Paragraph 2 of Article 75 of the Civil Code of the People's Republic of China stipulates that a third party has the right to request the legal person or the founder to bear the civil liability arising from the civil liability incurred by the founder in his or her own name for the purpose of establishing a legal person. Article 2 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (III) (2020 Amendment) also stipulates that if a promoter signs a contract in its own name for the purpose of establishing a company, and the counterparty of the contract requests the promoter to bear the contractual liability, the people's court shall support it; Where, after the establishment of the company, the contract counterparty requests that the company bear the contractual liability, the people's court shall support it.
In order to clarify the applicable rules of the above-mentioned laws and judicial interpretations, the author searched a large number of cases of courts at all levels, such as the Supreme People's Court and the provincial high courts, and found that the legal acts engaged in by the promoters for the establishment of the company are in essence ** acts, which should conform to the general principles of **. The court ruled that the rules on who should bear the contractual liability in this case are similar to the rules for determining the assumption of responsibility in the anonymous company, that is, the company after the establishment has the right to intervene, and the counterparty of the contract has the right to choose.
When the established company expressly or implicitly agrees to become a party to the contract, and the counterparty to the contract knows or should know that the company is performing the contract and accepts the performance of the company, it is deemed that the counterparty has chosen the company as the subject of the contract. The right of choice in the second paragraph of Article 75 of the Civil Code can only be exercised by the counterparty of the contract, and cannot be actively chosen by the promoter or the company. The counterparty of the contract can only choose one of the promoters or the established company to bear the contractual liability, and cannot require the promoter and the company to bear the liability at the same time. Once the bearer of contractual liability has been selected, it cannot be changed.
If the established company does not exercise the right to intervene or the counterparty chooses to have the promoter bear the contractual liability, the promoter who signed the contract should still bear the contractual liability to the counterparty in accordance with the principle of privity of contract.
The specific cases are summarized as follows.
1. Supreme People's Court (2013) Min Ti Zi No. 212Construction engineering design contract disputescase,The Supreme People's Court held that although the Hong Kong Hang Seng Company did not indicate that the contractual debts would be borne by the established Hang Seng Hotel Company when it commissioned the design, with respect to the promoter's act of signing a contract for the establishment of the company in its own name, according to Article 2 of Interpretation III of the Company Law, if the promoter signs a contract in its own name for the purpose of establishing the company, it can only become a party to the contract if the established company agrees to become a party to the contract by express means or by implicit means that the company actually enjoys the contractual rights or assumes contractual obligations. Only then will the established company replace the promoter and become a party to the contract. In this case, the counterparty to the contract has the right to choose the initiator of the contract or the established company as the party to the contract. The above-mentioned provisions embody the strict principle of privity of contract, and the contract must be agreed by the company after its establishment before it can be bound by the company, and its purpose is to prevent the promoter from abusing his power to the detriment of the interests of the company and other promoters during the establishment of the company.
2. Jiangxi Provincial High People's Court (2019) Gan Min Zhong No. 175 Contract Dispute CaseThe Jiangxi Provincial High Court held that, according to Article 2 of Interpretation III of the Company Law, when the promoter signs a contract in its own name, but the company has confirmed the relevant contract or has actually enjoyed the contractual rights or performed the contractual obligations after its establishment, the actual enjoyment and undertaking of the contractual rights and obligations at this time is the company. In this case, Jin Moumin was one of the shareholders of Golden Lion Real Estate Company at the time of its establishment, and was the promoter of the company. After Jin Moumin signed the contract with the county pharmaceutical company, the Golden Lion Real Estate Company paid the contract price, the Shangli County Local Taxation Bureau issued invoices to the Golden Lion Real Estate Company, and a number of ** documents approved the purchase of land by the Golden Lion Real Estate Company, reflecting that the Golden Lion Real Estate Company has become the actual enjoyer and bearer of the rights and obligations of the contract involved in the case, so the Golden Lion Real Estate Company has a factual and legal basis for claiming rights from the county pharmaceutical company.
3. Yunnan Provincial High People's Court (2021) Yun Min Shen No. 4135Private lending disputescase,The Yunnan Provincial High People's Court held that Article 2 of Interpretation III of the Company Law clarifies that if a contract entered into by the promoter in its own name for the purpose of establishing a company, the principle of relativity of the contract should be adhered to in principle, that is, the contract only has legal effect between specific parties, and the counterparty of the contract should claim contractual rights against the promoter, but not against a company outside the contractual relationship. However, after the establishment of the company, if the contract is confirmed or the company has actually become the subject of the contract, and the counterparty of the contract also sues the company to assume responsibility, the company bears the contractual liability in accordance with the general principle of the contract law, so the company can bear the contractual liability. ......Even if the contract is confirmed after the establishment of the company or the company has actually become the subject of the contract, the company can bear the contractual liability only if the counterparty of the contract takes the initiative to sue the company for liability.
