Category of contractCategory of contract

Kinds of ContractKinds of Contract– The Value for DifferentiationThe Value for Differentiation

Dispositive Juristic Act and Its CauseDispositive Juristic Act and Its Cause– Contract Contract CausaCausa

Type ContractType Contract– Non-type contractNon-type contract– Mixed-Type contractMixed-Type contract

Financial LeaseFinancial Lease

Kinds of ContractKinds of Contract

Nominate contract (type contract), non-Nominate contract (type contract), non-nominate contract (non-type contract)nominate contract (non-type contract)

Consensual contract, real contractConsensual contract, real contract

Two-side contract, one side contractTwo-side contract, one side contract

Onerous contract, gratuitous contractOnerous contract, gratuitous contract

Informal contract, formal contractInformal contract, formal contract

Main contract, preliminary contractMain contract, preliminary contract

Nominated contract (type contract) Nominated contract (type contract)

Transaction of propertyTransaction of property– Onerous contractOnerous contract

Sale, exchange, lease, loan for consumption, Sale, exchange, lease, loan for consumption, Contracts for the Supply and Use of Electricity, Contracts for the Supply and Use of Electricity, Water, Gas and HeatWater, Gas and Heat

– Non-onerousNon-onerousGift, loan for consumption, loan for useGift, loan for consumption, loan for use

Nominated contract (type contract)Nominated contract (type contract)

Service ContractService Contract– Typical service contractTypical service contract

EmploymentEmploymentContract for workContract for workMandateMandate

– Mixed type serviceMixed type service EmploymentEmploymentContract for workContract for work

– Construction Project ContractConstruction Project Contract– CarriageCarriage– Publishing contractPublishing contract

MandateMandate– Warehousing, brokerage, commission agent, forwarding agent, Warehousing, brokerage, commission agent, forwarding agent,

commercial agent, manager contract, deposit contractcommercial agent, manager contract, deposit contract

Nominated contract (type contract)Nominated contract (type contract)

Other contractOther contract– A joint undertakingA joint undertaking

Bid societyBid society

partnershippartnership

– Technology ContractTechnology Contract– SettlementSettlement– Suretyship Suretyship

non-nominated contract (non-type non-nominated contract (non-type contract)contract)

Contract Contract sui generissui generis

Binding ContractsBinding Contracts

Mixed contract (one contract)Mixed contract (one contract)– Absorption theoryAbsorption theory– Combination theoryCombination theory– Analogy theoryAnalogy theory

Consensual contractConsensual contract v. v. real contractreal contract

Consensual contractConsensual contract (executory contract) (executory contract)– A contract which is formed by the exchange of reciproA contract which is formed by the exchange of recipro

cal declarations of intention.cal declarations of intention.– sale, gift (PRC CLsale, gift (PRC CL§ 186§ 186), loan for consumption (PRC ), loan for consumption (PRC

CLCL§210§210), warehousing (PRC CL), warehousing (PRC CL§382§382), carriage (PRC ), carriage (PRC CL)CL)

RReal contracteal contract (executed contract) (executed contract)– A contract which is formed by the delivery of the subjeA contract which is formed by the delivery of the subje

ct matter of the contract in addition to the exchange of ct matter of the contract in addition to the exchange of reciprocal declaration of intention.reciprocal declaration of intention.

– Loan for consumption within natural person (PRC CLLoan for consumption within natural person (PRC CL§§210) ,loan for consumption (Japan, ROC210) ,loan for consumption (Japan, ROC), deposit (P), deposit (PRC ClRC Cl§367, Japan, ROC Civil C§367, Japan, ROC Civil C) )

Informal contract v. formal contractInformal contract v. formal contract

Formation of contractFormation of contract– Formation required by lawFormation required by law

Informal contractInformal contract– Japan: all type contracts Japan: all type contracts – PRC: sale, gift…PRC: sale, gift…– ROC: sale, gift…ROC: sale, gift…

Formal ContractFormal Contract– A contract which a specific formality shall be excised to A contract which a specific formality shall be excised to

form such a contractform such a contract

– Formation agreed by the partiesFormation agreed by the parties

Financial LeaseFinancial Lease

Definition of Financial Leasing ContractDefinition of Financial Leasing Contract

A financial leasing contract is a contract A financial leasing contract is a contract whereby the lessor, upon purchase of whereby the lessor, upon purchase of the the lessee-selected lease itemlessee-selected lease item from from a lessee-a lessee-selected sellerselected seller, provides the lease item to the , provides the lease item to the lessee for its use, and the lessee pays the lessee for its use, and the lessee pays the rent. (PRC CL Article 237) rent. (PRC CL Article 237) 

Unidroit Conventions on InternationalUnidroit Conventions on InternationalFinancial Leasing Financial Leasing Article I para. 2Article I para. 2

