Category of contract
Kinds of Contract
– The Value for Differentiation
Dispositive Juristic Act and Its Cause
– Contract Causa
Type Contract
– Non-type contract
– Mixed-Type contract
Financial Lease
Kinds of Contract
Nominate contract (type contract), nonnominate contract (non-type contract)
Consensual contract, real contract
Two-side contract, one side contract
Onerous contract, gratuitous contract
Informal contract, formal contract
Main contract, preliminary contract
Nominated contract (type contract)
Transaction of property
– Onerous contract
Sale, exchange, lease, loan for consumption,
Contracts for the Supply and Use of Electricity,
Water, Gas and Heat
– Non-onerous
Gift, loan for consumption, loan for use
Nominated contract (type contract)
Service Contract
– Typical service contract
Employment
Contract for work
Mandate
– Mixed type service
Employment
Contract for work
– Construction Project Contract
– Carriage
– Publishing contract
Mandate
– Warehousing, brokerage, commission agent, forwarding agent,
commercial agent, manager contract, deposit contract
Nominated contract (type contract)
Other contract
– A joint undertaking
Bid society
partnership
– Technology Contract
– Settlement
– Suretyship
non-nominated contract (non-type
contract)
Contract sui generis
Binding Contracts
Mixed contract (one contract)
– Absorption theory
– Combination theory
– Analogy theory
Consensual contract v. real contract
Consensual contract (executory contract)
– A contract which is formed by the exchange of
reciprocal declarations of intention.
– sale, gift (PRC CL§ 186), loan for consumption (PRC
CL§210), warehousing (PRC CL§382), carriage (PRC
CL)
Real contract (executed contract)
– A contract which is formed by the delivery of the
subject matter of the contract in addition to the
exchange of reciprocal declaration of intention.
– Loan for consumption within natural person (PRC
CL§210) ,loan for consumption (Japan, ROC), deposit
(PRC Cl§367, Japan, ROC Civil C)
Informal contract v. formal contract
Formation of contract
– Formation required by law
Informal contract
– Japan: all type contracts
– PRC: sale, gift…
– ROC: sale, gift…
Formal Contract
– A contract which a specific formality shall be excised to
form such a contract
– Formation agreed by the parties
Financial Lease
Definition of Financial Leasing Contract
A financial leasing contract is a contract
whereby the lessor, upon purchase of the
lessee-selected lease item from a lesseeselected seller, provides the lease item to the
lessee for its use, and the lessee pays the rent.
(PRC CL Article 237)
Unidroit Conventions on International
Financial Leasing Article I para. 2
2.The financial leasing transaction referred to in the previous
paragraph is a transaction which includes the following
characteristics:
– (a) the lessee specifies the equipment and selects the supplier without
relying primarily on the skill and judgment of the lessor;
– (b) the equipment is acquired by the lessor in connection with a leasing
agreement which, to the knowledge of the supplier, either has been
made or is to be made between the lessor and the lessee; and
– (c) the rentals payable under the leasing agreement are calculated so
as to take into account in particular the amortization of the whole or a
substantial part of the cost of the equipment.
3. This Convention applies whether or not the lessee has or
subsequently acquires the option to buy the equipment or to hold it
on lease for a further period, and whether or not for a nominal price
or rental.
4. This Convention applies to financial leasing transactions in
relation to all equipment save that which is to be used primarily for
the lessee's personal, family or household purposes.
loan
Lender
Lessor
Owner of the Purchaser
leased item
Borrower
Finance lease
Pay rent
lessee
The possessor of
the leased item
Sale of
Goods
Deliver the lease goods
Seller
Loan for consumption
Lender
Borrower
Purchaser
Amortize loans
Mortgagee
Mortgagor
Mortgage in a chattel
Sale of
Goods
Owner and
Possessor
of the item
Deliver
the lease goods
Seller
Sale of Goods
Seller
Purchaser
Transferor
Owner of
the item
Transferee
Transfer of the title :
until condition precedent fulfilled
Deliver the goods
Payment of the price by installment
Possessor
of the item
Attributes of Finance Lease
Type contract
– Lease
– Loan for consumption
– Sale
Non-type Contract
Attributes of Finance Lease
The alleged financial lease enterprise is an enterprise that leases
goods to a person who needs the goods after providing the capital to
buy the goods leased and obtaining the good title of goods, other
than an enterprise from which it lends money to a person who needs
capital funds. Such a transaction pattern, without violating
mandatory law, public policy, and good moral, is helpful to the
industrial and commercial activities of our country. The purpose of
such a financial lease is to provide capital fund for the lessee, and
the loan for consumption could reach the goal to raise capital fund
as well: however, both contract are totally different with each other.
Considering the features of a financial lease, it should be interpreted
as a “non-type contract” which is similar to a lease contract because
a financial lease differs with a loan for consumption regarding the
distribution of interest and hazards of the leased goods. Taiwan
Supreme Court Civil Decision Case No. 482 (2004).
Case Study
The finance lease means an economic activity from
which the leasing company purchases an object for
lease under the request of the lessee and rents it to the
lessee for the purpose of use. On the other hand, an
enterprise who needs an equipment or a machine
selects an equipment or a machine from a supplier or a
distributor. However, the enterprise is reluctant or unable
to raise funds to purchase the equipment or machine.
Then the enterprise turns to request the leasing
company to buy the equipment and machine from the
supplier or distributor and lease the item from the leasing
company. The lessee then pays rental at stated period to
assure of the payment of price, interest, other expenses,
and the profit afterward.
