Verifying Secondary Chop Authority in PRC Master Supply Agreements
Verify secondary contract chops against Public Security Bureau 13-digit codes and secure a primary-chopped Power of Attorney to prevent non-authorization defenses.
Written Authorization Scope
Meaning
Legal boundary defined in a power of attorney outlines the specific actions an agent or corporate officer is permitted to take on behalf of a company in China. A clear written authorization scope prevents unauthorized transactions by establishing the exact limits of a manager’s power to bind the enterprise. This document is presented to financial institutions and administrative authorities to ensure that any action beyond the stated limits is non-binding.
Administrative Limit
Drafting this document requires defining the specific financial thresholds and business areas the agent is authorized to handle. The written authorization scope should explicitly exclude the power to sell corporate real estate or pledge assets as collateral. These exclusions are registered with the local Administration for Market Regulation to ensure public visibility.
If an executive signs a contract that exceeds these limits, the company can deny liability by proving that the counterparty had access to these registered restrictions.
Judicial Evaluation
Courts assessing unauthorized contract claims examine this document to determine whether the counterparty acted in good faith under the apparent authority doctrine. Under the PRC Civil Code, if the written authorization scope was narrow and the transaction was unusually large, the counterparty must prove they verified the agent’s authority. If they failed to request a formal board resolution or a fresh power of attorney, the court will find that they acted with gross negligence.
This determination relieves the principal company of any contractual obligation.
Procedural Defense
Establishing a database of active powers of attorney and their respective expiry dates ensures that expired authorizations are immediately revoked. This system monitors all outstanding letters of authorization. This active management protects the company from post-termination liability.