Analysis Of A Case For The Decoration Contract Dispute Between Mr He And Hualong Corporation

With the social background of China’s rapid economic development, limitedliability companys (LLCs) exist as the most popular organizations in the socialproduction and life environment. The establishment of a LLC is a necessary phase forthe acquirement of the capacity for civil rights. Many studies have been focused onthe law of the activities of an established LLC, but studies on the law during theestablishment of a LLC are usually ignored. Mr He started a lawsuit against HualongCo. Ltd, because his benifit was impaired due to the default on construction cost. Inthe trial of this case, both parties in dispute persisted in their own opinions on whoshould be responsible for the construction cost. The question for the bearing ofliabilities for the contracts concluded by a company promoter during theestablishment of a LLC is then caused. There is a great conflict of opinion betweenboth parties on that whether the company promoter who sealed the contract shouldbear responsibility. The contract sealed by a company promoter during theestablishment of the company should be recognized and confirmed, and theresponsibility should be undertaken by the established company. For the activity thatthe shareholder or company promoter abuses the limited liability of the company toevade repayment obligations, the shareholder should bear the joint liability for thecreditor. The commercial law of China on the activities during the establishmentphase of a company is still far from perfect, which causes many dispute cases to occuron that phase. Only when the law on the establishment phase of companies isimproved, the deals in that phase can be protected better. The limited liabilities ofcompanies are the liabilities born by the funds from the shareholders, the purpose ofwhich is to reduce the risk of the shareholders, to increase the enthusiasm of investorsand to make the company undertake liabilities using all of its property. To inhibit theimproper behaviors of shareholders damaging the interests of others by misusing thelimited liabilities of companies, the disregarding of corporate personality should beproperly adopted to protect the legal interests of parties under the requirements oflaw.