2.The financial leasing transaction referred to in the previous 2.The financial leasing transaction referred to in the previous paragraph is a transaction which includes the following paragraph is a transaction which includes the following characteristics:characteristics:– (a) (a) the lessee specifies the equipment and selects the supplier without the lessee specifies the equipment and selects the supplier without

relying primarily on the skill and judgment of the lessorrelying primarily on the skill and judgment of the lessor;;– (b) (b) the equipment is acquired by the lessor in connection with a leasing the equipment is acquired by the lessor in connection with a leasing

agreementagreement which, to the knowledge of the supplier, either has been which, to the knowledge of the supplier, either has been made or is to be made between the lessor and the lessee; andmade or is to be made between the lessor and the lessee; and

– (c) (c) the rentals payable under the leasing agreement are calculated so the rentals payable under the leasing agreement are calculated so as to take into account in particular the amortization of the whole or a as to take into account in particular the amortization of the whole or a substantial part of the cost of the equipment.substantial part of the cost of the equipment.

3. This Convention applies whether or not the lessee has or 3. This Convention applies whether or not the lessee has or subsequently acquires the option to buy the equipment or to hold it 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 on lease for a further period, and whether or not for a nominal price or rental. or rental. 4. This Convention applies to financial leasing transactions in 4. This Convention applies to financial leasing transactions in relation to all equipment save that which is to be used primarily for relation to all equipment save that which is to be used primarily for the lessee's personal, family or household purposes.the lessee's personal, family or household purposes.

Lessor lesseeFinance lease

loanLender Borrower

Seller

PurchaserThe possessor of the leased item

Deliver the lease goods

Sale of Goods

Pay rentOwner of the leased item

Loan for consumption

Lender Borrower

Seller

Purchaser

Deliver the lease goods

Sale of Goods

Amortize loansOwner and Possessor of the item Mortgage in a chattel

Mortgagee Mortgagor

Seller Purchaser

Deliver the goods

Sale of Goods

Payment of the price by installment

Possessor of the item

Transfer of the title : until condition precedent fulfilled

TransfereeTransferor

Owner of the item

Attributes of Finance LeaseAttributes of Finance Lease

Type contractType contract– LeaseLease– Loan for consumptionLoan for consumption– SaleSale

Non-type ContractNon-type Contract

Attributes of Finance LeaseAttributes of Finance Lease

The alleged financial lease enterprise is an enterprise that leases The alleged financial lease enterprise is an enterprise that leases goods to a person who needs the goods after providing the capital 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 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 than an enterprise from which it lends money to a person who needs capital funds. Such a transaction pattern, without violating needs capital funds. Such a transaction pattern, without violating mandatory law, public policy, and good moral, is helpful to the mandatory law, public policy, and good moral, is helpful to the industrial and commercial activities of our country. The purpose of industrial and commercial activities of our country. The purpose of such a financial lease is to provide capital fund for the lessee, and 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 the loan for consumption could reach the goal to raise capital fund as well: however, both contract are totally different with each other. as well: however, both contract are totally different with each other. Considering the features of a financial lease, it should be interpreted Considering the features of a financial lease, it should be interpreted as a “non-type contract” which is similar to a lease contract because as a “non-type contract” which is similar to a lease contract because a financial lease differs with a loan for consumption regarding the a financial lease differs with a loan for consumption regarding the distribution of interest and hazards of the leased goods. Taiwan distribution of interest and hazards of the leased goods. Taiwan Supreme Court Civil Decision Case No. 482 (2004).Supreme Court Civil Decision Case No. 482 (2004).

Case StudyCase Study

The finance lease means an economic activity from The finance lease means an economic activity from which the leasing company purchases an object for which the leasing company purchases an object for lease under the request of the lessee and rents it to the lease under the request of the lessee and rents it to the lessee for the purpose of use. On the other hand, an lessee for the purpose of use. On the other hand, an enterprise who needs an equipment or a machine enterprise who needs an equipment or a machine selects an equipment or a machine from a supplier or a selects an equipment or a machine from a supplier or a distributor. However, the enterprise is reluctant or unable distributor. However, the enterprise is reluctant or unable to raise funds to purchase the equipment or machine. to raise funds to purchase the equipment or machine. Then the enterprise turns to request the leasing Then the enterprise turns to request the leasing company to buy the equipment and machine from the company to buy the equipment and machine from the supplier or distributor and lease the item from the leasing supplier or distributor and lease the item from the leasing company. The lessee then pays rental at stated period company. The lessee then pays rental at stated period to assure of the payment of price, interest, other to assure of the payment of price, interest, other expenses, and the profit afterward. expenses, and the profit afterward.