4. Shandong Provincial High People's Court (2022) Lu Min Zhong No. 1305 Ship Sales Contract Dispute CaseThe Shandong Provincial High Court held that the boat sales contract involved in this case was signed with Jinboyang Company in the name of the founders Wang and Zhang before the establishment of Xiangyun Herui Company, Wang and Zhang were one of the parties to the contract, Xiangyun Herui Company was not a party to the contract, and Xiangyun Herui Company had no right to exercise the rights of the parties to the contract to terminate the contract. Article 75 of the Civil Code is a provision on the assumption of contractual liability, not a provision on the assignment of contract, transfer of contractual rights, or succession, and the right to choose the liability of the contract signed by the founder's own name lies with the third party, not the subsequent establishment of a legal person. Therefore, according to this legal provision, Xiangyun Herui Company could not obtain the status of a party to the contract between Wang and Zhang.
5. Guangdong Provincial High People's Court (2018) Yue Min Shen No. 12856Lease contract disputescase,The Guangdong Provincial High Court held that the lease contract involved in the case was signed by Ma and Wan, who were not parties to the case, in their own names, and not in the name of the red brick wall company,......In the first-instance litigation, Redtory Company made it clear that the counterparties of the contract were Ma and Wan, and it was also Ma and Wan who paid the rent to them, and it was also clear that it required Ma and Wan to bear the relevant responsibilities of the lease contract. ......Paragraph 2 of Article 75 of the Civil Code does not give a legal person the option to make a contractual claim in its own name to a third party with whom it has no contractual relationship. The Red Brick Wall Company argued that according to the provisions of this paragraph, it had the right to make a contractual claim to the Red Toro, which had no contractual relationship with it, and this claim could not be sustained.
6. Guangdong Provincial High People's Court (2018) Yue Min Shen No. 7734Disputes over housing lease contractscase,The Guangdong Provincial High Court held that there was no sufficient evidence to prove that Xu and Ronggui Asset Management Office had reached an agreement on the general transfer of rights and obligations under the contract to Quansheng Company. According to Article 2 of Interpretation III of the Company Law and Paragraph 2 of Article 75 of the Civil Code, the counterparty to the contract may choose to request the initiator to bear the contractual liability, so that the company's claim that it has the qualification to be the subject of litigation in this case cannot be established.
7. Shanxi Provincial High People's Court (2019) Jin Min Shen No. 1463Lease contract disputescase,The Shanxi Provincial High Court held that the provisions of Article 2 of Interpretation III of the Company Law and Article 75, Paragraph 2 of the Civil CodeThe applicant is given the option to choose a legal person or an incorporator to be liable, but not both the legal person and the incorporator to be liable.
8. The People's Court of Lingui District, Guilin City, Guangxi Zhuang Autonomous Region (2022) Gui 0312 Min Chu No. 235Contractual disputescase,The Lingui District Court of Guilin City held that the "Elevator Equipment Sales and Installation Contract" involved in the case was a contract signed by the defendant Chai Mousheng and the plaintiff company in the process of preparing for the construction of a hotel. According to the provisions of Article 2 of Interpretation III of the Company Law, due to the dispute arising from the "Elevator Equipment Sales and Installation Contract" involved in the case, the plaintiff company can choose the defendant Chai Mousheng to bear the contractual liability, or the defendant hotel can choose to bear the contractual liability, but it cannot require both to bear the contractual liability at the same timeTherefore, the plaintiff's reason for requiring the defendant hotel to bear joint and several liability in this case cannot be established, and this court does not support it.
9. Intermediate People's Law of Anshan City, Liaoning Province (2022) Liao 03 Min Zhong No. 3257Disputes over housing lease contractscase,The Anshan Intermediate People's Court held that Bank of Jinzhou, as a creditor, could only choose to claim rights against one of the two parties, namely the initiator, i.e., Yu or the established company, i.e., Gerun Hotel, and that there was no legal basis for Bank of Jinzhou to require Yu and Gerun Hotel to bear joint and several liability. After the case was explained by the court, the plaintiff insisted that the promoter and the company bear joint and several liability, and the courts of both instances dismissed the lawsuit.
