Reproduced from Practical Law with the permission of the publishers. For further information, visit "www.practicallaw.com".
A Q&A guide to the sale and storage of goods in Taiwan.
This Q&A covers key matters relating to sale of goods contracts, including legislative framework, rules on formation, price and payment, delivery, passing of title and risk, enforcement and remedies, exclusion of liability, choice of law and jurisdiction, and arbitration. It also provides an overview of the rules governing storage of goods.
For more information on the regulation of international trade in goods and services in Taiwan, visit International trade in goods and services in Taiwan: overview.
This Q&A is part of the International Trade and Commercial Transactions Global Guide.
Sale of goods contracts and related disputes are mainly governed by the Civil Code of the Republic of China (Civil Code). The Fair Trade Act protects small businesses against unfair terms and contains provisions on the resolution of disputes between small businesses and their larger trading partners. These include the prohibition of specific conducts for enterprises that hold market shares above a certain threshold as well as concerted action among enterprises.
Although Taiwan is a member of the World Trade Organization (WTO), sale of goods contracts are mainly regulated by domestic legislation (see above, Domestic legislation) due to diplomatic difficulties.
International rules and standard contractual terms only apply if the parties have agreed that they will apply.
The International Chamber of Commerce (ICC) international commercial terms (Incoterms) 2010 are commonly used in Taiwan. The following standard terms are not commonly used in contracts:
UNIDROIT Principles of International Commercial Contracts (PICC).
Uniform Customs and Practice for Documentary Credits (UCP).
Uniform Rules for Demand Guarantees (URDG).
A legally enforceable contract is formed when one party makes an offer regarding the essential elements of the contract and the other party accepts the offer expressly or impliedly. The essential elements of a sale of goods contract include the goods and the price (Article 345, Civil Code). The Civil Code also governs non-essential elements of enforceable contracts (for example, the time and method of delivery, and the effects of termination).
A sale of goods contract need not be in writing, unless a writing is required by law or the parties. For example, contracts for the sale of real estate must be in writing (Civil Code).
Contracts in electronic form are legally binding and enforceable in Taiwan. However, the Taiwanese courts may cast doubt on the authenticity of emails. The person that seeks to enforce the contract will bear the burden of proof.
English is commonly used in international sale of goods contracts. The Taiwanese courts recognise the enforceability of contracts written in English. However, to submit a contract as evidence, the contract must be translated into Chinese.
The price of a sale of goods contract need not be fixed when the contract is formed, but must be determinable in light of the circumstances of the contract. For example, if the parties have agreed that the price will be the market price, the price is presumed to be the market price at the place and time of performance of the contract, unless otherwise provided by the contract (Article 346, Civil Code).
The Civil Code does not impose restrictions on the method of payment. There are no restrictions on currency of payment.
The price must be paid at the time and place of delivery of the goods, unless otherwise provided by law, current business practices, or the contract (Articles 369 and 371, Civil Code).
If the parties do not stipulate the time and method of delivery, the buyer can demand delivery at any time and the seller can deliver the goods at any time, unless otherwise provided by law, the contract, the nature of the obligation or other circumstances (Article 315, Civil Code). If the time of delivery has been agreed, the buyer cannot demand delivery before then, but the seller can deliver the goods before the agreed time if the buyer has no objections (Article 316, Civil Code).
Specific goods must be delivered at the place they were at the time of the contract, unless otherwise provided by law, the contract, customs, the nature of the obligation or other circumstances (Article 314, Civil Code).
Unless otherwise provided by the law, the contract, or the buyer's instructions or unilateral behaviour, the seller must bear the costs of delivery (Article 378, Civil Code). The buyer must inspect the goods according to ordinary procedures as soon as possible after receipt. The buyer must retain evidence and notify the seller of any significant defect found on the goods. Failure to do so within a reasonable time will be deemed acceptance of the goods (Articles 354 and 356, Civil Code).
Title to real estate passes to the buyer after registration of the transfer of title with the Land Registration Office in Taiwan. Title to other types of goods passes to the buyer on delivery, unless otherwise provided by law or the contract.
Generally, retention of title clauses are enforceable between the parties, but are only enforceable against third parties if they are registered with the Taiwanese authorities (Article 5, Personal Property Secured Transactions Act). However, there are currently no procedures in place to register retention of title clauses. As an alternative, the seller can reduce the credit period or request the buyer to grant a right to enter the buyer's premises to recover goods.
