A Must-Read for Freight Forwarders: Sue the Wrong Party and Your Case Comes to Nothing — A Guide to Identifying the Correct Legal Entity and Preventing Risk
In the freight forwarding business, forwarding companies often run into this predicament: they put in the work, complete the carriage, and advance the costs — and then, when they go to recover the money, they discover they have sued the wrong party. Sue the individual, and the court finds the act was performed in the course of employment (职务行为), so the individual bears no liability. Sue the company, and because apparent agency is not established, the company bears no liability either. In the end, not only is the money not recovered — the litigation costs are wasted for nothing. Through two real cases in which freight forwarding companies lost, this article offers an in-depth analysis of the judicial reasoning behind identifying the correct legal entity, and gives companies a practical, workable guide to preventing risk.
Why Suing the Individual Loses: Establishing an Act in the Course of Employment and Allocating the Burden of Proof
In the freight forwarding business, staff typically communicate through convenient channels such as WeChat and phone calls. When a forwarding company sues the person it dealt with to demand payment of the freight charges, and that person claims their conduct was performed in the course of employment, the forwarding company often faces the risk of losing the case.
Take the case of Guanmou International Logistics Co., Ltd. v. Li. Guanmou sued Li for payment of ocean freight and various other charges totaling VND 4,881,520,000 (converted at the exchange rate of May 27, 2022, to RMB 1,464,456), plus interest. Li argued that he was an employee of Lingmou Company (Vietnam); that his work — communication and negotiation, arranging shipment, and the like — was the performance of his duties; that the payments were likewise made by Lingmou's finance staff; and that he was not a counterparty to the contract.
The court found that the two sides had not signed a written freight forwarding contract. The WeChat records showed that when Li expressed his side's position he used "we" rather than "I"; that Guanmou's sales staff repeatedly sent messages saying "we accept your company's entrustment," and neither side raised any objection; that Li had once said "I'm just an employee myself"; and that the shipper named in the bill of lading was neither Li nor Lingmou. In the end, the court held that the available evidence was insufficient to establish that Li was the entrusting party to the freight forwarding contract, and dismissed the claims against him.
The heart of this case lies in establishing that conduct fell within the course of employment and in allocating the burden of proof. Article 170 of the Civil Code of the People's Republic of China provides that a civil juristic act performed by a person who carries out work tasks for a legal person or an unincorporated organization — within the scope of that person's authority and in the name of the legal person or unincorporated organization — is binding on that legal person or unincorporated organization, and that any restriction the legal person or unincorporated organization places on the scope of such a person's authority may not be asserted against a bona fide counterparty. In addition, Article 67 of the Civil Procedure Law of the People's Republic of China and Article 91 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China provide that a party is responsible for providing evidence for the claims it raises, and that the party asserting the existence of a legal relationship bears the burden of proving the basic facts that give rise to that relationship.
When a forwarding company sues an individual, the key question the court examines is whether that individual acted in their own name. If the communication records consistently use "we" and "your company," if there is no expression of intent by the individual to entrust, and if the payments were made from a company account, then the forwarding company will struggle to prove that a contractual relationship was formed with the individual. As the party asserting the existence of a contractual relationship, a forwarding company that fails to provide sufficient evidence that the individual is the counterparty will bear the adverse consequences of failing to discharge its burden of proof.
Why Suing the Company Loses: The Strict Standard for Establishing Apparent Agency When a forwarding company finds that the person it dealt with is an employee of a company and turns to hold the company liable, the question of apparent agency usually comes into play. If the employee's conduct fell outside the scope of their authority and the company had no knowledge of it, the forwarding company likewise faces the risk of losing the case. Take the case of Shenzhen Haoboxin Electronics Co., Ltd. v. Li Zufu and Shenzhen Kaide Xinfeng Logistics Co., Ltd. . Haoboxin sought an order that Kaide pay RMB 725,465 in payment collected on its behalf, plus interest. Li Zufu was a salesperson at Kaide, and he held Kaide's logistics waybills while conducting abnormal transactions with Haoboxin and with Duan Guirong, a person outside the case. In the course of those transactions, Li Zufu delivered to Haoboxin only the transit copy of the logistics waybill, not the sender's copy, and the goods were not handed over for carriage in accordance with the waybill's contents. Kaide was unaware of any of this. The court held that the key issue in the case was whether Li Zufu's conduct constituted apparent agency. Article 172 of the Civil Code of the People's Republic of China provides that where a person performs an act of agency without agency authority, beyond agency authority, or after agency authority has terminated, and the counterparty has grounds to believe that the person has agency authority, the act of agency is effective. Establishing apparent agency requires the following: the person had no agency authority; the counterparty was subjectively in good faith and free from fault; and the counterparty had grounds to believe that the person had agency authority. In this case, the transactions between Haoboxin and Li Zufu did not conform to normal transaction procedures. Haoboxin accepted an abnormal transit copy and could not query the waybill number, and it failed to show that the goods were carried by Kaide. Haoboxin knew the transactions were abnormal and continued them anyway, failing to exercise reasonable care, so it could not be found to have been subjectively in good faith and free from fault. At the same time, although Li Zufu was an employee of Kaide and held its waybills, there was no evidence that Kaide took part in collecting or making the payments — Kaide was unaware of the matter, and Li Zufu's conduct was not enough to give a third party confidence that he had agency authority. The court therefore held in its final judgment that Li Zufu's conduct did not constitute apparent agency, and that Kaide bore no liability to return the money.
Risk Prevention and Control Plan for Freight Forwarding Companies on Legal Entity Issues
Drawing on the lessons of the cases above and on industry risk-control practice, freight forwarding companies must put in place rigorous systems for transaction review and risk prevention. They need a "firewall" for identifying legal entities, built across three stages — before, during, and after the transaction — so that when a dispute arises they can pinpoint the entity that should bear liability.
