萬國法律事務所

Taiwan’s Ministry of the Interior (MOI) has recently decided to implement a performance guarantee mechanism to take effect in May 2011. The mechanism will be enforced to prevent situations where consumers are unable to claim compensation for the upfront payments previously made as a result of a Construction Company filing for bankruptcy prior to the completion of a project.

MOI has decided that the performance guarantee mechanism will be incorporated into the standard sales contract. However, the Taiwanese Architecture Trade Union has advised that to date, there is no clear proposal as to how the implementation will be made.

The Consumer Protection Commission has agreed that the protection mechanisms should be implemented in either one of the following ways. The Purchaser and the Seller may choose which method shall apply.

The first group of mechanisms is categorized into those that substitute the performance guarantee method. This includes the following methods:

1. Guaranteed refund of the upfront payment by financial institutions;

2. Establishing trust and place the purchase prices paid by consumers under the trust and the trustee will disburse the prices for exclusive purpose according to the timeframe / phases as agreed upon by the consumers/buyers and construction company and trustee;

3. Joint liability with a Joint Guarantor; and

4. Joint liability with the Trade Union.

The second group of mechanisms is the one proposed by MOI, which is yet to be decided. Further negotiations will be made with Construction Companies in order to appropriately implement the performance guarantee by May of 2011.