Haworth & Lexon Law Newsletter
No.2 2009 (Total:No.87) March.15th, 2009
Edited by Haworth & Lexon
“Haworth & Lexon Law Newsletter ” is issued every month, mainly introducing the legal change in the fields of Corporate, Securities, Foreign investment, E-commerce, International trade etc. with necessary comment. All the comments do not mean the legal opinion of our firm and the firm does not have any legal liability for such comment. Should you have any interest in any topics or any questions please feel free to contact the firm. You will be expected to have satisfactory response from the professional attorney of our firm.
News of Haworth & Lexon
The Case Handled by Attorney Daniel Sheen from Austin Haworth & Lexon (Sydney) Law Firm Is Embodied in the Case Report of Australia New South Wales State Supreme Court.
Latest Laws and Regulations:
Administrative Measures for the Registration of Technology Import and Export Contracts.
Administrative Measures for Technologies Prohibited or Restricted from Import.
Administrative Measures for the Registration of Capital Contributions Made with Equities.
Interim Measures for the Administration of Sourcing Withholding of Income Tax on Non-Resident Enterprise.
Working Guidelines for the Gratuitous Transfer of State-owned Property Rights of Enterprises.
Amendment to the Criminal Law of the People’s Republic of China (VII).
Regulation on Tour Corporations.
Food Safety Law of the People’s Republic of China.
Insurance Law of the People’s Republic of China.
Interim Provisions of Shanghai Municipality on the Installation of Advertisement in Public Transport Vehicles and Stations.
Administrative Provisions on Temporarily Medicine Practice in Mainland by Doctors from Hong Kong SAR and Macau SAR” and “Administrative Measures on Temporarily Medicine Practice in Mainland China by Directors from Taiwan Region.
Rights and Obligations between the Proprietor and the Subcontractor over Contracts on Undertaking Construction Projects.
Simple Analysis on the Stipulation of Service Term in Labor Dispatch.
The Lyric Searching Service Provided by Baidu Has Objectively Led the Users to Obtain Information Directly from Its Website and Is Held as Infringemnt by the People’s Court.
The New Patent Law Has Perfected the Principle of Exhaustion of Rights and Permitted Parallel Import.
Extraterritorial Laws and Regulations:
Main Business Modes That Are Available for Investment in Australia.
Extraterritorial Laws and Regulations
Relevant Legal Issues concerning the Purchase of Real Property by Foreigners in Australia.
News of Haworth & Lexon
The Case Handled by Attorney Daniel Sheen from Austin Haworth & Lexon (Sydney) Law Firm Is Embodied in the Case Report of Australia New South Wales State Supreme Court
The case handled by attorney Daniel Sheen from Austin Haworth & Lexon (Sydney) Law Firm is embodied in the Case Report of Australia New South Wales State Supreme Court.
Attorney Daniel Sheen, the partner of Austin Haworth & Lexon (Sydney) Law Firm, has represented a house buryer in a dispute involving of real estate purchase contract to bring a litigation, which claims that the real estate agency has committed unfair advertising and requires for rescission of the real estate purchase contract. The law and cases before this have also illustrated that, a real estate purchase contract signed by a lawyer on behalf of the principal, regardless the case whether the principal knows the content of the contract, shall be valid. Still, it is expressly stated in the real estate purchase contract of fixed format that any advertising by the real estate agency shall not constitute any part of the contract.
However, Australia New South Wales State Supreme Court upholds the claims of attorney Daniel Sheen in the case Zhang v VP3O2 SPV Pty Ltd & Ors ( NSWSC 73) and has rescinded the real estate purchase contract. The newspaper Sydney Morning Herald holds that such a judgment will be an important case of epoch making significance. And the spokesperson of New South Wales Real Estate Association says that, when receiving the interview of the newspaper, the New South Wales Real Estate Association is studying the case and the far-reaching consequences to the whole real estate industry.
Now, the case has been embodied in page 73 of the Case Report of Australia New South Wales State Supreme Court. For whole article of the judgment, please visit: http://www.haworthlexon.com/verdict/2009NSWSC73.doc
Latest Laws and Regulations
Administrative Measures for the Registration of Technology Import and Export Contracts
The revised Administrative Measures for the Registration of Technology Import and Export Contracts (hereinafter “the Measures”) is promulgated by the Ministry of Commerce on February 1, 2009 and shall come into force 30 days after promulgation. The Administrative Measures for the Registration of Technology Import and Export Contracts (Order No.17  of the former Ministry of Foreign Trade and Economic Cooperation) shall be abolished simultaneously.
Technology import and export contracts shall include a patent assignment contract, a contract for assigning the right to apply for a patent, a contract for licensing the implementation of a patent, a contract for licensing a technological secret, a technical service contract and other contracts concerning technology import and export. According to the Measures, administrative department of commerce shall be the administrative department for the registration of technology import and export contracts.
The revised Measures have mainly made the following adjustment to the former regulation:
1. Time for contract registration: the Measures provide that a technology importer or exporter shall handle the contract registration formalities within 60 days after the contract becomes effective, unless the contract provides for drawing a percentage as the mode of payment. For a contract providing for drawing a percentage as the mode of payment, contract registration formalities shall be handled within 60 days after the initial base amount for drawing a percentage is formed, and thereafter, the contract modification formalities shall be handled each time after the base amount for drawing a percentage is formed.
