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General Principles of Civil Law (民法通则） This chapter mainly deals with general provisions on civil subjects(民事主体） civil rights（民事 权利）civil legal act（民事法律行为） civil liability （民事义务）and limitation of action 1. Natural Person (自然人） 2. Legal Person （法人） 3. Partnership （合伙） 4. Civil Legal Acts （民事法律行为） 5. Agency （代理） 6. Limitation of Action （诉讼时效） 5. Agency （代理） 5.1 Overview 5.2 Classifications 5.3 Exercise of agency power 5.4 Unauthorized agency 5.5 Termination 5.1 Overview Principal ( 委托人） Agent(代理人） Third party Agency refers to that the agent performs civil legal acts in the principal’s name within the scope of the power of agency, the principal bears civil liability for the agent’s acts. Such powerful device （制度）is designed to enlarge people’s scope of action. Since no one can do everything in person due to limited time and energy. With this device in place, people may use their agents to fulfill certain actions just like he does it himself. Agent use their expertise to service the principal and act in the interest of the principals, who then assume all the legal consequences of the agent’s acts. Civil juristic acts( 民事法律行为) that should be performed by the principal himself, pursuant to legal provisions or the agreement between the two parties, shall not be entrusted(委托) to an agent. For example: the expression of mind possesses strict personal characters, such as execution of wills, marriage registration and adoption. 5.2 Classifications There are three types of agencies, i.e. 5.2.1 Entrusted agency (委托代理) 5.2.2 Statutory agency (法定代理) 5.2.3 Designated/ Appointed agency (指定代理) 5.2.1 Entrusted agency It is most widely used particularly in business. The entrusted agent exercises the power of agency as entrusted( 委托、托付) by the principal. Agency contract is a kind of contract by which the principal is bound by obligations created in its name by its agent. It is important to distinguish between two contracts in the agency relationship. (1) Principal and agent: it creates internal agency relationship and gives the agent the power to perform legal acts in the name of the principal. (2) Principal and third party: the agent makes the contract in principal’s name. Normally the agent does no have contract with the third party. Agency is divided into direct agency( 直接代理) and indirect agency( 间接代理), also known as brokerage（行 纪）. In direct agency, the relationship is between principal and agent, while in indirect agency the relationship is between principal and principal. The broker（行纪人） performs legal acts in its name, rather than in the name of its “ principal”. In terms of the scope and contents of the authority of the agent, it falls into full power and limited power agency. A civil juristic act may be entrusted to an agent in writing or orally. If legal provisions require the entrustment to be written, it shall be effected in writing. Where the entrustment of agency is in writing, the power of attorney shall clearly state the agent’s name, the entrusted tasks and the scope and duration of the power of agency, and it shall be signed or sealed by the principal. If the power of attorney is not clear as to the authority conferred, the principal shall bear civil liability towards the third party, and the agent shall be held jointly liable. ( art. 65 GPCL ) Case : Department Store and agent held jointly and severally liable In April 1993 the Department Store gave Mr Zhang sealed referral and some sealed blank contracts entrusting him to order some fashionable dress for the company. Mr Zhang executed a contract with a Costume Company ordering 1000 pieces of clothes covering more than ten varieties. Mr Zhang took delivery of clothes from the Costume Company twice thereafter. After the first delivery the Department Store found the clothes were not selling well on the market, thus refused to pay the price. The Costume Company requested payment a few times and the Department Store rejected on the ground that such clothes were not fashionable dress and the agent should be personally liable for said purchase due to ultra vires( 超越权限). The Costume Company had now way but to sue the Department Store before the court . The trial court held that the Department Store could not avoid liability since the instruction given by it was ambiguous , thus the Department Store and Mr Zhang should be jointly and severally liable for said payment. 5.2.2 Statutory agency It is based on direct provision in law. The statutory agent shall exercise the power of agency as prescribed by law. Its primary scope of application includes: (1) Guardians act as statutory agents of the wards. (2) Family agency where the spouse may represent each other in daily life. (3) Social organizations act as statutory agents for their members under express provisions in the law. The statutory agency differs from the legal representative in that the legal representative acts on behalf of the legal person in the capacity of the organ of legal person. In such case the legal representative is not independent from the legal person , while statutory agent is independent from its principal. 5.2.3 Designated/ Appointed agency Such agent is designated by the courts or relevant official organs. For instance the residents or villagers commission at the location of minors designates agent ( guardian ) for minors. The courts designate custodian for the missing persons so declared . In contrast with statutory agency where the scope of agency is broad, the scope of designated agency is relatively more specific and specialized. 