Category of contract

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Category of contract
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• 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

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Kinds of Contract

• Nominate contract (type contract), non-nominate
  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

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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

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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

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Nominated contract (type contract)

• Other contract
• A joint undertaking
• Bid society
• partnership
• Technology Contract
• Settlement
• Suretyship

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non-nominated contract (non-type contract)

• Contract sui generis
• Binding Contracts
• Mixed contract (one contract)
• Absorption theory
• Combination theory
• Analogy theory

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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 CL210), warehousing (PRC CL382), 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
  CL210) ,loan for consumption (Japan, ROC),
  deposit (PRC Cl367, Japan, ROC Civil C)

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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

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Financial Lease
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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 lessee-selected
  seller, provides the lease item to the lessee for
  its use, and the lessee pays the rent. (PRC CL
  Article 237) 

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Unidroit Conventions on InternationalFinancial
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.

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loan
Lender
Borrower
lessee
Finance lease
Lessor
The possessor of the leased item
Owner of the leased item
Purchaser
Pay rent
Sale of Goods
Deliver the lease goods
Seller
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Loan for consumption
Lender
Borrower
Purchaser
Amortize loans
Owner and Possessor of the item
Mortgagee
Mortgagor
Mortgage in a chattel
Deliver the lease goods
Sale of Goods
Seller
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Sale of Goods
Seller
Purchaser
Transferee
Transferor
Transfer of the title until condition
precedent fulfilled
Possessor of the item
Owner of the item
Deliver the goods
Payment of the price by installment
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Attributes of Finance Lease

• Type contract
• Lease
• Loan for consumption
• Sale
• Non-type Contract

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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).

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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.

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• Because the lessor is on the position of a fund
  provider, he dont own the inventory of equipment
  or machine and dont 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.

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loan
Borrower
Lender
Resale of the machine
Da Pi Fa Co. (the purchaser and possessor
of the machine)
Zhong Zu Leasing Company (The appellee)
Seller of resale
Buyer of resale
Payment of the price
Lease
The Lessee
The lessor
Rent payment
The Original Sale of Machine
compulsory execution of the machine
President Co. (Creditor of Da Pi Fa Co.) (The
appellant)
Hong Ying Co. (the seller of the machine)
21
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.

22
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.

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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.

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The lessees 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)

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The lessees rights

• Lessee's Assumption of Buyer's Remedies in Case
  of Seller's Non-performance
• 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)

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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) 

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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) 

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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)  

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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)

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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)   

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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)   

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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)

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Lessor' s Remedies

• Lessor' s Remedies in Case of Non-payment 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)

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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)

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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)