2. Content for contract registration: Article 10 of the Measures has modified the major content for registration of contracts on freely imported and exported technologies and deleted the former settlement method of foreign exchange and credit form and added the valid term of the contract. The major content for registration of contracts on freely imported and exported technologies are: contract number, contract name, provider of technology, accepting party of technology, user of technology, brief of contract, contracted amount, payment method and valid term of the contract.
3. Registration procedure for contracts that need revision: the Measures provide that if provider of technology, accepting party of technology or user of technology change their name or if such provisions as contracted amount, payment method and the like of a registered technology contract change, the importer or exporter may only handle the registration for the revised part in the original contract rather than re-entering into a new contract.
4. The Measures have also made provisions in respect of the loss, suspension, and dissolution of contract registration certificate: if the exporter loses technology export registration certificate, it is available to handle reissuance formalities in the administrative department of commerce by submitting loss-report certificate, reissuance application and payment certificate of foreign exchange issued by relevant departments; if a registered technology contract is suspended or dissolved for one reason or another during the process of implementation, it is necessary to make a filing in the administrative departments for registration.
Administrative Measures for Technologies Prohibited or Restricted from Import
The revised Administrative Measures for Technologies Prohibited or Restricted from Import (hereinafter “the Measures”) is promulgated by the Ministry of Commerce on February 1, 2009 and shall come into force 30 days after promulgation. The former Administrative Measures for Technologies Prohibited or Restricted from Import (Order No.18  of the former Ministry of Foreign Trade and Economic Cooperation and the State Economic and Trade Commission) shall be abolished simultaneously.
According to the Measures, the administration for technologies prohibited or restricted from import is divided into such two methods as prohibition of import and licensing administration: (1) Any technology prohibited from import as listed in the Catalogue of Technologies Prohibited or Restricted by China from Import shall not be imported; and (2) Any technology restricted from import as listed in the Catalogue shall handle the import licensing formalities according to these Measures.
The revised Measures have mainly made the following adjustment to the former regulation:
1. The administrative department of technologies restricted from import: the administrative departments of commerce of all provinces, autonomous regions and municipalities directly under the Central Government (hereinafter referred to as the “local administrative departments of commerce”) shall be examination organs of technologies restricted from import, and be responsible for the licensing work on the technologies restricted from import within their respective administrative regions. The Ministry of Commerce shall be responsible to supervise and inspect the technology import license undertaken by local administrative department of commerce. Centrally governed enterprises shall handle the licensing formalities at the local administrative departments of commerce according to the territorial jurisdiction principle. And local administrative department of commerce shall file the technology import licenses approved in the last year to the Ministry of Commerce on every January 31.
2. Further refine the provisions on technical examination and trade examination of technologies restricted from import: the Measures provide that the content of trade examination of technologies restricted from import contain: (1) whether it conforms to the foreign trade policies of China; (2) whether is good for the development of foreign economic and technological cooperation; and (3) whether it will have any adverse effect on the establishment or speeded establishment of a particular industry in China. The technical examination of technologies restricted from import shall contain: (1) whether it will endanger the national security, public interests or public morality; (2) whether it will endanger the health or safety of human beings or the life or health of animals and plants; (3) whether it will cause damage to the environment; and (4) whether it conforms to the industrial policies and economic and social development strategies of the state, and whether it is good for the technical progress and industrial upgrading of China and for protecting the economic and technical rights and interests of China.
3. The provisions on examination procedures has been slightly changed and the State Economic and Trade Commission as provided in former regulation is not covered: the Measures provide that local administrative department of commerce shall, within 30 workdays after receiving the Application Form, organize technical and trade experts to make technical and trade examinations on the technology to be imported, and decide whether to approve the import or not. And local administrative department of commerce shall, within 10 workdays after approval of the import, examine the reality of the technology import contract and decide whether to approve the license or not.
4. The Measures have also made revisions to other items: for example, the Measures provide that: the Letter of Intent of the People’s Republic of China on Licensing Technology Import uniformly made and numbered by the Ministry of Commerce and issued by local administrative department of commerce shall be valid for three years. The Measures have still made special provisions toward inspection and clearance formalities by the Customs: when importing the technologies restricted from import as listed in the Catalogue of Technologies Prohibited or Restricted by China, the technology importer shall present the Technology Import License to the Customs. The Customs will handle the inspection and clearance formalities on the ground of the Technology Import License.
Administrative Measures for the Registration of Capital Contributions Made with Equities
The “Administrative Measures for the Registration of Capital Contribution Made with Equities” (hereinafter “the Measures”) is promulgated on January 7, 2009 by the State Administration for Industry and Commerce and shall come into force as of March 1, 2009.
Capital contribution made with equities refier to the activity that the investor invests his (its) equities in a limited liability company or joint stock limited company established within China (hereinafter “equity company”) to any other limited liability company or joint stock limited company within China.
As provided in the Measures, the equities for capital contribution shall be clear and of full ownership, and may be transferred according to law. The equities shall not be used for a capital contribution under any of the following circumstances: (1) The registered capital of the equity company has not been paid up; (2) The equities have been pledged; (3) The equities have been frozen; (4). The equities shall not be transferred under the articles of association of the equity company; or (5) The transfer of equities by shareholders of an equity company shall be subject to an approval, but no approval has been acquired.
