On The Legal Effect Of A Company's Unauthorized Guarantee When The Counterparty Is Not In Good Fait

In the case of the company’s ultra vires guarantee,the review of the company guarantee by the counterpart is the key factor that affects the final legal effect of the guarantee contract.According to Notice by the Supreme People’s Court of Issuing the Minutes of the National Courts’ Civil and Commercial Trial Work Conference and Interpretation of Guarantee System of Civil Code,the identification of the goodwill of the counterpart is related to the examination of the legal representative’s authority to represent abroad.When accepting the company’s guarantee,the other party should ask the company to submit the articles of association and the documents that the guarantee should have according to the statutory or the articles of association,and review the specific contents of the above documents,including whether the transactions are related guarantees,whether the related shareholders abstain from voting,whether the resolution bodies and signatories confirmed according to the statutory or the articles of association,whether the requirements of effective voting ratio are met when the resolution was passed,whether the articles of association restrict the amount of individual guarantees and whether other restrictions that need to be considered ever exist.When reviewing,the counterpart should fulfill the duty of care that a qualified business subject,which is in its rational state,can fulfill on similar occasions.If there is evidence that the counterpart has a significantly higher standard than the general rational person,the subjective standard will be adopted.If the counterpart can prove that his review of the company guarantee meets the above standards,it can be deemed as goodwill.At this time,according to the provisions of Article 504 of the Civil Code of the People’s Republic of China,it can be deemed that the guarantee contract is effective to the company.If the counterpart can’t prove that his review of the company guarantee meets the above standards,it should be deemed as non-goodwill.At this time,the validity law of the guarantee contract is not stipulated,and there are two kinds of judging opinions in judicial practice,namely,validity theory and pending validity theory.Compared with judicial practice,some journals hold the opinions of validity theory,which can be divided into three kinds of opinions.No matter from the perspective of theoretical discussion or practical operation,the theory of undetermined effectiveness is more convincing and can meet the practical needs in a better way.When the other party is not in good faith,the company can confirm the validity of the guarantee contract by referring to the unauthorized agency system.Before the company makes a clear statement,the result is pending.If the company approves afterwards,the other party can claim rights from the company on the guarantee contract;If the company still refuses to accept it afterwards,the counterpart cannot ask the company to take responsibility according to the guarantee contract.Because the unauthorized agency system only allows the bona fide counterpart to exercise the revocation right,the counterpart has no right to propose to revoke the guarantee contract because of its non-goodwill.When the contract is invalid,if the counterpart is not unaware that the company’s ultra vires guarantee or ultra vires guarantee is the collusion between the counterpart and the legal representative,the company will not assume any responsibility;If the counterpart has fulfilled the obligation of examination but signed a guarantee contract with the company due to negligence or failure to examine the company guarantee,the situation of the company’s fault can be distinguished,and the responsibility can be shared between the counterpart and the company according to the degree of its fault: if the company is at fault,it will bear civil liability with the fault that can be identified;If there is no fault caused by the company,the company can’t be asked to take any responsibility,and the other party should bear its own responsibility.The scope of the company’s liability is not only limited by Article 17 of the Interpretation of Guarantee System of Civil Code,but also is not equal to that of the counterpart in principle and should be less than that of the counterpart.In addition,the legal representative should also refer to the relevant provisions of the unauthorized agency system,and bear the fault liability to the other party,which can be based on either tort liability or fault liability in contracting.When both the company and the legal representative need to take responsibility for the other party,they should have independent share responsibility instead of joint and several liability,otherwise,the company will still become the primary responsibility subject because of its strong strength,and the above discussion on the scope of company responsibility will lose its meaning.At the same time,because the legal representative has the duty of loyalty and diligence to the company,the company has the right to hold the legal representative accountable for all its responsibilities to the counterpart.In this way,the legal representative will became the ultimate subject who bears the company’s ultra vires guarantee responsibility.