Yuan Fu Development Co., Ltd. was suspected of violating the Fair Trade Law for making false and misleading representation regarding the mezzanine design when selling its pre-sold units and for requiring customers to pay deposits prior to the provision of contracts

Chinese Taipei

Case:

Yuan Fu Development Co., Ltd. was suspected of violating the Fair Trade Law for making false and misleading representation regarding the mezzanine design when selling its pre-sold units and for requiring customers to pay deposits prior to the provision of contracts

Key Words:

contract review, mezzanine

Reference:

Fair Trade Commission Decision of February 24, 2005 (the 694th Commissioners’ Meeting); Disposition Kung Chu Tzu No. 94014

Industry:

Real Estate Investment (6611)

Relevant Laws:

Articles 21 and 24 of the Fair Trade Law

Summary:

1. The complainant signed a sales contract of a pre-sold unit with Yuan Fu Development Co., Ltd. (hereinafter referred to as the “respondent”) in October 1999. The respondent required the complainant to pay NT$ 210,000 prior to the provision of the contract for review and the review period only lasted for three days. Also, the contract neither specified the square measures of public facilities distributed to each owner or the proportion of the distribution nor prepared a list of possession of each unit for review. Additionally, the contract did not clearly state the transfer period of real property. The aforesaid actions were in suspected violation of Article 24 of the Fair Trade Law. Moreover, a complaint letter was filed alleging that when the respondent was selling the pre-sold units, the sample unit constructed on the spot misled consumers into believing that such a product could be legally modified and the space of the product could be elevated by constructing a mezzanine, in violation of Article 21 o the Fair Trade Law.
   
2. The advertising materials regarding the building “Ching Wang” printed, published, and distributed by the respondent contained the words “Rational women who care for sizes and data living in a 1+2 magical space” and “small but beautiful and delicate 1+2 magical space, the trendy house purchase method that saves money” and were attached with a colorful picture of the mezzanine design. It was also found that the floor plan of the upper mezzanine floor (furniture placement plan) on the direct mail contained the symbol of a bedroom. The lower floor was living room and dining room. In the center of the direct mail, it said “Ching Wang = living room with elevated ceilings + attic + study + bedroom + kitchen…” and on the bottom it said “Brand new finished, invested and built by excellent listed company Taiwan Styrene Affiliated Enterprise Yuan Fu Development Co., Ltd.” From a comprehensive survey of the aforesaid advertisement, each unit of the building in question built by the respondent was around 360 square feet, yet there was “1 + 2” space or an “attic” to utilize. The aforesaid advertising materials and direct mail were sufficient to mislead consumers into believing that the building in question had been approved to construct “one mezzanine” when or after the units were handed over, and that it was legal to obtain the space of the mezzanine. Thus, the consumers falsely believed that they could in effect purchase more floor areas at a lower price and possibly entered into transactions with the company upon such a consideration. Furthermore, according to the Public Works Department of the Taipei City Government, although the floor plan of B1 on the sixth floor and the finished plan of the utilization license were almost consistent, the originally approved plan did not include the mezzanine design, which was inconsistent with the floor plan (furniture placement plan) published in the advertisement. The respondent claimed that the “1 + 2” space was merely emphasizing that the utilization of the space of the building could be more elastic than other general products and the picture of the advertisement was a reference for furniture placement. Nevertheless, due to the nature of pre-sold unit transactions, consumers often rely on advertisements to know the content of the building, and use the advertisements as a reference for trade. To prevent consumers from being misled by false advertisements, the business shall disseminate reasonable and accurate information in the advertisements and cannot use the words “For reference” in the advertisements and propose to free itself from liabilities. Moreover, the building in question was not approved to have mezzanine design, but the respondent claimed that the advertisement was merely a reference of space utilization and decoration for consumers. It was also sufficient to mislead consumers into believing that the building can have mezzanines. The respondent indeed made false or misleading representations or symbol in the advertisement of Ching Wang building regarding the mezzanine design.
   
3. Additionally, according to the credit card receipt submitted by the complainants, it was found that the date when the complainants paid the deposits by credit card was way earlier than the date, as asserted by the respondent, when the respondent provided the contract for review. It was obvious that the respondent required the customers to pay the deposit prior to the provision of the contract for review. Although the first page of the “housing/land/parking space pre-sold contract” stated that “…… The purchaser (the complainant) has reviewed the contract for over five days before signing the contract, and the contract is entered into upon the consent of both parties…” it only proved that the review period of more than five days was provided before the contract was instituted. There was no evidence to prove that the review period was provided before the deposit was paid. According to the credit card record of the complainant, the deposit was paid prior to the date when the respondent provided the contract and the date when both parties signed the contract. Thus, it was obvious to determine that the respondent exploited purchasers’ unfavorable position with regards to market information and requested the customers to pay the deposit prior to the provision of the contract. The aforesaid actions were obviously unfair conduct sufficient to affect trading order in violation of Article 24 of the Fair Trade Law.

Summarized by Chen, Jen-Ying
Supervised by Chen, Yuhn-Shan

Appendix:

Yuan Fu Development Co., Ltd.’s Uniform Invoice Number: 16743794