Comparing with the general provisions in the Company Law, the Measures has given more srtict provisions on the details such as the percentage of capital contribution: (1) The sum of capital contributions made with equities and other non-monetary property by all shareholders shall not be higher than 70% of the registered capital of the investee company; (2) The equities used for a capital contribution shall be appraised by a legally established appraisal agency; (3) Where an investor makes a capital contribution with equities at the time of forming a company, he or it shall make an actual payment and the investee company shall undergo the modification registration of the paid-in capital within 1 year as of the date of formation of the investee company; and (4) Where an investor makes a capital contribution with equities at the time of increasing the registered capital of a company, he or it shall make an actual payment before the investee company applies for undergoing the modification registration of the increase of registered capital.
As to the submission of materials, the Measures in general adopts the Regulations on the Administration of Company Registration and other relevant provisons concerning the submission of materials on enterprise registration as provided by the State Administration for Industry and Commerce, and strengthens that the invested company shall, when applying for registration in such form that subscription of capital contribution is made with equity, submit the warranty on subscription of capital contribution made with equity that is signed by the shareholders subscribing the capital contribution made with equity and the copy of the business license of the equity company.
Interim Measures for the Administration of Sourcing Withholding of Income Tax on Non-Resident Enterprise
The “Interim Measures for the Administration of Sourcing Withholding of Income Tax on Non-Resident Enterprise” (hereinafter “the Mearsures”) is promulgated on January 1, 2009 by the State Administration of Taxation and shall come into force as of promulgation.
The term "non-resident enterprise" refers to an enterprise, as provided in the Enterprise Income Tax Law, established under the law of a foreign country (region), whose actual institution of management is not inside China but which has offices or establishments inside China; or which does not have any offices or establishments inside China but has incomes sourced in China.
Sourcing withholding of income tax on non-resident enterprises refers to a non-resident enterprise that does not have any offices or establishments inside China but has incomes sourced in China, which mainly include equity incomes such as the dividend and bonus and incomes from interest, rent, royalties, lease of property and transfer of property, under such circumstances the domestic payer shall be the withholders.
The Measures have given provisions on administration of sourcing withholding of income tax on non-resident enterprises:
1. As to the source of income tax on non-resident enterprise, the Measures have set up withholding registration and contract filing systems. The Measures require that the withholder shall declare for tax withholding registration within 30 days after the execution of the contract with non-resident enterprises, and submit the contract signed with non-resident enterprise to taxation department for filing. At the same time, it shall report the Filing Registration Form for Contract Withholds Enterprise Income Tax, the copy of the contract and related materials to the competent taxation department. As to the equity assignment that is transacted outside the territory of China, the assigned domestic enterprises shall submit the copy of the contract to taxation department for filing.
2. As to such issues arising from taxation as the calculation of tax and status of treaty preferences in the process of withholding, the Measures have specified the method for tax calculation and tax pursuit. The Measures provides that the withholder shall, at every time when paying income from dividend or bonus to non-resident enterprise, withhold the enterprise income tax from the payment shall be paid or is due. The payment that is due refers to the payable amount that shall be added as costs or expenses by the payer according to accrual basis.
The Measures provide that if the non-resident refuses to withhold the tax, the withholder shall suspend to make certain payment that equals to the amount of the taxes that shall be paid by the non-resident enterprise, and report to the competent taxation department within one day and submit written statement. If the withholder fails to withhold the tax or is unable to withhold the tax according to the law, the non-resident enterprise shall, within 7 days after the payment made by the withholder or after the day of payment becomes due, declare and pay the enterprise income tax to the competent taxation department at the place where the income occurs.
3. As to follow-up management system, the Measures provide that competent taxation department shall set up management book to strengthen the after tax tracking management. The Measures require that competent taxation department shall conduct tax inspection in respect of the income tax on non-resident enterprises and give penalties to those activities that do not handle withholding registration, do not perform withholding obligation, do not make tax declaration and etc according to the relevant provisions in the Law on Tax Collection and Administration & its implementation rules and the Administrative Measures for Tax Registration.
Working Guidelines for the Gratuitous Transfer of State-owned Property Rights of Enterprises
The “Working Guidelines for the Gratuitous Transfer of State-owned Property Rights of Enterprises” (hereinafter “the Guidelines”) is promulgated on February 16, 2009 by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and shall come into force as of promulgation.
The gratuitous transfer of state-owned property rights of enterprises refers to the gratuitous transfer of state-owned property rights of enterprises between government organs, public institutions, solely state-owned enterprises or solely state-owned companies. The Guidelines are the supportive documents of the Interim Measures for the Administration of Gratuitous Transfer of State-owned Property Rights of Enterprises promulgated in 2005.
The Guidelines require that the gratuitous acceptance of state-owned property of enterprises by central enterprise and its affiliates shall conform to the requirements of SASAC on decreasing the management levels of enterprises, and the management level of enterprises after transfer shall not in principle exceed 3 levels. The parties to the transfer shall strictly prevent and control the risks from gratuitous transfer and the promised items shall be rigorous, reasonable and practical, and shall have direct relationship with the enterprise to be transferred.
According to the Guidelines, the concrete procedure for gratuitous transfers that need approval of SASAC shall be: the central enterprises shall submit application documents and relevant materials to SASAC after it has undertaken the internal procedure on examination and approval; the SASAC shall give preliminary examination opinions within 5 working days after receiving the application documents and relevant materials; where certain problems are found in the preliminary examination, the central enterprise shall, if no objection exist after communication with examination and approval persons in SASAC, revise and perfect the relevant materials within 5 working days and thereafter report the materials to the SASAC.
