Abstract: Article 20 of the Judicial Interpretation of the General Provisions of Contracts Book of the Civil Code for the first time distinguishes between contractual actions by legal representatives that exceed statutory authority and those that exceed agreed authority, assigning them different legal effects. The evaluation of actions exceeding statutory authority is constrained by two rigid restrictions of the legal representative system in China: the strict distinction between representation and agency and the statutory nature of representative organs. In the tightly regulated modern society, evaluating contractual actions that exceed statutory authority involves two values that are hard to reconcile with each other: the legal principles of presumed knowledge of the law and the protection of reliance. The essence of statutory limits on representative authority is the legal procedural requirements for the formation of a legal person’s will on specific matters, reflecting procedural justice in the formation of a legal person’s will, the nature of which is natural law norms, so it is not excessive to presume that counterparty should know and to require them to exercise reasonable due diligence. At this point, the counterparty should examine the legal person’s articles of association in accordance with law. Contract Law should recognize the impact of the legal person’s will formation process on the validity of contracts and make it clear that contractual actions exceeding statutory limits of representative authority are expressions of will of the legal representative, rather than that of the legal person. The legal person has the right to choose whether the contract is established for them, but should not be liable for damages to the counterparty. The legal representative is not obligated to perform the contract but should be liable for damages to the counterparty. The current law easily allows the role of legal representatives to elevate from organs expressing the will of legal persons to “persons in charge”, breaking through the checks and balances mechanism of corporate governance. In the future legislation, China could consider constructing a unified system for expressing the will of legal persons, downplaying the differences between representation and agency and establishing a public registration system for representatives (agents).

Key Words: legal representative; apparent representation; ultra vires acts, Article 61 of the Civil Code; Article 504 of the Civil Code

Author: Xie Hongfei, research fellow, CASS Institute of Law;

Source: 6 (2024) Law Science Magazine.