What is the effect of the legal person's behavior beyond the scope?

Article 42 of China's General Principles of Civil Law stipulates: "An enterprise as a legal person shall engage in business within the approved and registered business scope." Paragraph 3 of Article 11 of the Company Law stipulates: "A company shall engage in business activities within the registered business scope." Therefore, China's laws prohibit legal persons from operating beyond their business scope. If a legal person engages in business activities beyond the business scope, Article 71 of the Regulations of the People's Republic of China on the Administration of Company Registration stipulates: "If a company engages in business activities beyond the approved business scope, the company registration authority shall order it to make corrections and may impose a fine of not less than 10,000 yuan but not more than 100,000 yuan; If the circumstances are serious, the business license shall be revoked. " This provision is about the administrative responsibility that a legal person should bear if it goes beyond its business scope, but the problem that often appears in practice is that a legal person has signed a contract with others that goes beyond its business scope. How to determine the validity of this contract? Before the promulgation of "Contract Law", China's legislation and judicial interpretation all determined that the business activities of enterprise legal persons beyond the business scope were invalid. Generally speaking, the judicial practice in our country thinks that because the legal person's ability is a special ability, the legal person can only operate within its approved and registered production, operation and business scope. If it goes beyond its business scope and business scope, it is an act beyond its ability, or "ultra vires act", and its behavior is invalid. After the promulgation of "Contract Law", some comrades think that based on the provisions of Article 50 of the "Contract Law", contracts concluded beyond the business scope shall not be treated as invalid contracts. In my opinion, we can't simply draw the conclusion that the contract concluded beyond the scope of business is valid based on this provision of the Contract Law. In foreign company law, there are generally two kinds of consequences beyond the scope of business: first, the company is engaged in industries that have not been approved by the government, which is related to the interests of the public, and the administrative organ can take the initiative to take measures; Second, if the company goes beyond the business scope stipulated in the articles of association, shareholders have the right to appeal, and the court does not need to consider whether the company goes beyond the business scope at all. In this case, it is impossible to fight against a third party beyond the company's business scope. Before the third party obtains or transfers the property from the company, the shareholders may take the company as the defendant, and the company may take the directors and managers as the defendants, and request the court to prohibit ultra vires acts, thus causing direct losses to the third party, and the company shall be liable for compensation. The ultra vires behavior can be attributed to the negligence or intention of directors and managers, who should be liable for compensation to the company. After the third party obtains or transfers the property from the company, the shareholders or the company shall not take ultra vires as invalid against the third party, except that the third party knew or should have known that the company or its directors and managers were beyond the business scope when signing the contract. The latest views of foreign company law on ultra vires theory are worth learning. The author believes that simply declaring a contract concluded beyond the scope of business invalid will do more harm than good. First of all, it is not conducive to protecting the bona fide counterpart. In the process of contract conclusion and performance, the bona fide counterpart may not know that the contract concluded by the other enterprise as a legal person is beyond the business scope of the other party. In this way, the law generally confirms that the contract concluded and performed by an enterprise as a legal person is invalid, and it is easy to happen that the losses caused by the fault of a legal person exceeding its authority are borne by the bona fide counterpart, which violates the principle of fairness in civil law. Second, if contracts beyond the scope of business are deemed invalid for whatever reason, many contracts will be in a state of being confirmed invalid at any time, which is not conducive to strict compliance by the parties and is likely to undermine the principle that contracts must be observed. Third, if all transactions beyond the business scope are declared invalid, it will not only be detrimental to encouraging transactions, but also cause great waste of property and increase transaction costs. In view of the particularity of the problem of "exceeding the business scope" in China's real life, that is, because the business scope stipulated in the articles of association and business licenses of most enterprises is very general and simple, it cannot fully cover its actual business scope. Article 50 of the Contract Law stipulates that a contract concluded by the legal representative or person in charge of a legal person or other organization beyond its authority is valid, unless the other party knows or should know that it is beyond its authority. This article provides for the external effect of representative behavior, but there is no doubt whether this article belongs to the interpretation of ultra vires invalidity theory. The so-called representative behavior refers to the behavior carried out by the legal representative or responsible person of a legal person or other organization. When a legal representative engages in business activities on behalf of a legal person, his authority shall be determined by law and the articles of association. The content and scope of his activities are mainly stipulated by legal persons, and the purpose of his activities is to realize the functions of legal persons. Therefore, the behavior of the legal representative is the behavior of the legal person itself, and the consequences of its behavior are borne by the legal person. So are other organizations. It should be admitted that this provision of the contract law embodies the theory of ultra vires and invalidity to a certain extent. However, it is not exactly the same as the traditional theory of ultra vires invalidity: first of all, it only conditionally recognizes the validity of contracts concluded beyond the scope of business, that is, the parties to a contract are only valid if the other party is in good faith. The second is to stipulate that only contracts concluded by legal persons or legal representatives or responsible persons of other organizations beyond their functions and powers are valid. Then, is the contract concluded by the staff of a legal person or other organization beyond the scope of business valid? The law does not stipulate that the Supreme Court must interpret it judicially. After the promulgation of the Contract Law, in order to implement the Contract Law, the Supreme People's Court promulgated the Interpretation (I) on Several Issues Concerning the Application of the Contract Law of People's Republic of China (PRC). Article 10 of this judicial interpretation stipulates that the people's court shall not consider a contract concluded by the parties beyond their business scope invalid. However, unless it violates the state's restrictions on business operation, franchise operation and laws and administrative regulations prohibiting business operation. Among them, the exceptions beyond the business scope, that is, those restricted, preferential and prohibited by the state, mainly refer to coal, natural gas, refined oil, military vehicles and crude oil in industrial and mining products, as well as grain and cotton in agricultural products. This provision should be regarded as a supplement to the unclear provisions in the Contract Law. After the publication of the judicial interpretation, some comrades think that the provisions of Article 10 of the judicial interpretation conflict with those of Article 52 of the Contract Law. Even after the promulgation of the Contract Law, contracts concluded beyond the scope of business will still be declared invalid for violating the relevant provisions of the General Principles of the Civil Law and the Company Law. This is because the general principles of the civil law and the provisions of the company law are mandatory. According to Item 5 of Article 52 of the Contract Law, the contract is invalid because it violates the mandatory provisions of the law. The author believes that this involves the understanding of relevant legal provisions: although the General Principles of the Civil Law and the Company Law prohibit legal persons (companies) from operating beyond their business scope, there is no provision on the consequences (effectiveness) of contracts concluded by legal persons (companies) beyond their business scope. In other words, the General Principles of the Civil Law and the Company Law only prohibit legal persons (companies) from operating beyond their business scope, but they do not stipulate that contracts or transactions concluded beyond their business scope are invalid. Because the two laws do not stipulate the validity of contracts beyond the scope of business, the legal consequences of concluding contracts beyond the scope of business have not become prohibitive provisions of the law. Therefore, it is not yet possible to draw the conclusion that contracts concluded beyond the scope of business are invalid from the provisions of Item 5 of Article 52 of the Contract Law. To sum up, the effectiveness of ultra vires transactions should be handled according to different situations. First, if the enterprise as a legal person acts beyond its business scope, but it does not violate the mandatory provisions of the law and does not harm the interests of the state, the parties and the third party, as long as the contract itself conforms to the basic principles of civil law, the contract has been performed or can be actually performed, it should be considered as valid. Second, the counterpart of the ultra vires transaction is in good faith, while the ultra vires legal person is intentional or negligent, and the wrong party actively requests to confirm that the contract is invalid, so the contract shall be deemed to be valid.