[Direct answer]In the Beijing area, it usually depends on the scope of the project manager's duties and whether the counterparty acts in good faith. Such agreements may be effective or may not be binding on the company. Article 170 of the Civil Code of the People's Republic of China stipulates that the personnel who perform the work tasks of a legal person or a non-legal person organization shall, in the matters within their scope of authority, perform civil legal acts in the name of the legal person or non-legal person organization, and such acts shall be binding on the legal person or non-legal person organization. The restrictions imposed by the legal person or non-legal person organization on the scope of authority of the personnel performing their work tasks shall not be enforceable against a bona fide counterparty.

I. Problem Background and Typical Scenarios

Construction projects and project-based enterprises often authorize project managers to negotiate, procure, and settle contracts with external parties. However, unclear authority boundaries can easily lead to disputes. Typical scenarios include: project managers signing procurement or subcontracting contracts beyond authorized amounts; borrowing or providing guarantees on behalf of the project department; revoked authorizations within the company that the counterparty is unaware of; project managers signing contracts under their previous identities after leaving the company; contracts stamped with the project department's seal instead of the company's official seal; and the company claiming the contract is invalid due to exceeding authority while the counterparty insisting they conducted due diligence. When courts in Beijing adjudicate such cases, they review the project manager's position and authorizations, the counterparty's due diligence and reliance, and whether the contract content and transaction practices are reasonable. It should be noted that disputing parties often present conflicting versions of the same facts, making original evidence and written documents particularly crucial. Additionally, relevant procedural deadlines are typically short. Missing critical deadlines may directly affect the realization of rights, so early preparation and evidence preservation are essential. During specific analysis, it is recommended to use a timeline as the main framework, matching contracts, evidence, communication records, and relevant legal provisions to form a clear processing framework, which facilitates determining the chronological order and feasibility of various claims.

II. Key points of contention

First, how to define the scope of authority of the project manager and whether the signing of the contract constitutes an official act. Second, whether there is clear authorization and its public disclosure. Third, whether the counterparty acted in good faith and fulfilled its obligation of reasonable review. Fourth, whether it constitutes apparent agency or official agency. Fifth, whether the company's restrictions on authority can be invoked against the counterparty. Sixth, how to allocate responsibilities after the contract is valid or invalid. Seventh, whether there are procedural flaws in the actions of administrative authorities or the counterparty. Eighth, whether the calculation basis and grounds for losses are sufficient and whether corresponding evidence can be provided. Ninth, whether there are justifiable reasons to mitigate or exempt liability. In addition, attention should also be paid to whether the form of evidence is legal, whether key facts can be corroborated, and the differences in cost, time, and feasibility of different handling solutions. On this basis, the priority path to be pursued can be determined.

III. Professional analysis by Henglue Lawyers

The practical experience of Henglue Lawyers is that cases involving project managers exceeding their authority should be analyzed from two perspectives: agency by virtue of position and apparent agency. Firstly, review the project manager's duties and authorizations. If the contract matters fall within their scope of authority, it usually constitutes agency by virtue of position and is directly binding on the company; if it clearly exceeds the authorization, it is necessary to further determine whether it constitutes apparent agency. Secondly, determine whether the counterparty acted in good faith. Whether the counterparty verified the authorization documents, whether the contract subject and amount are reasonable, and whether the transaction complies with industry practices are all important factors. Thirdly, the company's internal restrictions on the project manager's authority usually cannot oppose a counterparty acting in good faith, so it is often difficult to claim the contract's invalidity solely based on internal regulations. Fourthly, if the contract is stamped with the project department's seal or signed by the project manager, it should also be comprehensively determined based on whether the company recognizes it through actions or has performed it before. Fifthly, after the contract is determined to be binding on the company, the company shall bear corresponding responsibilities; if the company suffers losses due to the project manager's exceeding authority, it may recover the losses from the project manager in accordance with internal management regulations. Lawyers can assist in sorting out the evidence of authorization and performance, assessing the contract's validity, and formulating response or recovery plans.
This case is handled by Beijing Henglu Law Firm.Xue SuhuaThe attorney (practice certificate number: 11101201211769926, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

Action list: First, verify the project manager's position and the scope of written authorization; Second, determine whether the counterparty acted in good faith and fulfilled its duty of review; Third, preserve the authorization documents, the official seal, and the performance records; Fourth, assess whether it constitutes an agency by virtue of position or apparent agency; Fifth, the company should standardize the management of authorization and the use of the official seal; Sixth, those who suffer losses may seek compensation from the responsible persons in accordance with internal regulations. In the event of contract disputes, reference may be made to the relevant provisions.Business and contract disputes in enterprises; Those interested in engineering and project management can refer to the following resources for further information.Real estate transactions and construction projectsLegal basis: Articles 170, 172, and 504 of the Civil Code of the People's Republic of China (all of which came into effect on January 1, 2021). The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

