Allocating Fault Ratios for Unauthorized Instrument Execution under Civil Code Principles
PRC Civil Code fault ratios split loss between negligent seal owners and unverified counterparties, capping invalid guarantee liability at fifty percent.
Genuine Seal
Meaning
An officially registered corporate stamp represents the primary instrument for expressing an enterprise’s legal assent to a contract or document. A genuine seal represents the highest level of corporate authorization in commercial transactions within China. This physical stamp binds the company to the terms of the signed document once it is applied by an authorized person.
Presumption of Authority
Contracts bearing the authentic stamp of a company carry a strong legal presumption of validity in civil courts. When a genuine seal is applied, the burden of proof shifts to the company to demonstrate that the stamp was used without authorization and that the counterparty was aware of this fact. This high evidentiary hurdle protects external parties from internal corporate disputes.
Corporate Control
Strict administrative custody of the registered stamp is necessary to prevent unauthorized transactions by rogue employees. If a company allows its genuine seal to be used by an employee for personal deals, it will be held liable under Article 170 or Article 172 of the Civil Code. Enterprise risk policies often require dual signatures alongside the stamp to ensure that no single individual can bind the company.
These rules reduce the likelihood of internal fraud and protect corporate assets from unauthorized disposition.
Judicial Verification
Courts verify the authenticity of corporate seals by comparing them with the samples registered at the local Public Security Bureau. If the stamp matches the registered version, the contract is presumed valid even if the signature of the legal representative is missing or forged. The legal consequence is that companies must bear the risk of stamp misuse.