As provided in the Guidelines, the SASAC will examine and approve the gratuitous transfer from the following four aspects: (1) the parties to the transfer have competent qualification and the property rights of the enterprise to be transferred are clear; (2) the transfer conform to the major business and development plan of the central enterprise and is better to improve the core competitiveness of the enterprise; (3) the decision procedure of the parties involved comply with relevant laws and regulations and the related documents are complete and effective; and (4) as to the prevention and control of relevant risks, it is provided that the content of the transfer agreement shall be full without any provision that may lead to disputes.
Amendment to the Criminal Law of the People’s Republic of China (VII)
The “Amendment to the Criminal Law of the People’s Republic of China (VII)” (hereinafter “the Catalogue” (hereinafter “the Amendment”) is adopted and promulgated at the 7th session of the Standing Committee of the 11th National People’s Congress of the People’s Republic of China on February 28, 2009 and shall come into force as of promulgation.
The Amendment has mainly made the following adjustment to the original law:
1. The Amendment has enlarged the scope of crime subject of bribery, which has added the near relative of a state functionary or other persons that have close relationship with a state functionary to the scope of crime subject of bribery. The Amendment provides that where the near relative of a state functionary or other persons that have close relationship with state functionary seek illegitimate gain, exact or accept articles of property from trustors by the action related to the post of such state functionary or by taking advantage of the position of such state functionary, shall be sentenced to a maximum of more than seven years of fixed-term imprisonment, and may in addition or exclusively be sentenced to a fine or confiscation of property. At the same time, the Amendment has supplemented such cases for resigned state functionary and increased the maximum fixed-term imprisonment of the crime of huge property of unknown source from 5 years to 10 years.
2. The Amendment has given more clear provisions to the concrete clues of inside transactions. It is defined in the Amendment that inside transaction refers to the such case where the person has inside information on securities or futures transactions or illegally obtains inside information on securities or futures transactions, and prior to the release of the information that involves the issuance of securities or securities or futures transactions or other information that has a material effect on the transaction price of securities or futures, buys or sells the said securities, engages in the futures transaction related to the inside information, leaks the said information, or explicitly or implicitly advises others to engage in the aforesaid transaction activities.
At the same time, the Amendment provides that where any practitioner of a stock exchange, a futures exchange, a securities company, a futures brokerage company, a fund management company, a commercial bank, an insurance company or any other financial institution or any staff member of the relevant regulatory department or industry association uses any undisclosed information obtained by taking advantage of his position other than the inside formation and violates the relevant provisions, it shall be deemed as the crime of inside transaction or crime of disclosing inside information.
3. The Amendment has made relatively large revision to the standard of measurement of penalty of the crime of tax evasion. It is provided in the Amendment that the crime of tax evasion shall be that a taxpayer files false tax returns by cheating or concealment or fails to file tax returns. As to the measurement of penalty of the crime of tax evasion, the Amendment has deleted the former standard for tax evasion and defined two standards for evasion of tax: (1) the amount of evaded taxes is relatively large and accounts for more than 10 percent of payable taxes; and (2) the amount is huge and accounts for more than 30 percent of payable taxes. In the meanwhile, the Amendment provides that where any taxpayer who has committed the tax evasion, but made up the payable taxes and paid the late fine, and has been administratively punished, he/she shall not be subject to criminal liability.
Beyond to the above content, the Amendment has made relevant revisions or further provisions to such crimes as smuggling of rare species, pyramid selling, kidnap and ransom, illegal disclosure of information, hacking activity and the like. Please visit our website for detailed information.
Regulation on Tour Corporations
The “Regulation on Tour Corporations” (hereinafter “the Regulation”) is promulgated on February 20, 2009 by the State Council and shall come into force as of May 1, 2009. The Regulation on the Administration of Tour Corporation shall be abolished simultaneously.
According to the Regulation, the tour corporation refers to enterprise legal persons that engage in such activities as soliciting, organizing and receiving tourists, provide tourists with relevant tourism services, and conduct domestic tourism business, inbound tourism business, or outbound tourism business. The establishment and business activities of tour corporations within the territory of Mainland China and the tour corporations invested by investors from Hong Kong SAR, Macau SAR and Taiwan region shall be subject to the Regulation.
The Regulation has mainly made the following adjustment to the former regulations:
1. The Regulation has confirmed the supervision and administration authority of tour corporations: the tourism administrative department of the State Council shall be responsible for the supervision and management of all tour corporations throughout the country. The relevant administration for industry and commerce, price, commerce, and foreign exchange, etc. of the people’s governments at and above the county level shall, according to the division of functions, supervise and manage tour corporations according to law.
2. The Regulation has uniformed the entry conditions for engagement of domestic tourism business and inbound tourism business: any tour corporation that has obtained the business permit for two years or more, and is not subject to any punishment more serious than fine by the administrative body due to the infringement upon the legitimate rights and interests of tourists, may apply for operating the outbound tourism business.