Because the lessor is on the position of a fund pBecause the lessor is on the position of a fund provider, he don’t own the inventory of equipment rovider, he don’t own the inventory of equipment or machine and don’t have knowledge about the or machine and don’t have knowledge about the equipment, in the whole lease activity, the lessor equipment, in the whole lease activity, the lessor is only obligated to provide a fund to purchase this only obligated to provide a fund to purchase the equipment and machine designated to the use e equipment and machine designated to the use of the lessor. Hence, all the duties pertaining to tof the lessor. Hence, all the duties pertaining to the owner, such as custody, repair, tax duty, burdhe owner, such as custody, repair, tax duty, burden of hazard, should be on the side of the lessee.en of hazard, should be on the side of the lessee.

The lessor The LesseeLease

loan

Lender Borrower

Seller of resale

Resale of the machine

Rent payment

Payment of the price

The Original Sale ofMachine

Da Pi Fa Co. (the purchaser and

possessor of the machine)

Zhong Zu Leasing Company

(The appellee)

President Co.(Creditor of Da Pi Fa Co.)

(The appellant) Hong Ying Co.(the seller of the machine)

Buyer of resale

compulsory execution of the machine

ROC Civil Code Article 761ROC Civil Code Article 761The transfer of rights in rem of personal property will not The transfer of rights in rem of personal property will not effect until the personal property has been delivered.effect until the personal property has been delivered. 　　However, if the transferee has been in possession of the However, if the transferee has been in possession of the personal property, the transfer effects when the parties apersonal property, the transfer effects when the parties agree to such transfer.gree to such transfer.

In the transfer of a right in rem of personal property, In the transfer of a right in rem of personal property, where the transferor is still in possession of it, a conwhere the transferor is still in possession of it, a contract causing the transferee to acquire its indirect potract causing the transferee to acquire its indirect possession may be made between the parties in the plassession may be made between the parties in the place of its deliveryce of its delivery..

ROC Civil Code Article 87ROC Civil Code Article 87

A fictitious expression of intent made by the A fictitious expression of intent made by the expresser in collusion with other party is void, expresser in collusion with other party is void, but the voidance can not be a valid defense but the voidance can not be a valid defense against any bona fide third party.against any bona fide third party.If the fictitious expression of intent was intended If the fictitious expression of intent was intended to conceal another juridical act, the provisions of to conceal another juridical act, the provisions of the act with respect to such another juridical act the act with respect to such another juridical act shall apply.shall apply.

ROC Civil Code Article 761ROC Civil Code Article 761

In the transfer of a right in rem of personal In the transfer of a right in rem of personal property, where a third party is in possessiproperty, where a third party is in possession of it, the transferor may transfer the claion of it, the transferor may transfer the claim against such third party for the return of m against such third party for the return of it to the transferee in place of its delivery.it to the transferee in place of its delivery.

The lessee’s rightsThe lessee’s rights

Lessee's Assumption of Buyer's RightsLessee's Assumption of Buyer's Rights– Under the sales contract concluded by the Under the sales contract concluded by the

lessor according to the lessee's selection of lessor according to the lessee's selection of the seller and the lease item, the seller and the lease item, the seller shall the seller shall deliver the subject matter to the lesseedeliver the subject matter to the lessee in in accordance with the contract, and accordance with the contract, and the lessee the lessee enjoys the rights of the buyerenjoys the rights of the buyer in respect of in respect of taking delivery of the subject mattertaking delivery of the subject matter. (PRC . (PRC Contract Code Article 239)Contract Code Article 239)

The lessee’s rightsThe lessee’s rights

Lessee's Assumption of Buyer's Lessee's Assumption of Buyer's Remedies in Case of Seller's Non-Remedies in Case of Seller's Non-performanceperformance

– The lessor, the seller and the lessee The lessor, the seller and the lessee maymay agreeagree that that any claim arising from the seller's any claim arising from the seller's non-performance of its obligationsnon-performance of its obligations under the under the sales contract will be made by the lessee. sales contract will be made by the lessee. Where the lessee makes such a claim, the Where the lessee makes such a claim, the lessor shall provide assistance. (PRC lessor shall provide assistance. (PRC Contract Code Article 240)Contract Code Article 240)

Amendment of Sales ContractAmendment of Sales Contract

Certain Amendment of Sales Contract Certain Amendment of Sales Contract Subject to Consent by LesseeSubject to Consent by Lessee

– Absent consent by the lessee, the lessor Absent consent by the lessee, the lessor may not amend any lessee-related term in may not amend any lessee-related term in the sales contract concluded by it according the sales contract concluded by it according to the lessee's selection of the seller and the to the lessee's selection of the seller and the lease item. (PRC Contract Code Article lease item. (PRC Contract Code Article 241) 241) 

Title to the lease itemTitle to the lease item

Exclusion of Lease Item from Bankruptcy Exclusion of Lease Item from Bankruptcy Assets of LesseeAssets of Lessee– Title to the lease item Title to the lease item vests in the lessorvests in the lessor. In . In

case the lessee enters into bankruptcy, the case the lessee enters into bankruptcy, the lease item is not part of its bankruptcy assets. lease item is not part of its bankruptcy assets. (PRC Contract Code Article 242) (PRC Contract Code Article 242) 