10. Guangzhou Intermediate People's Court of Guangdong Province (2022) Yue 01 Min Zhong No. 10848Contractual disputescase,The Guangzhou Intermediate People's Court held that the promoter is the representative organ and executive organ of the company in establishment, and the promoter enters into a contract with the outside world, and the counterparty does not know that the promoter is for the benefit of the company, according to the provisions of the Civil Code on incognito, the company shall enjoy the right of intervention after its establishment, and the counterparty shall enjoy the right of choice. When the company acknowledges its willingness to accept the company as the subject of the contract by expressly confirming or by actually enjoying the contractual rights or performing the contractual obligations, the contract counterparty has the option to request the promoter or the company to bear the contractual liability, but cannot require the promoter and the company to bear joint and several liability at the same time.
Ten.
1. Intermediate People's Court of Jiangmen City, Guangdong Province (2022) Yue 07 Min Zhong No. 3060Lease contract disputescase,The Jiangmen Intermediate People's Court held that, according to Article 2 of Interpretation III of the Company Law, the counterparty to the contract may request both the initiator and the company to bear the liability, but cannot claim it at the same time. In the first-instance litigation, Situ Moumou asserted that Feng should bear the contractual liability and at the same time asserted that Senhe Company should jointly bear the debts of the case with Feng in accordance with the above provisions, and after the court's explanation during the second-instance trial, Situ Moumou clearly requested Feng to bear the contractual liability, and Feng and Senhe Company had no objection to this, and this court supported Situ's claim that Feng should be the counterparty to the contract to pay the rent and occupancy fees owed and vacate the leased space involved in the case.
Ten.
2. In the case of a dispute over a housing lease contract in the Intermediate People's Court of Xining City, Qinghai Province (2020) Qing 01 Min Zhong No. 3251The Xining Intermediate People's Court held that Zhu Mouping, as a shareholder of Green Valley Supermarket Company, signed a Lease Agreement with Haodu Huating Company before the establishment of the company, and leased the site involved in the case for supermarket operation. After the establishment of Green Valley Supermarket Company, it opened and operated Qinghai Green Valley Life Supermarket at the site involved in the case, and actually occupied and used the leased site, that is, it enjoyed the contractual rights stipulated in the Lease Agreement. According to the overall interpretation of Article 2 of Interpretation III of the Company Law, in principle, the promoter should adhere to the principle of relativity and nominalism of the contract in order to establish the company, but when the company actually enjoys the contractual rights and performs the contractual obligations after its establishment, and the other party has accepted the obligations performed by the company, it conforms to the general principle of ** and the company shall bear the contractual liability. It is true that the counterparty of the contract has the right to choose that the promoter or the company assume the contractual liability, but once selected, it cannot be changed. In this case, Green Valley Supermarket Company actually became the subject of the contract and Haodu Huating Company had also accepted it, so Green Valley Supermarket Company should bear the contractual liability, and Haodu Huating Company's request for Zhu Mouping to pay the unpaid rent could not be established.
Ten.
3. The Intermediate People's Court of Foshan City, Guangdong Province (2023) Yue 06 Min Zhong No. 3890Disputes over sales contractscase,The Foshan Intermediate People's Court held that, in principle, the principle of relativity and nominalism of the contract should be adhered to, and the contract only has legal effect between the promoter and the counterparty of the contract, and the counterparty of the contract should claim contractual rights against the promoter, but not against the company outside the contractual relationship. However, if the contract is confirmed after the establishment of the company or the company has actually become the subject of the contract (i.e., enjoying contractual rights or performing contractual obligations), the contractual counterparty has the right to choose the promoter or the company to bear the contractual liability, but it cannot be changed after selection, nor can it require the promoter and the company to jointly bear the contractual liability. In this case, there is no evidence to prove that Yang disclosed to Wang that he was acting on behalf of Xiangfu Leju Company to conduct the transaction with Wang Moudong on behalf of the mattress involved in the case, and Xiangfu Leju Company did not confirm that he was the counterparty to the sales contract involved in the case, nor did he enjoy contractual rights or perform contractual obligations, and according to the principle of privity of contract, Wang Moudong had no right to request Xiangfu Leju Company outside the contractual relationship to perform its contractual obligations. Even if Wang Moudong has the right to request Xiangfu Leju Company to bear the responsibility for the repayment of the money involved in the case, he cannot also request Yang and Xiangfu Leju Company to jointly bear the responsibility for the sales contract involved in the case.
Ten.
4. Guangdong Provincial High People's Court (2019) Yue Min Shen No. 3502Disputes over housing lease contractscase,The Guangdong Provincial High Court held that Article 2 of Interpretation III of the Company Law stipulates that the counterparty of the contract has the right to choose the promoter or the company to bear the contractual liability, but it cannot be changed after selectionNor can the promoter be required to share contractual liability with the company.
