Dispute over the Sales Contract between Company Shuang and Company Chen and Zhao (Second Instance)

Keywords: Disputes over sales contracts, forgery of official seals, nominal affiliation, and payment for goods

Counseling Attorneys: Hu Guanglei, Liu Jianfeng

Basic Facts of the Case: Our client, Shuangmou Company, had absolutely no prior dealings with the plaintiff in the first instance, Chenmou Company. The other defendant, Zhao (who has already been criminally charged), without obtaining any genuine and valid authorization from Shuangmou Company, forged the company’s official seal and entered into a contract with the plaintiff, Chenmou Company, in the name of Shuangmou Company. Moreover, the plaintiff made the payment accordingly, while Shuangmou Company remained completely unaware of these actions. During the first-instance proceedings, the plaintiff, Chenmou Company, filed a lawsuit with the first-instance court requesting: 1) that the contract be legally terminated; 2) that our client, Shuangmou Company, pay the outstanding goods payment of 473,170 yuan; and 3) that the court order the defendant to pay interest and liquidated damages as required by law... The first-instance court ruled that the case constituted apparent agency, upheld the plaintiff’s claims, ordered the termination of the contract, and found that our client, Shuangmou Company, must pay the goods payment together with interest and liquidated damages. Shuangmou Company has entrusted our firm’s lawyers to represent it in the second-instance proceedings.

Case Highlights: Does signing a contract on behalf of the company using a forged official seal constitute apparent authority? In similar disputes, courts generally recognize such cases as involving apparent authority, holding the company liable after the official seal has been forged. In this case, thanks to the lawyer’s efforts and despite enormous difficulties, we successfully obtained a reversal in the second trial.

Typical significance: There are numerous cases in which courts have recognized apparent agency in similar disputes and held companies liable after the official seal was forged. Without substantial new evidence, the legal reasoning underlying this judgment is entirely reasonable, and it is uncommon for second-instance courts to overturn such rulings. Therefore, if this case is to be won, the challenge is indeed extremely difficult. After accepting the mandate, our firm’s lawyers devoted considerable effort to thoroughly reviewing the case files. They discovered that the goods stipulated in the contract had actually been delivered to a specific project, and Mr. Zhao had also served as an agent for another company on that very same project. It is highly unusual for one person to simultaneously hold positions as head of two different companies within the same project. Furthermore, according to our client’s own account, our lawyers found that the interrogation records taken by the public security authorities from employees of Chen’s Company might contain references to this matter. To clarify the facts, our lawyers submitted a request to the court for an investigation order, obtained the relevant interrogation records from the public security authorities, and after careful examination, identified crucial evidence favorable to our client. We then submitted this evidence to the second-instance court. This evidence subsequently proved beyond doubt that the case did not involve apparent agency. Relying on the key evidence provided by our lawyers, the second-instance court adopted our client’s arguments, successfully reversing the original judgment and achieving a favorable outcome—a rare result in cases of this nature.

Lawyer's Insights (Optional): The contract at issue in this case is a forged document. The primary focus of subsequent efforts in this case will be to demonstrate that no apparent agency relationship existed. For an apparent agency relationship to be established, the counterparty must act in good faith and without negligence, and the apparent agent must present a sufficiently credible appearance of authority. To prove the existence of an agency relationship between the parties, the agent must have been duly authorized when signing the contract on behalf of the company; only then can such authorization bind the company. The significance of this case lies in the fact that Attorney Hu Guanglei devoted considerable effort to gathering evidence demonstrating that this case does not constitute an apparent agency relationship, ultimately achieving a successful reversal of the original judgment in the second instance—a rare and commendable outcome. This not only sets a fine example in law of upholding legal justice and basing decisions on facts but also reflects Tongfang Lawyers’ guiding principle of walking the righteous path together and adhering steadfastly to integrity and principle.