Civil Code Commercial Seal Enforcement Rules for Procurement Officers
Civil Code commercial seal rules tie contract validity to corporate authorization, requiring procurement officers to verify seal registrations and legal representative mandates.
Article 504 Civil Code
Meaning
Judicial mandates concerning the powers of a representative are ineffective against a counterparty acting in good faith. If a legal representative enters an agreement exceeding specific powers, article 504 civil code preserves the validity of that agreement unless the other party knew or should have known of the limitation. This provision prevents companies from avoiding contractual obligations by citing internal bylaws that were not disclosed to the public.
Representative Authority
The statutory power of a chairperson or manager to sign for an enterprise is presumed to be absolute in the eyes of the law. Under article 504 civil code, the internal division of responsibilities does not affect the external perception of authority held by the person listed on the business license.
Good Faith Requirement
A counterparty is deemed to have acted in good faith if they performed reasonable diligence by checking the publicly available registry of the firm. Proving that the other party had knowledge of an ultra vires act requires the company to produce evidence of direct communication or a prior course of dealing that clearly established the boundary of the representative. This evidentiary burden is high to support the stability of commercial transactions.
Contractual Validity
Agreements signed by a representative in violation of internal rules remain binding and enforceable through the courts. The validity of such documents ensures that vendors and service providers are not required to audit the private governance documents of every client before signing a purchase order.