5.3 Exercise of agency power 5.3.1 Duties of the agent 5.3.2 Restriction on agency power 5.3.3 Re-delegation of power 5.3.1 Duties of the agent The agency is to a large extent based on the trust between the principal and agent. The exercise of agency power is in fact the process of performing agency duties. By fulfilling the duties on the part of the agent, the agent realizes the goals, which the principal creates such agency. The main duties of the agent: (1) To act in the interests of the principal. Since the principal and the agent are in a fiduciary relationship (信赖关系), the agent must act in complete good faith for the principal. The agent must place the interests of his principal above all else except the law. (2) To act in person. Due to high degree of confidence and trust implicit in agency relationship, the agent is required to personally perform its duties and cannot delegate its duties normally. The reason is that the agent’s personal skill and judgement are what lead the principal to retain this particular agent and not another one. Else it is a breach of contract by the agent. (3) To report to the principal promptly. The agent shall promptly report to principal major issues relating to the disposition of agency affairs, so that the principal knows the progress and gain and loss status of his/her property. Upon completion of agency ,the agent shall report to principal the progress and result of executing agency affairs and provide necessary documents. (4) To keep secrecy. The agent may not disclose the personal secrets and trade secrets of the principal obtained in the course of agency, or resort to unfair competition with the principal by utilizing such secrets. 5.3.2 Restriction on agency power In order to ensure the interests of the principal, various limitations are imposed on the exercise of agency power. Such restrictions include: (1) Prohibition of self-dealing (禁止自己代理) Just as the economics assumes that people are selfish economic persons, it is impossible to protect the interests of the principal if the agent enters into deals on behalf of the principal with the agent himself/ herself. In such case the agent poses dual roles, i.e. agent and third party. Such agreement is doubtlessly detrimental to the interests of the principal, hence prohibited by the law. (2) Prohibition of dual agent ( 禁止双方代理） it is also known as simultaneous agency, referring to the situation where the agent poses as agents for two parties simultaneously. Though not dealing with himself/herself, such agent manipulates the transactions easily and may make private profits therefore. Unless otherwise agreed by the foregoing two parties in advance or ratified afterwards, such agency is null and void. (3) Prohibition of nonfeasance and conspiracy. ( 禁止懈怠和密谋） Nonfeasance means that the agent fails to fulfill the agency affairs diligently and with care, which renders the goal of creating such agency meaning-less and the principal suffers loss consequently. Conspiracy means that the agent colludes with third party maliciously harming the interests of the principal . In such cases the agent shall be separately or jointly liable with third party respectively. Case : Mr Cheng’s dual agency banned Mr Zhang and Mr Cheng are colleagues living in the same dormitory. Zhang was sent to work in Shenzhen for one year. Before his departture, he entursted Cheng to keep and use his TV. Three months later, Zhang informed Cheng that he had purchased another TV and asked him to sell his old TV at reasonable price. Mr Tan is also the colleague of Zhang and Cheng. He wanted to buy TV but unwilling to pay reasonable price. Tan asked Cheng to write to Zhang and fraudulently inform him that tube of his TV has broken down, thus can only be sold at reduced price. Cheng did so, because Tan is a driver and he often asked him to transport private materials for him and Zhang agreed so. Therefore Cheng sold it to Tan for only RMB500. When Zhang came back and learned of the true situation, he asked Tan to return the TV. Following Tan’s refusal, Zhang sued Cheng and Tan for invalidation of the TV sale. Zhang won the lawsuit. 5.3.3 Re-delegation of power The re-delegation of power requires prior consent by the principal. In emergency circumstances the agent may do so for safeguarding the principal’s interests. In such cases the principal is liable for the acts of the sub-agent. It is very important to note that the sub- agent is the agent of the principal rather than that of the agent. Such sub-agent shall act in the interest of the principal. In the meanwhile the re-delegation does not replace the agent. In other words both the agent and sub-agent are the agent of the principal simultaneously. Case: Painter Songshi cannot use sub-agent 54-year-old Songshi was retained by the Painting Store to paint six traditional Chinese painting on 8 October 1986. The Store provided him the papers and brushes, and an advance payment of RMB3000. He was very busy and did not have time to do this. On 4 December 1986, he had to go abroad. Before his departure, he transferred those papers and brushes as well as his stamp to one of his students. The student finished the painting and sent them to the Store on 28 December 1986. The Store examined and found that the paintings delivered by the student were inferior to his painting in every aspect. On 4 January 1987, he came back to China and the Store asked him to personally make the foregoing paintings for the Store. Following his refusal, the Store sued him and requested for personal performance. The court supported the Store’s claim and ordered him to make those paintings personally for the Store. 5.4 Unauthorized agency 5.4.1 concept 5.4.2 consequences 188.8.131.52 effective by ratification ( 追认有效) 184.108.40.206 invalid ( 无效) 5.4.3 ostensible agency ( 表见代理 ) 5.4.1 concept Unauthorized agency refers to agency exercised by agent without agency power. Such situation may be caused by ( Art.66 GPCL) : (1) no authorization on the part of agent at all, (2) ultra vires, (超越权限) and (3) termination of agency power. In all these cases the acts of agents appears to be in conformity with agency. However the agent exercises the foregoing acts in absence of agency power resulting from either primary or secondary causes. 