengtou Raw Water Company, and whether Wang's act of not having the right to act as an agent constitutes apparent agency. This court held that the original judgment determined that Wang's conduct did not constitute apparent agency, had a factual basis, and complied with the provisions of the law based on a comprehensive analysis of Wang's appearance of his position and the reason for the loan, the process of determining the borrower, the process of signing the Loan Contract, and the performance of the contract.

First, Wang was only the director of the diversified operation integration office of Chengtou Raw Water Company, and his position did not have the appearance of convincing the counterpart that he had the authority to borrow money on behalf of the company, and Zeng was well aware of Wang's position as Chengtou Raw Water Company.

Second, it was obviously unreasonable for the company to borrow money from a large state-owned enterprise with mortgageable real estate, and it did not borrow money from financial institutions but borrowed from natural persons at a high interest rate of 2.2% per month, and handed over the borrowed money to employees for personal use.

Third, the Loan Contract, the Resolution of the Board of Directors and the Resolution of the Shareholders in this case were all printed by Wang in his computer and stamped in the office by Wang when the two parties were in Wang's office. Although Wang provided Zeng with an application form for the use of seals, which was later found to be forged by Wang, however, according to the content of the application form for the use of seals, that is, "the name of the documents and materials is the borrowing of the official seal, the legal person seal, and the main content is the "Resolution of the Board of Directors" and the loan contract with the official seal and the legal person seal, etc.", it can be judged by common sense that it is impossible for the Chengtou Raw Water Company, as a large state-owned enterprise, to hand over the company's official seal and legal person seal to a middle-level manager of the company for use in the "Loan Contract" and the "Resolution of the Board of Directors" involving the company's major business activities On this basis, it can also be determined that Zeng clearly knew that the Chengtou Raw Water Company did not convene a board of directors for the relevant commercial proposals involving loans and guarantees, and Zeng clearly knew that the "Loan Contract" and the "Resolution of the Board of Directors" were not the true expression of the intention of the Chengtou Raw Water Company.

Case No.: :(2020) Supreme Law Min Shen No. 2588

Transferred from the same judgment rule for similar cases