Unless otherwise provided by the contract, risk in relation to the goods passes to the buyer either:
At the time of delivery (Article 373, Civil Code).
At the time the seller delivers the goods to a carrier, provided that the buyer requested delivery to a place other than the agreed place of delivery (Article 374, Civil Code).
The seller must warrant that, at the time when risk passes to the buyer, the goods:
Exist.
Have no significant defect that may result in a reduction in value.
Are fit for their ordinary function or the purpose of the contract.
Are free from any right enforceable by third parties against the buyer.
Comply with any contractual quality requirements.
Unless otherwise provided by the contract, the seller is not liable for defects if the buyer knew of the defects at the time of conclusion of the contract. If the buyer was not aware of the defects due to gross negligence, the seller is only liable for those defects if it guaranteed that the goods were free from defects or deliberately chose not to disclose them to the buyer. These issues are regulated by Articles 349 to 355 of the Civil Code.
The remedies for breach of a sale of goods contract are regulated by the provisions of the Civil Code governing non-performance and warranty for defective goods. Subject to the applicable statute of limitations, these remedies include:
Cancellation of the contract. Cancellation dissolves the contract and restores the parties to their original position. Reliance damages and restitution damages may also be awarded in addition to cancellation.
Reliance damages. Reliance damages compensate the non-breaching party for losses arising from reliance on the breaching party's promise.
Expectation damages. Expectation damages compensate the non-breaching party for losses arising from non-performance, late performance, or inadequate performance.
Restitution damages. Restitution damages return any unjust enrichment obtained by any party during performance of the contract.
Liquidated damages. Liquidated damages are agreed by the parties on conclusion of the contract. However, the court can reduce the amount of liquidated damages if it considers them to be unreasonably high.
If the non-breaching party's negligence contributed to or aggravated the damage, the court can reduce the amount of damages or refuse to award damages (Article 217, Civil Code).
A court can order that a contract be performed rather than awarding damages for non-performance. However, in practice, the main remedy is seeking damages.
If the seller does not perform its obligations, the buyer can seek remedies under the rules on non-performance (Article 353, Civil Code). The buyer can either:
Cancel the contract and seek reliance damages and/or restitution damages.
Maintain the contract and seek expectation damages, restitution damages, and/or other types of damages (if applicable).
(Part II, Civil Code.)
Where the goods are defective, the buyer can do any one of the following:
Request the seller to replace the goods (Article 364, Civil Code), provided that the goods are manufactured products that are replaceable.
Seek a price reduction (Article 359, Civil Code).
Cancel the contract (Article 359, Civil Code).
In addition, the buyer can claim damages if either:
The goods lack any quality warranted by the seller.
The seller deliberately failed to disclose significant defects to the buyer.
(Article 360, Civil Code.)
Generally, the seller can refuse to deliver the goods until the buyer pays the price, unless otherwise provided by law, current business practices, or the contract (Articles 264 and 369, Civil Code). If the seller must perform its obligations first, and the buyer's assets have decreased, the seller can refuse to deliver the goods until the buyer pays the price or provide security for payment (Article 265, Civil Code).
The seller can also choose to either:
Cancel the contract and seek reliance damages and/or restitution damages.
Maintain the contract and seek expectation damages, restitution damages, and/or another type of damages.
(Part II, Civil Code.)
The parties to a contract cannot exclude liability for intentional or gross negligence (Article 222, Civil Code).
A clause excluding or limiting the seller's liability for defective goods or rights is ineffective if the seller intentionally concealed a significant defect (Article 366, Civil Code).
Generally, exclusion clauses are enforceable for other types of breach and there are no specific requirements for creating enforceable exclusion clauses.
The Taiwanese courts generally recognise and apply a choice of foreign law in a sale of goods contract, unless the chosen law is ineffective under the relevant legal system (Article 20, Act Governing the Choice of Law in Civil Matters Involving Foreign Elements).
The courts can refuse to apply a chosen law that violates Taiwan public order or good morals (Article 8, Act Governing the Choice of Law in Civil Matters Involving Foreign Elements). In addition, local laws governing real estate will override a choice of foreign law in the case of conflicting provisions.