3. The Regulation has set up the assurance fund system: it is provided in the Regulation that a tour corporation may either open a special account for quality assurance fund in the bank designated by the tourism administrative department or provide the secured amount of which is not less than the amount of the corresponding quality assurance fund to the tourism administrative department. Tour corporations that operate the domestic tourism business and inbound tourism business shall deposit the quality assurance fund of 200,000 Yuan and tour corporations that operate the outbound tourism business shall increase the deposit of quality assurance fund by 1,200,000 Yuan. Interests from the quality assurance fund shall be owned by the tour corporation. For tour corporations that do not engage in tourism business, the quality assurance fund may be taken back from the bank by presenting the document issued by tourism administrative department.
4. The Regulation has revised the entry for foreign invested tourism corporations and the relevant examination and approval formalities. The Regulation has deleted the special requirements for foreign invested tour corporations such as the minimum registered capital and the condition for investors, and abolished the restriction on foreign invested tour corporations that no branch is allowed to be set up. In addition, it is allowed to set up foreign invested tour corporations in such form as Sino-foreign equity joint, Sino-foreign cooperative and solely foreign invested tour corporation, however, foreign invested tour corporations may not operate the business for residents’ in Mainland China to travel to other countries and to Hong Kong SAR, Macao SAR and Taiwan region, unless it is otherwise provided for by the economic and trading agreement or by other provisions.
Apart from that, the Regulation has made concrete provisions on such issues as the establishment and operation of tour corporations, travelling contract and tour corporation liability insurance. Please visit our website for detailed information.
Food Safety Law of the People’s Republic of China
The “Food Safety Law of the People’s Republic of China” (hereinafter “the Food Safety Law”) is promulgated by the Standing Committee of the National People’s Congress of China on February 28, 2009, and shall come into force as of June 1, 2009. The Food Hygiene Law of the People’s Republic of China that is implemented on October 30, 1995 shall be abolished simultaneously.
The Food Safety Law has mainly made the following major revisions to the original law:
1. The Food Safety Law has set up a food safety supervision system, in which various departments at various levels be the supervision bodies and the Food Safety Committee under the State Council shall be the overall coordination and guidance body. It is provided in the Food Safety Law that the State Council shall establish a Food Safety Committee; the health administrative department shall undertake the comprehensive coordination function for food safety; the quality supervision department, industry and commerce administrative department and food and drug administrative department shall supervise and administer the food production, food circulation and catering services, respectively; the agriculture administrative department shall undertake the supervision according to the Law on the Quality and Safety of Agricultural Products, however, the formulation of quality and safety standards for edible agricultural products and the release of safety information about edible agricultural products shall be governed by the Food Safety Law.
2. The Food Safety Law provides that food safety risk monitoring system shall be established to monitor the food-borne diseases, food contamination and harmful factors in food. The result of food safety risk assessment is the scientific basis for formulating and revising the food safety standards, and for exercising food safety supervision and administration, the content includes risk assessment on the biological, chemical and physical hazards in food and food additives. The health administrative department of the State Council shall be responsible for organizing the food safety risk assessment work. It shall form a food safety risk assessment expert committee composed of experts in medical science, agriculture, food, nutrition, etc., to assess food safety risks, and shall timely report the result of food safety risk assessment to relevant departments of the State Council.
3. The Food Safety Law provides that the food safety standard is a standard of compulsory enforceability, and there shall be no other food compulsory standards other than the food safety standard. It is provided in the Food Safety Law that the health administrative department of the State Council shall consolidate the compulsory standards in the existing edible agricultural product quality and safety standards, food safety standards, food quality standards as well as relevant industrial standards on food and uniformly publish them as national food safety standards. In the absence of national food standards or local standards for the food produced by an enterprise, the enterprise shall formulate enterprise standards as the basis for organizing the production thereof.
4. The Food Safety Law provides licensing system for the production and operation of food. Those intending to engage in food production, food circulation or catering services shall obtain a license for food production, food circulation or catering services. Besides, the Food Safety Law has made detailed provisions in respect of such systems as the check and inspection record for the purchased food, ex-factory check record and food additives during the production and operation of food production enterprises.
5. The Food Safety Law has set up the food recall and business suspension system, and abolished the former quality-inspection-free mechanism. It is provided in the Food Safety Law that where a food producer finds that any food it produces does not conform to the food safety standards, it shall promptly stop the production, recall all the food already placed on market for sale, notify the related producers, business operators and consumers and record the recall and notification information. The food safety supervision and administration department shall not implement quality-inspection-free mechanism in respect of food. The food producer or business operator may inspect the food it produces by itself, or by authorizing any food inspection institutions qualified under the Food Safety Law。
6. The Food Safety Law has set up the principle of preference of civil compensation and the mechanism of punitive compensation. The Food Safety Law provides that where the enterprise that breaks the law cannot pay the penalties, fine and the civil compensation at the same time, the civil compensations shall be paid at first. Besides, the Food Safety Law has set up the punitive compensation mechanism at the first time: as to enterprise that breaks the law by producing food that does not meet the food safety standard or selling food that does not meet the food safety standard to which the it has awareness, the consumers may, except for claiming compensations, require the producer or seller to pay an amount of compensation that equals to 10 times of the price.
Apart from that, the Food Safety Law has made regulations on health-care food, forgery advertisement, import & export of food and other related issues. Please visit our website for detailed information.
Insurance Law of the People’s Republic of China
The revised “Insurance Law of the People’s Republic of China” (hereinafter “the Insurance Law”) is promulgated by the Standing Committee of the National People’s Congress on February 28, 2009 and shall come into force as of October 1, 2009.
