• What are Legal Effects of Contracts with Unauthorized Agency, Untitled Disposal and Prospectus by China Contracts Law?
  • September 21, 2015
  • Law Firm: YingKe Law Firm - Beijing Office
  • Unauthorized agency means a person acts in principal’s name but without principal’s authorization. This kind of contracts are effectively pending. If the principal ratifies the agency, the contract is effective since beginning. If not the principal doesn’t have to undertake any responsibilities, but the unauthorized agent will do it.

    Untitled disposal contracts are property transfer deeds which are entered into by a party who actually has no-right to dispose. By article 51, China Contracts Law, where a person without right to dispose a property dispose it, the contract is void unless the right holder ratifies the disposal or the person obtains the right to dispose after entering into the contract.

    Prospectus contracts actually belong to unauthorized agency contracts. But the legal effect is different. As prospectus is established, the counterpart has justifiable cause to believe that the principal has empowered the agent full right to act on his behalf, that is, the counterpart is in good faith to enter into this contract. The contract is valid from the beginning. The principal has to fulfill the contract entirely and if he suffers any loss arising from that, he can claim it against the agent.