In the retrieved cases, the author also found that when the High People's Court determined the bearer of contractual liability, even if the company after the establishment of the company actually performed the rights and obligations of the contract, and the counterparty to the contract had accepted the performance of the company, the court still determined that the promoter was the person responsible for the performance of the contractual obligations on the grounds that the counterparty of the contract chose the promoter to bear the contractual liability. In the author's opinion, the performance of the contract by the established company, especially the continuous performance and the counterparty has accepted the performance of the company, can be inferred that the counterparty has chosen to bear the contractual liability of the established company, and therefore, it cannot make a second choice and claim the liability of the initiator through litigation.
Ten.
5. Jiangsu Provincial High People's Court (2019) Su Min Zhong No. 1243Lease contract disputescase,The Jiangsu Provincial High Court held that even if Xu Moujin handed over the original Laotangkou Mountain involved in the contract to Dongshan Quarrying Company established by him as the initiator for mining and operation after signing the Lease Contract, according to the provisions of Paragraph 1 of Article 2 of Interpretation 3 of the Company Law and Paragraph 2 of Article 75 of the Civil Code, Laoshan Forest Farm and Dongshan Branch of Laoshan Forest Farm could also choose Xu Moujin as the counterparty to perform their contractual obligations, so the grounds of appeal of Dongshan Quarrying Company lacked factual and legal basis and could not be established.
Ten.
6. Shandong Provincial High People's Court (2020) Lu Min Shen No. 4613Disputes over housing sales contractscase,The Shandong Provincial High Court held that the sublease contract was entered into between the applicant and the respondent in its own name, and the applicant was the initiator of 37 Degrees 2 Company, and 37 Degrees 2 Company had not yet been established when the sublease contract was concluded. Although 37 Degrees 2 actually performed its rights and obligations under the housing lease contract after its establishment, according to the first paragraph of Article 2 of Interpretation 3 of the Company Law and the second paragraph of Article 75 of the Civil Code, the respondent has the right to choose the subject to bear the civil liability of the housing lease contract involved in the case, and the respondent has a legal basis for choosing the applicant as the subject to bear the civil liability of the contract involved in the case, and the original judgment has a legal basis for determining that the applicant is a qualified subject in this case.
Ten.
7. Jiangsu Provincial High People's Court (2020) Su Min Shen No. 4408Disputes over housing lease contractscase,The Jiangsu Provincial High People's Court held that Zhang Mouheng and Pan Mouming signed a lease contract with Liansipu Company in their own names for the establishment of Tengjinda Company, and Tengjinda Company actually used the leased plant involved in the case and paid rent and water and electricity bills after its establishment, and according to the provisions of Paragraph 1 of Article 2 of Interpretation 3 of the Company Law and Paragraph 2 of Article 75 of the Civil Code, Liansipu Company had the right to choose to request Zhang Xinheng and Pan Yanming or Tengjinda Company to bear contractual liability.
In addition to the above-mentioned circumstances, the author has also retrieved two cases in which the provincial high court ruled that both the company and the promoter were liable after the establishment, and the author believes that the handling of these two cases has broken through the proper meaning of "the third party has the right to choose to request the legal person or the founder" in the second paragraph of Article 75 of the Civil Code, and the handling method is not universal.
Ten.
8. Inner Mongolia Autonomous Region High People's Court (2020) Nei Min Shen No. 2558Disputes over housing lease contractscase,The Inner Mongolia High Court held that Li Mouyu and Yang Moulin signed the "Housing Lease Contract" on August 14, 2014, stipulating that the purpose of the lease was to open a hospital and the lease term was 12 years. According to the court's review, as of August 26, 2019, the date of Li Mouyu's lawsuit, Shouda Hospital had not affixed the seal or signature of the legal person in the above-mentioned contract. The court of first instance found that it was not improper for Yang Moulin and Shouda Hospital to jointly bear the responsibility for paying rent and corresponding breach of contract based on the conclusion of the Housing Lease Contract and the fact that Shouda Hospital actually occupied and used the premises and paid the lease fee.
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9. Fujian Provincial High People's Court (2021) Min Min Zai No. 327Contractual disputescase,The Fujian Provincial High Court held that the disputed contract was a contract signed by Huang Moudong in his own name with the Longcun Sannong Center for the purpose of establishing the Liming Hydropower Company. Dawn Hydropower Company has set up and enjoyed the rights to the disputed contract. According to Article 2 of Interpretation III of the Company Law, Huang Moudong signed the litigation contract in this case for the establishment of Liming Hydropower Company and Liming Hydropower Company was established in accordance with the law, and now Longcun Sannong Center, as the counterparty of the litigation contract, requests Huang Moudong and Liming Hydropower Company to bear the liability of the litigation contract, which has a legal basis and should be supported. In the end, it was decided that Huang Moudong and Liming Hydropower Company jointly bear the obligation to pay.
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