2017.9.13
Jenny Chen
The Taichung branch of the Taiwan High Court rendered the 106-Shang-300 Civil Decision of September 13, 2017 (hereinafter, the “Decision”), holding that when entering into a contract with a third party, the chairman of a company limited by shares is only required to indicate that he represents the company, and this is not necessitated by the affixation of the company’s seal.
According to the facts underlying this Decision, the Appellant (i.e., the Plaintiff) and the Appellee (i.e., the Defendant) entered into a letter of intent on the purchase of corporate shares (hereinafter, the “Letter of Intent at Issue”), under which the Appellee would purchase all shares of Company A from the Appellant and delivered the check at issue for NT$5 million as the deposit upon execution. However, when the Appellant subsequently cashed the check at issue at the maturity date, the check was rejected for insufficient funds. The Appellant filed a complaint to request payment of deposit from the Appellee on the ground that the Appellant could forfeit the deposit when the contract was terminated due to the Appellee’s breach.
According to this Decision, when entering into a contract with a third party, the chairman of a company limited by shares or another person authorized to represent the company is only required to indicate that he/she represents the company, and this is not necessitated by the affixation of the company’s seal. The validity of the contract cannot be denied because the seal is not affixed. Although there was only the Appellant’s personal signature and seal in the field for Party B at the end of the Letter of Intent at Issue, still it was specifically set forth from the very beginning in the Letter of Intent at Issue: “The Undersigned [i.e., the Appellee] (hereinafter, “Party A”) purchased shares of the A Co, Ltd. from its corporate representative [i.e. the Appellant] (hereinafter, “Party B”) on September 20, 2016.” This suggested an act engaged on behalf of Company A. Furthermore, the objects under the Letter of Intent at Issue not only included the property held in the name of Company A but also the land held under the personal title of the Appellant. This should be sufficient to conclude that the Appellant entered into the Letter of Intent at Issue in the name of Company A and in his own name. Even though the seal of Company A was not affixed, it still could not be ruled out that the Appellant also signed on behalf of the company. Now that the sellers in this Letter of Intent inseparably included the Appellant and Company A, that the Appellant merely filed the complaint against the Appellee merely in his name rather than in his and the company’s combined capacity was unlawful. Therefore, this Decision was rendered against the Appellant.