The Insurance Law has mainly made the following adjustment to the original law:
1. The Insurance Law has added the incontestable principle. The Insurance Law provides that the right to rescind an insurance contract shall be annulled after the lapse of 30 days or more from the day when the insurer knows the cause of rescission. After the lapse of two years or more from the day when an insurance contract is entered into, the insurer may not rescind the contract; where an insured incident occurs, the insurer shall be liable for paying indemnity or insurance money.
2. As to the payment capacity of the insurance company the Insurance Law provides that insurance supervision and administration departments shall establish and perfect the regulatory system for payment capacity to monitor the minimum payment capacity of insurance companies. An insurance company shall have the minimum payment ability compatible with its size of business operations and the risk level. The difference of the admissible assets subtracting admissible liabilities shall not be less than the amount stipulated by the insurance supervision and administration department of the State Council. If the amount is less than the prescribed amount, capital funds shall be increased to make up for the deficit. Where an insurance company is seriously insufficient of payment ability, the insurance supervision and administration department may take over the insurance company.
3. As to the entry to set up insurance company, the Insurance has added the requirements to the major shareholders. It is provided that the major shareholder of insurance company shall have a sustainable capability to make profits, have a good credit standing, have no record of material violation of law or regulation in the last three years and have a net assets value not less than 200 million Yuan. At the same time, the Insurance Law has revised the clause “the minimum amount of registered capital shall be actually paid in money capital” in the former law as “the registered capital shall be actually in money capital”. Besides, the Insurance Law still take the directors and supervisor of insurance company under the qualification management and authorizes the insurance supervision and administration department to add the entry needs according to supervision and administration needs.
4. The Insurance Law further confirms and specifies the claims procedure and term. It is provided that: if the insurer deems that the relevant certificates and materials in relation to the claims application provided by the insured are incomplete according to the contract, it shall notify in written, in a timely manner and at one time, the insured or other associated applicant of all certificates and materials to be supplemented. Still, the insurer shall, after receiving the claims application, complete the assessment within 30 days, unless it is otherwise agreed.
5. The Insurance Law has given more detailed provisions on the policy holder. As to the clause on discharge of liability, the Insurance Law further provides that the insurer shall notice the policy holder of those clauses in the insurance application form, the insurance policy or any other insurance certificate, and expressly explain the contents of those clauses to the insurance applicant in writing or verbally. If the insurer fails to give a notice or express explanation thereof, those clauses shall not be effective. Where an insurance contract is entered into by using the standard clauses of the insurer, the insurer shall provide an insurance policy with the standard clauses attached and explain the contents of the contract to the insurance applicant.
6. The Insurance Law has added the relevant provisions concerning the legal liabilities: the director, supervisor or senior manager of an insurance company who breaks a law or administrative regulation or the bylaw of the company in the process of performing duties for the company and causes any loss to the company shall assume the compensatory liability; At the same time, it is expressly provided that if the insurance company assigns, leases or lends the insurance business license in violation of the law, the insurance supervision and administration department may issue a fine more than RMB 10,000 Yuan but less than RMB 100,000 Yuan; if the circumstances of their offenses are serious, it shall be ordered to suspend operations for rectification or rescind their business license. Any establishment of insurance company or insurance asset management company without approval or any operation of commercial insurance that is in violation of law shall be banned by the insurance supervision and administration, and all the illegal income thereof shall be confiscated with a fine more than one time but less than 5 times the amount of the illegal income.
Apart from that, the Insurance Law still provides that insurance supervision and administration department may under take on-site inspection to insurance company, insurance agency, insurance broker, insurance asset management company and the representative office of foreign insurance institutions, or conduct investigation and collect evidences to the premise where the suspected illegal activity occurs.
Interim Provisions of Shanghai Municipality on the Installation of Advertisement in Public Transport Vehicles and Stations
The “Interim Provisions of Shanghai Municipality on the Installation of Advertisement in Public Transport Vehicles and Stations” (hereinafter “the Provisions”) is jointly promulgated by Shanghai Municipal Transport and Port Authority and other 4 departments on January 14, 2009 and shall come into force as of promulgation.
The Provisions confirm that the examination and approval department for advertisement publication on public transport vehicles, stations, railway transport stations in shanghai: the ads publication on the surface of public transport vehicles and the stations shall handle the registration or filing formalities to the administration for industry and commerce; the installation of outdoor ads in stations shall handle relevant examination and approval formalities to municipal appearance & environmental sanitation administration, administration for industry and commerce and planning administration; where it is necessary to occupy city roads, it shall handle relevant examination and approval formalities to municipal administration departments. Besides, where the program is broadcasted via information visual devices, the examination and approval from the competent administration of radio and television shall be obtained.
As to the content of the ads, the Provisions provides that the content published shall be real and legal and the area or time for public welfare ads shall not be less than 10% of the total square or volume.
The Provisions have given more detailed rules to the ads publication on public bus or tram stop, taxi stand board, railway transport station and the like. For instance, no ads shall be installed on public bus and tram stop board, no ads shall be installed and published on taxi stand board; no ads shall be installed and published on the public bus waiting room, unless otherwise provided; no audio ads shall be broadcasted or no hanging ads shall be installed inside the railway transport station, except in the operation information display devices in the platform floor; no ads shall be handed out inside the railway transport station and the train.
