The director of the foreign company can sign.
This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection. We will explain how debt collection works in China below.
As we have introduced in the previous posts, when a Chinese company signs a contract with you, if the contract is to be effective in China, it is better for the Chinese company to seal the contract with company stamp. If the Chinese company does not have its company stamp sealed, the contract can only be signed by its legal representative; if the company seal is stamped, anyone can sign the contract as the company stamp alone is sufficient to make the contract effective.
As the other party to the contract, i.e. the foreign company, who should sign the contract so as to ensure its validity in the eyes of the Chinese courts?
Generally speaking, the Chinese courts hold that the act of a director of a foreign company signing and concluding a contract in the form of a written agreement, a letter, a data message or via other means on behalf of the company may be regarded as an expression of intent made by the company. This means that once the director signs on the contract, it signifies that the company has entered into the contract.
That is to say, even if the contract is not stamped with the company seal of the foreign company, as long as it is signed by the director, it will not affect the validity of the contract.
There are two things to keep in mind.
1. If you and the Chinese company have agreed in the contract on other methods of signing a contracts, or if the law of the foreign company’s country provides for other methods of signing contracts, the contract will only be valid if it is signed in accordance with such methods.
2. The company’s articles of association or the company’s authority may restrict the representative rights of its directors so that they are not authorised to sign contracts on behalf of the company. In such a case, as long as the Chinese company acts in good faith when accepting the signature of a director of the foreign company, the contract signed by such director will still be valid, unless otherwise provided by the laws of the country where the foreign company is incorporated.
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Contributors: CJO Staff Contributors Team
