As the legal representative of his company, Steve was sent to Beijing to talk some business with an advertising company. They struck a great deal as the owner of the advertising company fell in love with Steve’s good looks.
Steve, unfortunately, apart from being lost in the sea of love, also lost the company stamp in the process. Therefore, the new contract was drafted specifically to exclude the company stamp, and that the signature of both legal representatives were enough.
When Steve returned to the headquarters of his own company, his boss was not impressed. As said earlier, Steve was a handsome guy and the boss’s daughter had also fallen in love with him at the same time. Steve got fired immediately.
The boss then tried to cancel the deal with the advertising company because of bad blood. ‘Steve signed the contract without agreeing and without the company stamp, so you go find him to pay up instead. We are not paying a penny for your services.’ he yelled into the phone.
So can the deal be cancelled because of no company stamp?
Law In A Minute
The answer is no in this case.
Firstly, Steve was the legal representative of the company when he signed the deal, so he signed it on behalf of the company, but not himself. The company, not Steve, is responsible for the advertising fees.
Moreover, the point of the deal is the advertisement of Steve’s former company, so it is considered within Steve’s authority. Therefore, the contract has legally binding power.
Lastly, the new terms and conditions excluded the company stamp, and the signature takes the place of the stamp in the contract. Steve’s former boss either has to pay the advertising fees, or break the contract and pay the compensation as loss and damage.
Legal Basis
General Provisions of the Civil Law of the People’s Republic of China – Article 61
In accordance with the provisions of laws or the bylaws of a legal person, the person in charge who conducts civil activities on behalf of the legal person shall be the legal representative of the legal person.
The legal consequences of civil activities conducted by the legal representative in the name of the legal person shall be assumed by the legal person.
Any restriction on the legal representative’s right of representation imposed by the bylaws or the supreme organ of the legal person shall not be set up against bona fide opposite parties.
Article 62
Where the legal representative of a legal person causes damage to any other person in the performance of duties, the legal person shall assume civil liability for such damage.
The legal person may, after assuming such civil liability, claim reimbursement from the legal representative at fault in accordance with the laws or its bylaws.
Edgar Choi is author of “Commercial Law in a Minute” and host of a legal-advice account “Law in a minute” on WeChat
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