As to the ads that do not meet the requirements, the Provisions require that it is necessary to clean them up before December 31, 2009.
Administrative Provisions on Temporarily Medicine Practice in Mainland by Doctors from Hong Kong SAR and Macau SAR and Administrative Measures on Temporarily Medicine Practice in Mainland China by Directors from Taiwan Region
The “Administrative Provisions on Temporarily Medicine Practice in Mainland by Doctors from Hong Kong SAR and Macau SAR” and “Administrative Measures on Temporarily Medicine Practice in Mainland China by Directors from Taiwan Region” (hereinafter “the Two Provisions”) is promulgated by the Ministry of Health on January 4, 2009 and shall come into force as of March 1, 2009.
According to the two Provisions, doctors from Hong Kong, Macau and Taiwan who are undertaking temporary medicine practice not more than 3 years in Mainland (Mainland China) shall execute practice registration and obtain Temporary Medicine Practice Qualification for Doctor from Hong Kong and Macau or Temporary Medicine Practice Qualification for Doctor from Taiwan, and shall be employed by medical institutions of independent legal person qualification in Mainland (Mainland China). If the doctors need to continue their practice 3 years later, temporary medicine practice registration formalities shall be re-handled.
The Two Provisions require that doctors from Hong Kong, Macau and Taiwan shall undertake competent medical practices according to the registered practice place, practice type and practice scope. The practice registration agency shall be the health administrative department and traditional Chinese medicine administrative departments at the municipal level or above at the place where the medical institution is located. The practice type may be either one of clinical, traditional Chinese medicine and mouth. Any dispute concerning the medical accident by doctors from Hong Kong, Macau and Taiwan in Mainland (Mainland China) shall be resolved according to the Regulation on the Handling of Medical Accident and relevant provisions.
Rights and Obligations between the Proprietor and the Subcontractor over Contracts on Undertaking Construction Projects
Company A is a foreign invested company in Chengdu set up by a famous multinational company. At the beginning of 2006, Company A entered into a general contracting contract with Company B in respect of the construction project of a production base. It is stipulated in the contract that: steel structure and other several professional subcontracting projects as contained in the construction project shall be separately tendered by Company A, to which Company B receives corresponding management fees. In March 2006, Company A itself undertook the public invitation of bid for the steel structure project of the production base and later Company C won the bid. It is stated in the Letter of Acceptance that the bidding price shall be RMB 11,400,000 Yuan.
Under the arrangement of Company A, Company B, as the general contractor of the construction project, entered into a steel structure project subcontracting contract with Company C according to the content of the Letter of Acceptance and the documents of the public invitation of bid for the steel structure project. In May 2006, the steel price in Chengdu increased unreasonably and Company C was unable to assume the increase of steel price and adopted to dissolve the contract. In June 2006, Company A re-tendered the steel structure project and re-confirmed the bidding price, which was far higher than the original price as a result of the increase of the steel price. The dissolution of contract by Company C without approval had not only delayed the completion time of the whole project of the production base, but also led Company A to pay extra RMB 3 millions Yuan.
Attorney Chambers Yang and Attorney Bruce Luan are the permanent legal counsel of the multinational company in China and represented in this case Company A v. Company B and Company C concerning the dispute on breach of project contract. Sichuan Chengdu Municipal Intermediate People’s Court examined the case and made a judgment in recent time.
In this case, the major argument between the attorneys of Company A and Company C is whether Company A and Company C had built the project contracting relationship under the contract. We hold that: (1) seeing from the conclusion process of the disputed steel structure project construction contract, Company C issued the tender according to the public invitation of bid and then won the bid; the Letter of Acceptance sent by Company A to Company C had given detailed provisions to such matters as the project scope, project price, completion and acceptance time and the like. Article 45 of the Bidding Law provides that “the letter of acceptance shall be legally binding on the bid inviting party and the winning bidder”, therefore, the Letter of Acceptance in this case shall directly bind all the steel structure contract entered into by company C; (2) seeing from the provisions of the contracts entered into by the parties, it is expressly specified in the general contracting contract between Company A and Company B that Company C is the steel structure project subcontractor designated by Company A, however, for the convenience of the general contractor Company B to manage the contraction project from overall aspects, it is arranged by Company A that Company B may enter into the steel structure project construction contract instead of the real contractee Company A. Nevertheless, the obligations and rights in such a contract shall be assumed by the owner Company A. In this connection, Company A and Company C shall have built the project contracting relationship and the general contractor Company B expressly knew, recognized and cooperated the subcontracting designated by Company A. Chengdu Intermediate People’s Court adopted our opinion and held in the judgment of first instance that the relationship between Company A and Company C shall be project contracting relationship, i.e. Company A was the contractee of the disputed steel structure project construction contract and Company C shall be the construction entity. As Company C dissolved the contract without approval during the process of contract performance which had violated the stipulation in the steel structure project construction contract, therefore, it shall assume the liabilities for beach of contract.