Firstly, contracts signed within the scope of duties usually take effect directly for the company. Secondly, internal authority restrictions generally cannot be used against bona fide counterparties. Thirdly, whether the counterparty is bona fide is the key to determining the effectiveness of the contract. Fourthly, the effectiveness of the project department's stamp and individual signatures needs to be comprehensively judged based on the performance of the contract. Fifthly, enterprises should standardize the authorization and stamp management to prevent risks. In cases involving disputes over the project manager's exceeding authority and the effectiveness of the contract, the parties may resolve the disputes through legal means.Business and contract disputes in enterprisesThe service receives support, and it can be combined with the settlement of engineering payments and projectsReal estate transactions and construction projectsFor reference, you can check the section related to the execution of paymentsCreditor's rights and debts, and enforcementColumn.

VI. Frequently Asked Questions

Q1: Is the contract signed by the project manager beyond his authority valid?

It is necessary to determine whether the act falls within the scope of the agent's authority and whether the counterparty acted in good faith. If the act falls within the agent's scope of authority, it will generally be effective for the company; if the agent clearly exceeded his authority, but the counterparty had reason to believe that the agent had the right of agency, it may constitute an apparent agency and be effective; if the counterparty knew or should have known that the agent did not have the right of agency, the act may not be effective for the company. The facts and evidence of each case vary greatly, and the responsibility and remedies need to be determined based on the contractual provisions, the actual performance, and the procedural deadlines. It is recommended to collect and preserve evidence as soon as possible, assert rights on schedule, and fix evidence that may be lost in time. Specific solutions should be evaluated and determined by professional lawyers after reviewing the materials.

Q2: Is it valid if it's stamped with the project department's stamp?

Not necessarily. The effectiveness of the project department's stamp needs to be judged comprehensively based on whether the company has authorized it, whether the contractual matters fall within the scope of the project, and whether the company has recognized it through actions or actually performed it. If the counterparty acts in good faith and has reasonable grounds to rely on it, it may be effective for the company; otherwise, its effectiveness is questionable, and it is recommended to evaluate it based on the evidence. The facts and evidence of individual cases vary greatly, and the responsibility for compensation and remedies need to be judged comprehensively based on the contractual provisions, the actual performance of the contract, and the procedural deadlines. It is recommended to collect and preserve evidence as soon as possible, assert rights on time, and fix evidence that may be lost in a timely manner. Specific solutions should be evaluated and determined by professional lawyers after reviewing the materials.

Q3: Can the company's internal regulations be used to counter the other party's actions?

Generally, this is not possible. According to Article 170 of the Civil Code of the People's Republic of China, the restrictions imposed by legal persons or non-legal organizations on the scope of authority of the personnel performing their work tasks cannot be invoked against bona fide counterparties. Therefore, it is usually difficult to establish that the exercise of authority beyond the scope of authority is invalid solely on the basis of internal authorization documents. It also depends on whether the counterparty is bona fide. The facts and evidence of each case vary greatly, and the liability and remedies need to be comprehensively judged in light of the contractual provisions, the performance facts, and the procedural deadlines. It is recommended to collect and preserve evidence as soon as possible, assert rights on schedule, and fix any evidence that may be lost in time. The specific plan should be evaluated and determined by a professional lawyer after reviewing the materials.

Q4: How to determine whether the counterparty is acting in good faith?

It is necessary to check whether the counterparty has verified the authorization documents, whether the subject matter and amount of the contract are reasonable, whether the transaction complies with industry practices, and the past cooperation methods between the two parties. If the counterparty has conducted reasonable review and has reason to trust, it is generally considered that they acted in good faith; if the content of the contract is obviously abnormal or the counterparty clearly knows that they have no rights, it is difficult to determine that they acted in good faith. The facts and evidence of each case vary greatly, and the responsibility and remedies need to be judged comprehensively based on the contract provisions, the performance facts, and the procedural deadlines. It is recommended to collect and preserve evidence as soon as possible, assert rights on time, and fix evidence that may be lost in a timely manner. The specific plan should be evaluated and determined by a professional lawyer after reviewing the materials.

Q5: Can the company recover the compensation from the project manager?

Yes. If the project manager signs a contract beyond his authority and causes losses to the company, the company may recover the compensation from him according to the labor contract, internal management rules or authorization agreements after assuming external liabilities, but it needs to provide evidence of his fault and the amount of losses. It is recommended to improve the authorization and approval system to reduce the risk of exceeding authority at the source. The facts and evidence of individual cases vary greatly, and the responsibility and remedies need to be judged comprehensively based on the contract provisions, the performance facts and the procedural deadlines. It is recommended to collect and preserve evidence as soon as possible, assert rights on time, and fix the evidence that may be lost in time. The specific plan should be evaluated and determined by professional lawyers after reviewing the materials.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication guidelines in other regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Business and commercial legal services·Attorney Xue Suhua·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.