Because the lessor is on the position of a fund
provider, he don’t own the inventory of
equipment or machine and don’t have
knowledge about the equipment, in the whole
lease activity, the lessor is only obligated to
provide a fund to purchase the equipment and
machine designated to the use of the lessor.
Hence, all the duties pertaining to the owner,
such as custody, repair, tax duty, burden of
hazard, should be on the side of the lessee.
loan
Borrower
Lender
Resale of the machine
Zhong Zu
Buyer
Leasing
of resale
Company
(The appellee)
Payment of the price
Lease
Seller
of resale
Da Pi Fa Co.
(the purchaser and
possessor of
the machine)
The Lessee
The lessor
Rent payment
compulsory
execution of
the machine
President Co.
(Creditor of Da Pi Fa Co.)
(The appellant)
The
Original
Sale of
Machine
Hong Ying Co.
(the seller of
the machine)
ROC Civil Code Article 761
The transfer of rights in rem of personal property will not
effect until the personal property has been delivered.
However, if the transferee has been in possession of the
personal property, the transfer effects when the parties
agree to such transfer.
In the transfer of a right in rem of personal property,
where the transferor is still in possession of it, a
contract causing the transferee to acquire its
indirect possession may be made between the
parties in the place of its delivery.
ROC Civil Code Article 87
A fictitious expression of intent made by the
expresser in collusion with other party is void,
but the voidance can not be a valid defense
against any bona fide third party.
If the fictitious expression of intent was intended
to conceal another juridical act, the provisions of
the act with respect to such another juridical act
shall apply.
ROC Civil Code Article 761
In the transfer of a right in rem of personal
property, where a third party is in
possession of it, the transferor may
transfer the claim against such third party
for the return of it to the transferee in place
of its delivery.
The lessee’s rights
Lessee's Assumption of Buyer's Rights
– Under the sales contract concluded by the
lessor according to the lessee's selection of
the seller and the lease item, the seller shall
deliver the subject matter to the lessee in
accordance with the contract, and the lessee
enjoys the rights of the buyer in respect of
taking delivery of the subject matter. (PRC
Contract Code Article 239)
The lessee’s rights
Lessee's Assumption of Buyer's
Remedies in Case of Seller's Nonperformance
– The lessor, the seller and the lessee may
agree that any claim arising from the seller's
non-performance of its obligations under the
sales contract will be made by the lessee.
Where the lessee makes such a claim, the
lessor shall provide assistance. (PRC
Contract Code Article 240)
Amendment of Sales Contract
Certain Amendment of Sales Contract
Subject to Consent by Lessee
– Absent consent by the lessee, the lessor
may not amend any lessee-related term in
the sales contract concluded by it according
to the lessee's selection of the seller and the
lease item. (PRC Contract Code Article
241)
Title to the lease item
Exclusion of Lease Item from Bankruptcy
Assets of Lessee
– Title to the lease item vests in the lessor. In
case the lessee enters into bankruptcy, the
lease item is not part of its bankruptcy assets.
(PRC Contract Code Article 242)
Rent
Determination of Rental Components
– Unless otherwise agreed by the parties, the
rent under a financial leasing contract shall be
determined based on the major portion of or
full costs of purchasing the lease item and the
lessor's reasonable profit. (PRC Contract
Code Article 243)
Warranty for fitness
Lessor Not Liable for Non-fitness of Lease
Item; Exceptions
– Where the lease item does not comply with
the contract or is not fit for the intended
purpose, the lessor is not liable, except where
the lessee relied on the skills of the lessor in
selecting the lease item or the lessor
interfered in the selection thereof. (PRC
Contract Code Article 244)
Warranty by Lessor
The lessor shall give warranty in respect of
the lessee's possession and use of the
lease item. (PRC Contract Code Article
245)
Liability for Injury
Lessor Not Liable for Damage or Injury
– If while in the possession of the lessee, the
lease item caused personal injury or property
damage to any third person, the lessor is not
liable. (PRC Contract Code Article 246)
Maintenance Obligations
Lessee's Obligation of Due Care;
Maintenance Obligations
– The lessee shall keep (or keep it in his
custody) and use the lease item with due care.
– While in possession of the lease item, the
lessee shall perform the obligations of
maintenance and repair thereof. (PRC
Contract Code Article 247)
Lessor' s Remedies
Lessor' s Remedies in Case of Nonpayment by Lessee
– The lessee shall pay the rent in accordance
with the contract. Where the lessee fails to
pay the rent within a reasonable period after
receiving demand for payment from the lessor,
the lessor may require payment of the full rent;
or it may terminate the contract and
repossess the lease item. (PRC Contract
Code Article 248)
Refund
Partial Refund in Case of Termination by Lessor
– Where the parties agreed that title to the lease item
will vest in the lessee at the end of the lease term,
and after paying a major portion of the rent, the
lessee is unable to pay the remaining balance,
resulting in the lessor's termination of the contract and
repossession of the lease item, if the value of the
repossessed lease item exceeds the rent owed by the
lessee and other expenses, the lessee may require
partial refund. (PRC Contract Code Article 249)
Ownership of Lease Item
Ownership of Lease Item at End of Lease
Term
– The lessor and the lessee may agree on the
ownership of the lease item at the end of the
lease term.
– Where ownership of the lease item was not
prescribed or clearly prescribed, and cannot
be determined in accordance with Article 61
hereof, title to the lease item shall vest in the
lessor. (PRC Contract Code Article 250)