5.4.2 consequences 220.127.116.11 Effective by ratification ( 追认有效) The principal may ratify such unauthorized agency. Once ratified, it is converted into formal agency where the principal is liable for the acts of the agents. Such ratification may be made expressly to the third party or unauthorized agents. Once ratified, such agency is effective retroactively ( 追溯地) from the very beginning . Ratification may also be implied from the fact of assuming the benefits of the legal acts made for it. Such ratification cannot be partial. In other words, the principal cannot accept the benefits without reimbursing the costs of the agent , nor can it ratify only those advantageous aspects but rejects the disadvantageous aspects. In addition, if the principal is aware that pseudo( 假的、虚伪的 ) agent is executing acts in his name but fails to repudiate ( 拒 绝接受、否认) it, he is deemed to have given consent. In other words he is liable for his silence in such case. 18.104.22.168 Invalid ( 无效) In absence of ratification by the principal , such unauthorized agency is null and void. The pseudo agent i.e. the performer bears civil liability for it. Case: Li Jin should be personally liable As a staff of A Company, Li Jin was retained as advisor with a monthly subsidy of RMB50 by B Company mainly engaged in sunflower seeds on 29 September 1984. On 27 October 1984, Li Jin privately signed a purchase contact with B in the name of A. By the contract, B would supply 100000 kg sunflower seeds to A with a total value of RMB 80000. Goods should be delivered from November 1984 to November 1985. Li Jin affixed A’s official seal on the contract, but A was not aware of the contract. In December 1984, B contacted the sales department of A , and the department agreed to purchase 6700 kg. Goods were delivered and payments were settled immediately. Later B delivered another 11900 kg to A , which was accepted and paid in full. However no one in A Company was aware of the contract between Li Jin and B . A Company leader soon became aware of the contract and the true situation, thus ordered its subordinate departments to reject further delivery from B . B sued A for breach of contract, but the court invalidated said contract. Instead Li Jin should be personally liable for performing the contract with B . 5.4.3 Ostensible agency (表见代理) The agent’s apparent authority to act on behalf the principal and its actual authority do not always coincide. You may be an agent but act beyond the scope of authority, or you may have been an agent but are no longer , or you may have less power than the agent normally do in such a trade or profession. You may appear to have authority though you are not an agent at all. You may have some real authority, but your apparent authority exceeds your real authority. Ostensible agency refers to the situation where the third party may reasonably believe from the acts of the principal that unauthorized agent has agency power , and therefore enters into the deal with such unauthorized agent based on such reliance, the principal is liable for the acts of the foregoing unauthorized agent. It is also known as agency with apparent authority. The agent may acquire apparent authority from the past manner of business dealing by the principal or from trade usages or custom. In some cases, the circumstances may make it appear to the third party that such agent has authority to make the legal acts. The major causes for the third party to reasonably believe that the unauthorized agent has apparent authority include: (1) The principal informs the third party in oral or in writing directly or indirectly that he will use others as agent, but does not delegate power to anyone yet. (2) The principal gives others documents capable of evidencing agency power, but does not intend to delegate him any agency power. (3) The authorization in the power of attorney is unclear. (4) The principal fails to adopt relevant measures and publicize the fact of termination of agency after termination. (5) The principal is aware that pseudo agent is executing acts in his name but fails to repudiate it. Under such cases the third party may reasonably believe that the pseudo agent has apparent authority to represent the principal and therefore makes deal with him. Thus such ostensible agency has equal legal force and effect with the authorized agency. That is to say the principal bears the consequences of such agency . No doubt internally the principal has recourse against such agent for losses suffered thereby. The acts performed by the agent on behalf of the principal who dies, are still effective under the following situations: (1) the entrusted agent is not aware of the death of the principal; (2) the successors of the principal agree to ratify the act; (3) the principal and the agent have agreed that the agency would terminate only after the matters have been completely accomplished; or (4) the act was already under way before the principal died , and the continued performance until completion is in the best interest of the successors of the principal. The causes for terminating statutory and designated agency are : (art. 70 GPCL) (1) the principal gains or recovers competence; (2) the principal or the agent dies; (3) the agent becomes incompetent; (4) the people’s court or the unit designating the agent rescinds such designation; (5) the guardian relationship between the principal and agent terminates due to other reasons. 5.5.2 Consequence Upon termination of agency, the agent can no longer act in the name of the principal. Else, it is invalid as discussed above. The agent should in time of necessary and possible , report to the principal, or its heirs, liquidators or new agent the status of the agency matters and deliver to them relevant documents and property. The agent shall also return the principal the power of attorney and other documents capable of evidencing agency power. The principal should take care to inform the third party with whom the agent was acting in his name, that The agency relationship has now been terminated and the agent no longer has the authority to bind the principal . Else , if the former agent still holds himself as the agent, such agent falls within the scope of apparent authority. If the third party has no reason to suspect the former agent is acting beyond his scope of authority, the principal is still bound by the act of the agent.
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