Violation of the Fair Trade Law by Shang Neng Construction Company for failing to provide consumers the right to fully review the sales contract

Chinese Taipei

Case:

Violation of the Fair Trade Law by Shang Neng Construction Company for failing to provide consumers the right to fully review the sales contract

Key Words:

deceptive or obviously unfair, superior market position, right to review a contract

Reference:

Fair Trade Commission Decision of November 25, 1992 (the 60th Commission Meeting); Disposition (81) Kung Ch'u Tzu No. 053

Industry:

Real Estate Industry (6040)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. In transactions involving the sale of a real estate house, it is typical for earnest money to be paid and for the parties to sign a written contract. However, Article 248 of the Civil Code provides that "a contract will be deemed to have been formed when one of the parties receives earnest money from the other party". A party in violation of such a contract will loss the earnest money it paid or will have to repay double the amount of earnest money. However, after earnest money having been paid and prior to the signing of a written contract, both parties still need to substantiate the terms and conditions of the contract reasonably if the contract before signing has not had any terms except for the price and the size of the real estate house. In order to substantiate the content of a contract which has been deemed formed as mentioned above, both parties have an ancillary obligation to provide full information to each other, to express fully their intentions, to negotiate the terms intended to be substantiated in good faith, and to formulate reasonable terms. Under circumstances like this, where Shang Neng enjoyed a dominant market position in terms of its possession of information regarding the purchase and sales of houses, and where Shang Neng enjoyed superior specialized knowledge, Shang Neng should unconditionally provide the complainant with full details of the terms of the contract and afford the complainant with an opportunity to take the contract back for review. However, Shang Neng imposed a number of conditions on the complainant such as not permitting the complainant to take the contract out of Shang Neng's view or without a person from Shang Neng accompanying the complainant during the complainant's review of the agreement. It is obvious that were likely to these restrictions obstruct the complainant's judgment on terms and conditions of the agreement. Therefore, it could be found that Shang Neng did refuse to provide the written contract to the complainant for review.

2. It was also found that

(1) Shang Neng accepted the earnest money from the complainant, and if the complainant did not execute the written contract the earnest money would be confiscated;

(2) the real estate at sale had unique qualities such as geographic location and low fungibility;

(3) the transaction price for sales of such property is relatively high, the content of the transaction is complex, and due to its possession of superior information, Shang Neng enjoys a dominant position.

The purchaser should be given full opportunity, to review the agreement before execution, and to fully consider the terms of the transaction. The methods of Shang Neng, which refused to provide such opportunity, constituted unfair practices that adversely affect the trading order.

3. In addition to protecting trading order and safeguarding fair competition, the legislative intent of the Fair Trade Law also includes the protection of consumer interests and promotion of the nation's economic prosperity. Although not all transactions are subject to the Fair Trade Law, there is no inconsistency between the mandate in the Fair Trade Law to prevent enterprises from engaging in restrictive practices or unfair competition and the Civil Code's prohibition against abuse of negotiating power for contract. By depriving the complainant of a full opportunity to review the agreement through assertion of its superior market position, the tactics of Shang Neng constituted unfair practices which adversely affect the trading order and are in violation of Article 24 of the Fair Trade Law.

　

Summarized by Chuang, Kuo-lun
Supervised by Hsu, Chau-ying

＊: For information of translation, click here

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