Chenghan Limited Company [hereinafter "Chenghan"] violated the Fair Trade Law for false quotation of transaction price in the course of a real property brokerage transaction

Chinese Taipei

Case:

Chenghan Limited Company [hereinafter "Chenghan"] violated the Fair Trade Law for false quotation of transaction price in the course of a real property brokerage transaction

Key Words:

deceptive or obviously unfair practices, deceit or covering up material facts, causing others to form a false belief

Reference:

Fair Trade Commission Decision of 15 March 1995 (the 179th Commission Meeting); Disposition (84) Kung Ch'u Tzu No. O47.

Industry:

Real Property Brokers (6812)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. A seller of a home commissioned Chenghan to sell the property, initially for an amount to be received by the seller of NT$4.4 million. The seller authorized Chenghan to earn a commission on the excess above this amount but there would not be any other fees for brokerage services.

A buyer offered to purchase the property for NT$4.3 million, whereas Chenghan asked for NT$4.96 million. The difference was too high and no deal was effected. The buyer gave Chenghan an earnest fee to hold the property and negotiate with the seller. Several days later Chenghan informed the buyer that the seller agreed to reduce the price to NT$4.5 million. That same evening the buyer signed an agreement to purchase the property.

However, on the day the buyer agreed to purchase the property, Chenghan told the seller that the price was too high and it would be difficult to sell the property. Chenghan requested the seller to reduce the price. The seller agreed that it would accept a received amount of NT$4.3 million. However, Chenghan said the buyer had only offered NT$4.3 million, and that a sale for such price would result in no commission for Chenghan and thus requested the seller to pay NT$50,000 for services. Believing what Chenghan had stated to be true, the seller agreed.

The parties met at Chenghan's office on the date of signing the agreement. The seller arrived first and on seeing the price in the agreement as NT$4.5 million, questioned Chenghan. Chenghan lied to the seller and stated that the false statement of a higher price in the sales agreement was to facilitate the buyer's loan. Chenghan had also changed the date on the receipt for the earnest money, further showing Chenghan's intent to obtain more profit. Chenghan made false statements to the seller thereby causing the seller to make a decision which was not in the seller's best interest.

2. In summary, the seller and Chenghan in this case clearly agreed that Chenghan's commission would be the difference between the price asked for by the seller and the price actually obtained by Chenghan. There is thus no issue with an arrangement whereby the commission is the excess selling price. However, during the course of the transaction, Chenghan used its superior knowledge of the market information and falsely quoted the transaction price so that the seller agreed to reduce the price based on a false belief. It is essential for the real property brokerage industry to effectuate transparency and trust, and the situation described above violates industry standards and the acts of Chenghan violate the provisions of Article 24 of the Fair Trade Law.

Summarized by Lin, Sheng-wen
Supervised by Hu, Kuang Yu

＊: For information of translation, click here

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