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Representation of legal entities: what allows unscrupulous counterparties to evade their obligations?

authors: Maxim Oleksiyuk, Yaroslava Ivasiuk, Volodymyr Tsiupryk

02 July, 2024 Exclusive

Under Article 92 of the Civil Code of Ukraine, limitations on the powers of representation of a legal entity in relations with third parties are not legally binding unless the legal entity proves that the third party knew or, under all the circumstances, could not have been unaware of such limitations.

This provision generates numerous misuses, including the fact that a party can now enter bonded contracts with the other party's employees, claiming that it could not and should not have known about such restrictions, regardless of how obvious the lack of such authority of the legal entity's employee was.

This has led the Ukrainian Supreme Court to develop numerous rules for applying this provision, which, therefore, have given rise to other ways of misuse, in particular, presenting the counterparty with an old version of the charter.

Thus, it is worth carefully checking the counterparty's powers and applying the interpretation approaches of the Supreme Court mentioned above, as well as trying to check the version of the counterparty's charter on the website of the Ministry of Justice of Ukraine, but there may be a delay in updating the data, so this method of verification is not 100% reliable.

The full version of the article is available in Ukrainian by the link.

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