RentRent

Determination of Rental ComponentsDetermination of Rental Components– Unless otherwise agreed by the parties, the Unless otherwise agreed by the parties, the

rent under a financial leasing contract shall be rent under a financial leasing contract shall be determined determined based on the major portion of or based on the major portion of or full costs of purchasing the lease itemfull costs of purchasing the lease item and and the the lessor's reasonable profitlessor's reasonable profit. (PRC Contract . (PRC Contract Code Article 243)  Code Article 243)  

Warranty Warranty for fitness for fitness

Lessor Not Liable for Non-fitness of Lease Lessor Not Liable for Non-fitness of Lease Item; ExceptionsItem; Exceptions– Where the lease item does not comply with Where the lease item does not comply with

the contract or is not fit for the intended the contract or is not fit for the intended purpose, purpose, the lessor is not liablethe lessor is not liable, , except where except where the lessee relied on the skills of the lessor in the lessee relied on the skills of the lessor in selecting the lease itemselecting the lease item or or the lessor the lessor interfered in the selection thereofinterfered in the selection thereof. (PRC . (PRC Contract Code Article 244)Contract Code Article 244)

Warranty by LessorWarranty by Lessor

The lessor shall give warranty in respect of The lessor shall give warranty in respect of the lessee's possession and use of the the lessee's possession and use of the lease item. (PRC Contract Code Article lease item. (PRC Contract Code Article 245)   245)   

Liability for InjuryLiability for Injury

Lessor Not Liable for Damage or InjuryLessor Not Liable for Damage or Injury– If while in the possession of the lessee, the If while in the possession of the lessee, the

lease item caused personal injury or property lease item caused personal injury or property damage to any third person, the lessor is not damage to any third person, the lessor is not liable. (PRC Contract Code Article 246)   liable. (PRC Contract Code Article 246)   

Maintenance ObligationsMaintenance Obligations

Lessee's Obligation of Due Care; Lessee's Obligation of Due Care; Maintenance ObligationsMaintenance Obligations– The lessee shall The lessee shall keepkeep (or (or keep it in his custodkeep it in his custod

y)y) and and use the lease item with due careuse the lease item with due care..– While in possession of the lease item, the While in possession of the lease item, the

lessee shall perform the obligations of lessee shall perform the obligations of maintenance and repairmaintenance and repair thereof. (PRC thereof. (PRC Contract Code Article 247)Contract Code Article 247)

Lessor' s RemediesLessor' s Remedies

Lessor' s Remedies in Case of Non-Lessor' s Remedies in Case of Non-payment by Lesseepayment by Lessee– The lessee shall pay the rent in accordance The lessee shall pay the rent in accordance

with the contract. Where the lessee fails to with the contract. Where the lessee fails to pay the rent within a reasonable period after pay the rent within a reasonable period after receiving demand for payment from the receiving demand for payment from the lessor, the lessor may lessor, the lessor may require payment of the require payment of the full rentfull rent; or it may ; or it may terminate terminate the contract and the contract and repossessrepossess the lease item. (PRC Contract the lease item. (PRC Contract Code Article 248)Code Article 248)

RefundRefund

Partial Refund in Case of Termination by LessorPartial Refund in Case of Termination by Lessor– Where the parties agreed that title to Where the parties agreed that title to the lease item the lease item

will vest in the lesseewill vest in the lessee at the end of the lease term, at the end of the lease term, and after paying a major portion of the rent, the and after paying a major portion of the rent, the lessee is unable to pay the remaining balance, lessee is unable to pay the remaining balance, resulting in the lessor's termination of the contract and resulting in the lessor's termination of the contract and repossession of the lease item, repossession of the lease item, if the value of the if the value of the repossessed lease item exceeds the rent owed by the repossessed lease item exceeds the rent owed by the lessee and other expenses, the lessee may require lessee and other expenses, the lessee may require partial refundpartial refund. (PRC Contract Code Article 249). (PRC Contract Code Article 249)

Ownership of Lease ItemOwnership of Lease Item

Ownership of Lease Item at End of Lease Ownership of Lease Item at End of Lease TermTerm– The lessor and the lessee may agree on the The lessor and the lessee may agree on the

ownership of the lease item at the end of the ownership of the lease item at the end of the lease term. lease term.

– Where ownership of the lease item was not Where ownership of the lease item was not prescribed or clearly prescribed, and cannot prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 be determined in accordance with Article 61 hereof, title to the lease item shall vest in the hereof, title to the lease item shall vest in the lessor. (PRC Contract Code Article 250)lessor. (PRC Contract Code Article 250)