Scope and framing
- This memorandum addresses the doctrine of apparent authority (表见代理) under the People’s Republic of China (PRC) Civil Code and, for comparative illumination and additional case law referencing, under common-law jurisdictions (United Kingdom and United States).
- In PRC practice, binding authority derives primarily from statute and judicial interpretations; “Guiding Cases” and “typical cases” are persuasive but not formally binding. Accordingly, PRC analysis is statute-centered with practice-based illustrations. The UK and US sections supply well-established case law articulating the elements and limits of apparent authority.
I. PRC law: governing provisions and elements
- Statutory basis
- PRC Civil Code, Article 171 (effective 1 Jan. 2021): where a person, without authority, beyond authority, or after the termination of authority, conducts a juridical act in the name of the principal, if the counterparty has reason to believe that person has authority based on the principal’s manifestations or fault, the act is effective against the principal, except where the counterparty is in bad faith or grossly negligent.
- Historical predecessor: Contract Law of the PRC (1999, repealed upon enactment of the Civil Code), Article 49. Courts continue to cite Article 49 when the facts predate the Civil Code’s effectiveness.
- Elements distilled from Article 171 and judicial practice
- Lack or defect of authority: the actor has no authority, exceeds granted authority, or acts after authority terminates.
- Principal-attributable manifestation creating reasonable reliance: there must be an objective manifestation attributable to the principal (e.g., use of the principal’s name, chop, position, public announcements, prior acquiescence) sufficient to induce a reasonable third party to believe authority exists or continues.
- Good-faith, non-negligent third party: the counterparty must be in good faith and not grossly negligent in relying on the manifestation.
- Causation: the third party’s reliance on the principal’s manifestation is the proximate cause of entering into the transaction.
- Allocation of proof in practice: the third party bears the burden to show (i) the unauthorized nature of the act and (ii) a principal-attributable manifestation giving rise to reasonable reliance and its own good faith; the principal can defeat apparent authority by proving the third party knew or should have known of the lack of authority.
- Consequences and remedies
- Binding effect: the juridical act binds the principal as if authorized (Civil Code art. 171).
- Internal recourse: the principal may seek recourse from the unauthorized actor for exceeding authority (Civil Code chapter on agency).
- If apparent authority is not established and no ratification occurs, the unauthorized actor may bear liability to the counterparty for ensuing loss (Civil Code provisions on unauthorized agency; historically Contract Law art. 48, 50).
- Typical fact patterns recognized in adjudication
- Company chop/letterhead/use of principal’s indicia: Use of the principal’s official chop or letterhead, or transaction documents bearing the chop, often constitutes a principal-attributable manifestation sufficient for reasonable reliance, absent red flags suggesting misuse.
- Position-based holding out: Appointments to roles that ordinarily carry transactional authority (e.g., general manager, head of sales, company secretary), coupled with the principal’s acquiescence, may create apparent authority for acts within the ordinary scope of that role.
- Public registry and publicity: Corporate registration information, public authorizations, or consistent prior dealings ratified by the principal can create reasonable reliance.
- Continuation after termination: Failure to notify trading partners of revoked authority, while allowing the former agent to retain indicia of office, may sustain apparent authority for a reasonable period.
- Repeated ratification or retention of benefits: Consistent ratification of similar acts can, in practice, contribute to a finding that the principal held the actor out as authorized.
Authorities
- PRC Civil Code art. 171 (表见代理).
- Contract Law (1999) art. 49 (historical; pre-Civil Code transactions).
- While not binding, the Supreme People’s Court’s civil and commercial adjudication guidance and many provincial “typical cases” endorse the foregoing patterns; courts routinely analyze whether company chops, positions, and prior acquiescence constitute principal-attributable manifestations and whether the third party acted with reasonable care.
II. Common-law comparators: elements and leading cases
A. United Kingdom (company and general agency law)
Elements
- Representation by the principal that the agent has authority.
- The representation is made by words or conduct to the third party (or to the world at large in some contexts).
- Reliance by the third party on the representation.
- The principal has capacity, and the transaction is within the kind of acts the principal can authorize.
Leading cases
- Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480: Canonical four-part test for apparent authority; company bound by representations through conduct holding out a director as managing agent.
- Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549: Distinguishes actual (implied from conduct) and apparent authority; chairman had actual authority by acquiescence; court’s discussion clarifies the interplay with apparent authority.
- Armagas Ltd v Mundogas SA [1986] AC 717 (HL): The representation must emanate from the principal (or someone with authority to speak for the principal), not from the agent’s own statement of authority.
- Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711: Company secretary’s position-based holding out created apparent authority for car hire; the principal was bound.
Practice notes
- Holding out by conferring office and allowing the officer to act within the “ordinary course” of that office often suffices.
- Limitations: The agent’s self-assertion of authority, without principal-originating manifestation, is insufficient (Armagas).
B. United States (Restatement-driven doctrine with state variation)
Framework
- Restatement (Third) of Agency § 2.03: Apparent authority is power held by an agent or other actor to affect a principal’s legal relations when a third party reasonably believes the actor has authority and that belief is traceable to the principal’s manifestations.
- Restatement (Third) of Agency § 2.05: Estoppel to deny agency where the principal’s intentional or negligent conduct caused a third party’s justifiable belief.
Representative cases
- Hallock v. State of New York, 64 N.Y.2d 224 (1984): Apparent authority must be founded upon the principal’s manifestations, not the agent’s; reliance must be reasonable. Frequently cited statement of the New York rule.
- American Society of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556 (1982): Organization could be liable under antitrust law for actions of volunteers acting with apparent authority; confirms that principal-originating manifestations can ground liability to third parties relying thereon.
- Tomerlin v. Canadian Indemnity Co., 61 Cal. 2d 638 (1964): Insurer bound by counsel’s representations where the principal’s conduct reasonably caused reliance; illustrates application to insurers and litigation counsel.
Elements across US jurisdictions (consistent with the Restatement)
- Manifestation by the principal (including appointing titles, prior ratifications, public communications).
- Reasonable, good-faith reliance by the third party.
- Causation between the manifestation and the transaction.
- The agent’s own statements of authority are insufficient without principal-attributable manifestations.
III. Comparative synthesis and application guidance
- Common core across systems: Apparent authority requires (i) a principal-attributable manifestation, (ii) reasonable and good-faith reliance by the third party, and (iii) a causal nexus. PRC Civil Code art. 171 embeds the principal’s fault dimension and the good-faith safeguard; UK and US law emphasize the principal’s manifestations and the reasonableness of reliance.
- Red flags defeating reliance: Knowledge of internal limits, obvious irregularities (e.g., missing required chops, inconsistent documentation, manifest conflict with public filings), or circumstances demanding heightened inquiry will defeat good faith/reasonableness under all three systems.
- Risk controls in practice (for counterparties): Verify authority against public corporate records, obtain up-to-date written powers of attorney, confirm internal approvals where customary, require affixation of the official company chop (PRC), and avoid relying solely on position titles or the agent’s say-so.
- Internal controls for principals: Timely revoke apparent indicia (chops/cards/system access), notify counterparties of revocations, correct public filings, and avoid post hoc ratification of unauthorized acts that could create a pattern of holding out.
IV. Citation checklist
PRC
- Civil Code of the People’s Republic of China, art. 171 (apparent agency).
- Contract Law of the People’s Republic of China (1999, repealed), art. 49 (historical precursor; applicable to pre-2021 facts).
- Practice sources: Supreme People’s Court civil and commercial adjudication guidance and typical cases, frequently recognizing company chop use, position-based holding out, and prior acquiescence as manifestations attributable to the principal.
United Kingdom
- Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.
- Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549.
- Armagas Ltd v Mundogas SA [1986] AC 717 (HL).
- Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711.
United States
- Restatement (Third) of Agency §§ 2.03, 2.05, 3.03.
- Hallock v. State of New York, 64 N.Y.2d 224 (1984).
- American Society of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556 (1982).
- Tomerlin v. Canadian Indemnity Co., 61 Cal. 2d 638 (1964).
If you require jurisdiction-specific PRC “Guiding Cases” or local “typical cases” with docket numbers and citations tailored to a particular industry (e.g., guarantees, bank lending, distribution), please indicate the jurisdiction, timeframe of the transactions (pre-/post-2021), and sector; I can then curate a focused list of persuasive cases and summarize their holdings against the above elements.