If the parties do not make a choice of law (or the chosen law is ineffective), the court will determine the governing law according to the doctrines of the proper law and characteristic performance, as follows:
The formation and effect of the contract are governed by the law that is most closely connected with the contract.
The law of the domicile of the party that must perform the characteristic obligation is presumed to be the most closely connected law. However, if the contract concerns immovable property, the law of the place where the immovable property is located is presumed to be the most closely connected law.
(Article 20, Act Governing the Choice of Law in Civil Matters Involving Foreign Elements.)
In accordance with the Code of Civil Procedure and a Supreme Court's ruling (Tai Appellate No. 445 of 106), the local courts will give effect to a choice of foreign jurisdiction in a sale of goods contract, unless any of the following applies:
The choice violates exclusive jurisdiction provisions of the Code of Civil Procedure.
The chosen foreign jurisdiction does not permit a choice of jurisdiction between the parties.
The choice of foreign jurisdiction is manifestly unfair under Article 28, paragraph 2 of the Code of Civil Procedure.
The parties wish to resolve their dispute in the Taiwanese courts.
In addition to meeting these conditions, parties that wish to choose a foreign jurisdiction to the exclusion of other courts should stipulate this expressly and conspicuously in the contract, or this may give rise to disputes. Some courts have held that a choice of foreign jurisdiction without an express exclusion of other courts must be exclusive in principle. However, in 2019, the Supreme Court held that a choice of foreign jurisdiction is not definitely exclusive and must be construed as a choice granting jurisdiction to the chosen court in principle, unless otherwise explicitly provided by the parties or other special circumstances (Supreme Court's ruling, Tai-Appellate No. 373 of 108). Generally, the Taiwanese courts still hold diverse opinions on this issue.
If the parties do not make a choice of jurisdiction, the Taiwanese courts will decide on the issue of jurisdiction in accordance with the Code of Civil Procedure. Generally, a lawsuit must be filed in the courts of the claimant's location.
Arbitration and ADR clauses are commonly included in contracts for the sale of high technology products.
Generally, local courts recognise and enforce domestic and foreign arbitration awards. The recognition of a foreign arbitration award must be initiated by filing an application with a competent district court together with:
An original of the award or a copy certified by a Taiwanese consulate or authorised agency abroad.
An original of the arbitration agreement or a copy certified by a Taiwanese consulate or authorised agency abroad.
The full text of the foreign arbitration law.
The applicable rules of the foreign arbitration institution or international arbitration institution.
A Chinese translation of the above documents, if any of these documents were drafted in a foreign language.
(Article 48, Arbitraition Law of ROC.)
However, the courts must refuse to recognise and enforce foreign arbitration awards that are against Taiwan's public policy or cannot be resolved through arbitration under Taiwanese laws. In addition, the Taiwanese courts may refuse to recognise foreign arbitration awards issued in jurisdictions that do not recognise and enforce arbitration awards rendered in Taiwan (Article 49, Arbitration Law of ROC).
Taiwan is not a party to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention).
On request by the depositor, a warehouseman must issue a warehouse receipt as proof of the depositor's right to claim back the goods in storage. Transfer of ownership to goods in storage must be done by delivery of the warehouse receipt, which must be endorsed by the depositor/holder of the receipt and the warehouseman (Articles 615 and 618, Civil Code).
A warehouse receipt must contain the following information in addition to the warehouseman's signature:
The name and address of the depositor.
The place of storage.
The type, quality, and quantity of goods stored, and the type, number and marks of packages.
The place and date of issue of the receipt.
The period for which the goods are stored, if applicable.
The storage charge.
If the goods are insured, the amount of insurance cover, the period for which the goods are insured and the name of the insurer.
(Article 616, Civil Code.)
Goods in storage can be pledged in accordance with Article 618 of the Civil Code (Article 902, Civil Code).
There are currently no impending developments or proposals for reform of national legislation affecting sale of goods contracts and/or storage of goods in your jurisdiction.
AUTHOR: Hung Ou Yang
Managing Attorney
Taipei
+886-2-2707-9976
[email protected]
AUTHOR: Jia-Jun Fang
.jpg)
Taipei
+886-2-2707-9976
[email protected]
Copyright Brain Trust International Law Firm
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
撥打電話