Civil Judgment Regarding a Request for Performance of Contract by Pei Ch'u Real Estate Brokerage Co., Ltd.

Chinese Taipei


Case:

Civil Judgment Regarding a Request for Performance of Contract by Pei Ch'u Real Estate Brokerage Co., Ltd.

Key Words:

letter of authority to negotiate sales price; middleman, review period

Reference:

District Court Civil Judgment, ref. (88) Chu Chien Tzu No. 680

Industry:

Real Estate Brokerage (6812)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

  1. According to the plaintiff:
    On 10 July 1999 the defendant signed a Letter of Authority to Negotiate a Purchase Price ("Letter of Authority"), entrusting the plaintiff to act as a middleman to purchase a parcel of land located in the Chinshan Section of Hsinchu from third party Wei Ta Construction Co., Ltd. ("Wei Ta Construction") at the price of NT$9.1 million. Wei Ta Construction refused to sell at that price, and the defendant subsequently agreed on 12 July 1999 to raise its offered purchase price to NT$9.5 million. The defendant also agreed to pay the plaintiff a fee for its services equal to three percent of the transaction price once it had successfully found the land for the defendant and negotiated a price. The plaintiff then contacted Wei Ta Construction and obtained its agreement to the proposed purchase price of NT$9.5 million. The plaintiff, however, subsequently refused to draw up and sign a contract. It ignored repeated phone calls and documented registered letters from the plaintiff asking it to sign the contract. The plaintiff then sued the defendant, requesting that it perform their agreement and pay it three percent of the transaction price, or NT$285,000.
  2. According to the defendant:
    The defendant has never entered into a contract to purchase the land, so the plaintiff did not complete its function as middleman, and had no grounds for requesting the payment of a service fee. Furthermore, the plaintiff had asked the defendant to sign the Letter of Authority in a hurried manner, without giving it a reasonable period of time to review it, and thus was in violation of the Consumer Protection Law and Fair Trade Law. The plaintiff also told the defendant at the time the Letter of Authority was signed that if the transaction did not occur, the Letter of Authority would become annulled automatically. The defendant took the plaintiff at its words and signed the Letter of Authority. Subsequently, the defendant decided not to buy because it was not fully satisfied with the land and was not happy with the conditions set forth by the seller with respect to the payment method and the liability for value-added tax. Since the defendant has never entered into a contract for purchase of the land, the defendant asserted, the plaintiff's subsequent requests for payment of an NT$285,000 service fee were baseless.
  3. Judgment of the court:
    The court held that the basic facts of the case as represented by the plaintiff are supported by the Letter of Authority, land registration transcript, and documented registered letters submitted in evidence by the plaintiff. The defendant did not dispute that it had commissioned the plaintiff to purchase the land, that Wei Ta Construction agreed to sell the land at a price of NT$9.5 million, and that the plaintiff notified the defendant of this fact.
    The court found as follows regarding the defendant's stated reasons for not buying the land, its allegations that the plaintiff orally represented the Letter of Authority would be annulled in case of non-transaction, and its claims the plaintiff violated the Fair Trade Law and Consumer Protection Law by not giving it an adequate period of time to review the Letter of Authority:
    (1) Before the defendant authorized the plaintiff to negotiate purchase of the land by signing the Letter of Authority on 10 September 1999, he had previously acted in the name of a third party - his wife Hsieh Hsiu-ying - to authorize the plaintiff to negotiate purchase of the same land, and on other previous occasions had also, in his own and his wife's name, authorized the plaintiff to arrange the purchase of other land. This is evidenced by photocopies of three other letters of authority dated 18 January 1999, 21 January 1999, and 5 April 1999 submitted by the plaintiff, and is also not contested by the defendant. It is evident then that the defendant was already very well acquainted both with the land and with the import of the Letter of Authority. His argument that the plaintiff hurried him into signing the Letter of Authority without giving him a reasonable period of time to review it is unconvincing.
    (2) The plaintiff challenged the defendant's assertions that it was unsatisfied with the land and the terms of purchase, and the defendant failed to provided any explanation as to how the terms proposed by Wei Ta Construction were unreasonable. Article 345(2) of the Civil Code provides that a contract of sale is completed when the parties have expressed mutual agreement on the object to be sold and the price to be paid. The method and place of payment are not crucial elements, and can be decided based either on the law or on customary trading practices. Furthermore, the Letter of Authority entered into between the parties addressed only the location, area, and price of the land; it was silent on details such as payment method. Article 4 of the Letter of Authority provided that "Value-added tax shall be paid by the seller [i.e. Wei Ta Construction] and contract tax shall be paid by Party A [i.e. the defendant]," as evidenced by the photocopy in the case file. "Successful negotiation" in Article 5 of the Letter of Authority refers to agreement on the property to be purchased and the total purchase price. Details of the method of payment would need only to conform to general trading practices. The reasons given by the defendant for its failure to enter into a purchase contract are therefore unconvincing.
    (3) A middleman has no grounds for requesting payment unless a contract is entered into as a result of his services. On the other hand, however, if he has already successfully arranged a contract between the parties and the authorizing party then refuses to sign, the authorizing party should pay a consideration based on the principle of good faith, as was explicated by the Supreme Court in judgment ref. (84) T'ai Shang Tzu No. 2925. The plaintiff in the present case had obtained agreement by the third party Wei Ta Construction to sell the land at the price of NT$9.5 million, and had notified the defendant to sign a purchase contract. It had thus completed its task as a middleman, yet the defendant refused to sign without offering a reasonable explanation for its refusal. In keeping with the purport of the aforesaid Supreme Court judgment, the plaintiff is entitled to demand the payment of the brokerage fee from the defendant.


Appendix:
Pei Ch'u Fang Wu Real Estate Brokerage Co., Ltd.'s Uniform Invoice Number: 22516163


Summarized by Ch'iu Shu-fen
Supervised by Hsu Chao-ying


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