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Effects of the conclusion of a contract by an unauthorized authority

On November 29, 2018, the President of the Republic of Poland signed the Act amending certain acts in order to introduce simplifications for entrepreneurs in tax and business law. The Act provides for a number of amendments in tax regulations and laws regarding business operations, including art. 39 of the Civil Code regulating the effects of the conclusion of the contract by a person not being a body of a legal person, or acting beyond the scope of authorization of such a body.
 

Conclusion of contracts by a person not being a body of a legal person

 
According to the new version of this provision, if person concluding a contract as a legal person does not have authorization or exceeds its scope, the validity of the contract depends on confirmation of the contract by the legal person for which benefit the contract was concluded. Such confirmation may be given to the other party in any form at the initiative of the legal person itself. In addition, the other party may set a deadline for the legal person to confirm the contract. In the event of a lack of a confirmation within the prescribed period, the contract becomes void.
 
Lack of confirmation of the contract will entail the obligation of the unauthorized person to return what he received from the other party when entering into the contract, as well as the obligation to pay damages suffered by the other party by concluding the contract without knowing about lack of authorization.
 

Performing unilateral legal action by a "false body"

 
Other effects occur when unilateral legal actions are performed by an unauthorized body. According to the new wording of art. 39 of Civil Code, a unilateral legal action carried out by a body of a legal person without authorization or exceeding its scope is void. However, in case the addressee of a legal action agrees to act without authorization, the provisions on the conclusion of the contract without authorization shall apply accordingly.
 
The new provisions will come into force three months after the date of announcement.
 
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Denis Ushakov

Lawyer

Denis Ushakov

Counsel Lawyer

Denis Ushakov

Contact:

Rondo ONZ 1
00-124 Warsaw