The Legal Representative’s Ultra Vires Guarantee The Validity Of The Contract

The revised ‘Company Law’ in 2005 affirmed the company’s ability of external guarantee,that is,the explicit prohibition of external guarantee stipulated in the‘Company Law’ in 1993 was changed to consent to the company’s external guarantee,and the phenomenon of the company’s legal representative’s ultra vires guarantee began to emerge,which also led to more disputes.Through case analysis,it is found that there are many problems in the understanding and handling of Article 16 of the Company Law in practice,and the judge directly regards it as the basis for judging the effectiveness of the legal representative’s ultra vires guarantee behavior and ignores different situations.First,whether the legal representative’s ultra vires guarantee contract is based on Article 16 of the Company Law or Article 504 of the Civil Code or both;Secondly,different courts have different ideas on whether the company can ratify the ultra vires guarantee contract when its validity is pending,and under what circumstances.Thirdly,how to identify the“good faith” mentioned in Article 504 of the Civil Code has not yet formed a unified answer,and at this time it also involves the question of whether the responsibility identification is reasonable when the relative person and the company are at fault.The fundamental reason for the above problems lies in the theoretical controversy of scholars on this issue,which leads to legislative gaps and conflicts,and finally leads to the disunity of judicial decisions.To solve the above problems,we should not only analyze the theoretical disputes of scholars,but also start with the Company Law,the Civil Code and judicial interpretation.First of all,many scholars fall into the pattern of “normative nature identification theory” to argue whether Article 16 of the Company Law is effective or administrative mandatory.In fact,Article 504 of the Civil Code is the basis for judging the effect of the legal representative’s ultra vires guarantee,that is,judging whether the contract belongs to the company according to whether the counterpart is in good faith;Secondly,the theory of ‘limitation of representation’ introduces whether the counterpart is in good faith into the legal representative’s ultra vires guarantee,which also increases the difficulty of understanding and judging in judicial practice.In fact,if the counterpart is in good faith,the ultra vires guarantee contract should be effective for the legal person;Correspondingly,if the other party is not in good faith,the validity of the contract should be judged according to Article 61 of the Civil Code,and the restrictions on the representation of the legal representative in the articles of association can be used against the third party who is not in good faith.Therefore,whether the counterpart is in good faith is actually the main factor to judge whether the effectiveness of the legal representative’s ultra vires guarantee contract should belong to the company.Finally,whether the company ratifies or not should depend on whether the authority exceeded by the legal representative is statutory or intentional,and the liability of the ultra vires guarantee contract after it becomes ineffective should also be judged according to the fault of both parties.Therefore,we should strengthen the specific regulation of the legal representative’s external guarantees in the Company Law on the basis of the Minutes of Nine Citizens,judge whether the counterpart is in good faith by requiring the counterpart to conduct a reasonable review of the company’s articles of association and resolutions,and require the counterpart to conduct simple logical reasoning to balance the interests of both the counterpart and the company.In addition,it is necessary to combine other supporting laws to facilitate the relative person to consult the company’s articles of association and related contents.The above practice can not only straighten out the relationship between laws and norms,but also reduce the phenomenon of disunity in judicial judgment,which is conducive to unifying the judgment standards of the legal representative of the ultra vires guarantee.