1. Before Cooperation: Admittance Verification to Pin Down the Real Trading Party
When a forwarding company cooperates with a new counterparty for the first time, it must rigorously scrutinize the other side's identity and authorization, shoring up the first line of defense.
Three checks on the counterparty's qualifications. For corporate clients, require a business license and a unified social credit code, and verify the business's operating status through Qichacha or the National Enterprise Credit Information Publicity System. For overseas clients, retain the overseas company's registration documents and translated proof of employment.
Verifying the contact person's authority. Require a written power of attorney stamped with the company seal, stating the scope of business the contact is authorized to handle, their settlement authority, and the term of the authorization. Where the contact is the legal representative, retain proof of their status as legal representative.
A mechanism to block departed employees. Proactively ask about the handler's employment status before cooperating. If the person has just left the company, terminate the business immediately or re-sign with the company's headquarters.
Signing a formal contract. A written contract is the legal cornerstone for pinning down the entrustment relationship and specifying rights and obligations — and, more importantly, the primary basis on which a court determines the contracting party when a dispute arises. Forwarding companies should avoid doing business on the strength of WeChat, phone calls, or oral agreement alone; before each shipment begins, they must sign a Freight Forwarding Contract or a Booking Agreement with the entrusting party.
Control over electronic documents and seals. Prohibit the use of unapproved electronic seal templates and switch to dynamically encrypted electronic signatures. When an employee leaves, immediately revoke their access to the business systems and customer WeChat groups, and notify all cooperating clients in writing that the contact person has changed.
A tiered customer whitelist system. First-time cooperation with a new client must complete the full set of qualification checks; for long-standing clients, refresh the authorization documents once a year, so that a salesperson's departure does not leave business rights and responsibilities in limbo.
2. During Performance: Keeping a Full Record and Ensuring the "Four Flows" Stay Consistent
Performance is the core risk-control stage. Communication must follow standard wording, documents must be consistent, and the finances must match.
Standardized communication wording that makes the trading party clear. In WeChat and WeCom communications, consistently use expressions such as "your company" and the name of the company concerned; do not allow the practice of addressing only the individual over the long term. Proactively send a standard-form cooperation confirmation letter and have the other company stamp and return it, so that the whole exchange is not conducted with one individual alone.
Consistency of the parties named on documents and statements. Booking instructions, statements of account, and fee confirmation forms must be handled with the designated contact in the manner agreed in the contract, and stamped with the counterparty's company seal or electronic signature where necessary. The shipper and consignee information on bills of lading and customs declarations must be consistent with the contracting party; if they differ, the other side must issue a written explanation. It is strictly prohibited to retain only invalid settlement documents such as the transit copy — the complete originals of the sender's copy and the finance copy must be collected and filed.
Payments and collections must strictly match the party. As a rule, accept payment only from a corporate account. If the other side asks to pay from a personal account, it must provide a company-stamped explanation of payment on another's behalf, stating the reason for the payment and the corresponding business reference number. The invoice header, the receiving party, and the contracting party must correspond one to one; collection into private accounts and mismatched invoicing entities must be eliminated.
Cut losses promptly on abnormal transactions. Where any of the following occurs — a request to transfer large freight charges into a personal account, refusal to provide company-stamped documents, avoidance of the corporate entity in communications in favor of dealing only with individuals, or inability to provide proper corporate payment records — suspend the business immediately and re-verify the party's authorization.
3. Reconciliation and Post-Dispute Enforcement: Locking Down a Complete Chain of Evidence
An evidence-archiving checklist is indispensable. All of the following must be archived in full: the enterprise's qualification documents, powers of attorney, stamped statements of account, complete chat records (retained on the original phone, with nothing deleted), corporate bank transfer records, bills of lading, stamped booking orders, and records of invoice receipt.
Put reconciliation in writing and make the party liable for payment clear. Issue a formal statement of account every month, setting out the full name of the entrusting company and the handler, and wherever possible require the other company to stamp and return it. Establish a mechanism for responding to unidentified payments: where payment comes from a party other than the contracting party, demand an explanation of its source and written confirmation within 48 hours.
Pin down the liable party at the outset of a dispute. When freight charges go unpaid, send a written demand letter simultaneously to the handler and to the company that employs them, serving it both by EMS and via WeCom, and keep proof of service. Use the demand process to secure the other side's chat or written records acknowledging that the business was entrusted by the company, so that later you are not left with no option but to sue the individual.
### 4. Improving Supporting Internal Management Systems
To close loopholes in appearances of authority at the root, supporting internal systems need to be improved. Establish a mechanism for severing ties when employees leave: a departing employee must sign an undertaking not to do business by falsely using the company's name; notice of the change of contact person must be sent to all cooperating clients; and all blank logistics waybills and electronic seal access rights must be recovered. Set up a mechanism for auditing financial transactions, to put a stop to employees privately collecting payments for goods. Carry out regular confirmation of claims and debts — confirm claims in writing with core clients every quarter, and clarify who the contracting counterparty is.
## Conclusion
The freight forwarding industry's shift online and its lightweight transaction model easily blur the boundary between an individual's conduct and an act performed by an employee in the course of employment. The two lost cases send a clear judicial signal: a court will not hold a company liable merely on the strength of a salesperson's job title or chat records — the burden of proof rests entirely on the forwarding company. Rather than bearing litigation costs for nothing and missing the window to recover payment after a dispute arises because you sued the wrong party, it is better to apply entity verification, written authorization, and "Four Flows" consistency to every single shipment. One more qualification check before the fact, one more stamped confirmation during it — that is how you build solid legal protection for recovering tens of millions in freight charges.
