In cases where a legal representative acts as an ultra vires representative,if the counterp-arty is in good faith,the legal person or unincorporated organization shall bear the legal effects of the acts of ultra vires the representative.However,an important criterion for determining good faith is whether the counterparty has fulfilled its duty of reasonable review.In China,civil legislation on the level of the duty of review has gone through four stages:effectiveness scrutiny,empowerment scrutiny,formal scru-tiny,and reasonable scrutiny.The duty of reasonable review established by the"Interpretation of Con-tract Book of Civil Code"can benefit the cooperation of contracting parties and the improvement of corpo-rate governance structures.The essence of the duty of reasonable review asks whether the counterparty knew or should have known about the legal representative's actions within the scope of their representa-tive authority.The standard for the duty of reasonable review is determined by the statutory nature of the duty of review,the accessibility of the subject of review,the reasonableness of the level of review,and the efficiency of the method of review.It is necessary to distinguish between statutory restrictions and agreed-upon restrictions on the scope of representation,so as to determine different review contents.If the duty of reasonable review is not fulfilled,the counterparty does not meet the requirements of good faith,and therefore the effect of the ultra vires act shall not be borne by the legal person or unincorporat-ed organization.When the legal representative exceeds his authority and the counterparty is unable to know despite its performance of the duty of reasonable review,the effect of the ultra vires act shall be borne by the legal person or unincorporated organization.
Ultra Vires RepresentativeContract ValidityLegal RepresentativeDuty of Reasona-ble Review
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