Can a Sales Manager Represent the Supplier Company?
Last week, a US company consulted us the effectiveness of the contract with a Chinese company. In the case of the said contract, the sales manager of the Chinese company made an consent, via Wechat, with the US company of changing the specific contents of the said contract. However, the Chinese company refused to recognize and agree the changes of the said contract due to the fact that there is no official seal of the company and no written contract. Thus the agreement made by the sales manager of the Chinese company could not represent the behavior of the company.
Whether the sales manager could represent the behavior of the company? If the other party of the contract could reasonably believe the sales manager has the the agency right represent the company, whether the contract could still be effective even without the permission of the company? Here are some useful advice provided by the Chinese lawyers in Landing Offices towards these issues.
According to Article 172 of the General Provisions of Civil Law of the People's Republic of China（中华人民共和国民法总则）and Article 49 of the Contract Law of the People's Republic of China（中华人民共和国合同法）, if an agent has no agency right, overstepping the agency right or terminating the agency right, signs or alters a contract with the other party on behalf of his company, and the other party is in good faith and without fault subjectively, and has reason to believe that the agent has the agency right, this act of agency constitutes apparent agency and has legal effect. Therefore, in the case of the said contract between the US company and the Chinese company, if the court considers that the US company is in good faith and without fault when changing the contract with the sales manager of the Chinese company, and there is reason to believe that the sales manager of the Chinese company has the right of agency, the court will determine that the behavior of the sales manager of the Chinese company constitutes apparent agency, and the Chinese company shall bear legal responsibility for the behavior of its sales manager.
According to Guiding Opinions on Several Issues Concerning the Trial of Civil and Commercial Contract Disputes under the Current Situation issued by the Supreme People's court and the judgment opinions of the Supreme People's Court, Shenyang Intermediate People's Court, Wuxi Intermediate People's Court and other people's courts, the important conditions for the acts of the agent to meet apparent agency are as follow:
1. the agent has signed a contract; and
2. the agent has stamped the official seal of the principal.
In the said case between the US company and the Chinese company, the sales manager of the Chinese company has not signed the written contract or affixed the official seal when agreeing to change the contract with the US company. Therefore, the court may determine that the agency act of the sales manager did not constitute apparent agency.
However, there is also another opinion in the jurisprudence of the Supreme People's Court and the Nanjing Intermediate People's Court. When the actor has no right or exceeds his authority to sign or change the contract on behalf of his company, even if the agent does not sign the contract or stamp the official seal when carrying out the act of agency, the act of agency shall be deemed to constitute an apparent agency based on the transaction practice and the other party's trust in the agent.
In conclusion, it would be better make a written contract with the official seal of the opposite company represented by the sales manager in the case of changing the contents of contract, in order to provide a better protection of the trust and benefits of the other party, like the said US company.
If you would like to consult more professional information and suggestions, please contact Landing Law Offices to speak with one of our experienced Chinese lawyers.
Larry Zhou, Partner
Landing Law Offices China
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