（Contact of Author：firstname.lastname@example.org）
Simple Analysis on the Stipulation of Service Term in Labor Dispatch
In 2005, a labor dispatch company (hereinafter “Company A”) recruited a university graduate S pursuant to the requirements of a world TOP 500 Chinese company (hereinafter “Company B”). On July 6, 2005, S entered into an employment contract with Company A with a term of two years and was later dispatched to the branch company at Beijing and Shanghai of Company B to receive the trainings specifically arranged by Company B for university graduate. On July 11, 2005, Company B, in order to cooperate with the trainings, entered into a training agreement with S, in which it is provided that the trainee shall work for Company B for another 3 years after the two-year trainings, or he/she shall compensate the “training expenses” at a maximum amount of RMB 300,000 Yuan to Company B. On June 30, 2007, S denied to renew the employment contract with Company A after the termination of employment relationship between S and Company A. Therefore, Company B claimed for RMB 300,000 Yuan as liquidated damage against S on August 20, 2007. S defended that the “training” was in fact “work” and refused to serve another 3 years for Company B. On September 6, Company B submitted the dispute to Labor Arbitration Commission of Shanghai Pudong New District for arbitration. The Arbitration Commission held that S was a labor dispatched employee to whom Company B was not the employer, therefore, there was no employment relationship between S and Company B, and Company B cannot set liquidated damage against S. In consequence, the claim of Company B was not supported.
In recent years, labor disputes concerning labor dispatch and service term break frequently. The major reason is lack of applicable laws and regulations. However, the training and service term are regulated at the first time by national legislation by Labor Contract Law. Article 22 of Labor Contract Law provides that where an employer pays specific training expenses for the professional and technical training of the employees, the employer may enter into an agreement with the employees to specify their service term. If an employee violates the stipulation regarding the service term, he/she shall pay the employer a liquidated damage for breach of contract. The amount of liquidated damage for breach of contract shall not exceed the training fees provided by the employer. The liquidated damage for breach of a contract in which the employer requires the employee to pay shall not exceed the training expenses attributable to the service time period that is unfulfilled. But, it is still questionable on such aspects as the training and service term of labor dispatched employee or the stipulation of provisions.
In a labor dispatch, the employment and use of labor is divided. The “employment” strengthens on the qualification of a employment relationship, while the “use” strengthens on the content of a employment relationship. In this connection, the “employer” in the legal sense—the labor dispatch company (Article 58 of Labor Contract Law) normally will not – and in fact not necessary to-- train the employee, while the employing company—(Article 59 of Labor Contract Law) will train the dispatched employee in order to make sure that the employee can finish the designated work with more profession and experience.
I hereby advice that, more attention shall be paid to the following aspects in legal practice:
1. Expressly stipulate the service term in the employment contract
The labor dispatch company shall directly enter into such provisions or agreement in respect of service term with the employee, so as to avoid the disputes that are not in line with the law in the above case. If so, the employee shall perform the obligation of service term directly with labor dispatch company. In the mean time, it is available to give such detail stipulations in the service term provision as the “specific training” that is undergoing (or to be undergone) will be implemented by the employing company on behalf of the dispatch company to the employee. In this connection, the relationships among such three parties will be adjusted strictly according to the provisions of law concerning service term.
2. Define the employing company and post of the dispatched employee
Article 58 of Labor Contract Law provides that the employing company and post shall be expressly indicated in the employment contract. This provision is very important on stipulation of service term. As the employee has the obligation to the dispatch company to perform the service term, while on the other hand the post of the employee is stipulated in the employment contract, therefore, the obligation of the employee is to perform the work of the employing company rather than the work of the dispatch company, which as a result avoided the blindness of the employee to work at the dispatch company to merely strengthen the relativity of the agreement.
3. Define the burden of liabilities
As the employment contract has given stipulations on the service term between the labor dispatch company and employee, therefore, the employee shall pay liquidated damage to labor dispatch company if he/she breaks the rules of service term. Generally, the expenses of specific trainings are paid by employing company, therefore, to protect the legal rights and interest of the employing company, it is necessary to stipulate in the dispatch agreement that if the employee breaks the rules of service term, the real employing company shall have the right to claim compensation or liquidated damage from the dispatch company.
Even though it is possible to decrease the legal risks that may be faced by the employing company by above stipulations, the employing company, however, is not certainly without any risks. Article 22 of Labor Dispute Arbitration Law provides that where labor disputes arise between the labor dispatch company and the employee, the labor dispatch company and the employing company shall be the joint party, still, the relationship among such three parties, if the rights and obligations therein are more completely stipulated, is typically more complex than the stipulation of service term within the bi-relationship between employer and employee. Therefore, I advice that, if an employee is really desirable, the actual employer (i.e. the employing company) shall directly employ the dispatched employee.
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The Lyric Searching Service Provided by Baidu Has Objectively Led the Users to Obtain Information Directly from Its Website and Is Held as Infringemnt by the People’s Court
Plaintiff: Zhejiang Fanya E-Commerce Co., Ltd. (hereinafter “Fanya Company”); Defendant: Beijing Baidu Network Information Technology Co., Ltd. (hereinafter “Baidu Net-Info”), Baidu Online Network Technology (Beijing) Co., Ltd. (hereinafter “Baidu Online”); Cause of action: disputes concerning copyright infringement. After examination of first instance, Beijing Superior People’s Court held that the provision of music searching by the defendant to the users did not constitute infringement, however, the “lyric” button service provided in the mp3 searching bar shall have infringed the copyright.
The people’s court found that: the plaintiff Fanya Company has property rights, performers’ rights and audio record producers’ rights over the song “Your Choice” and other 350 songs. The defendant had provided mp3 searching services for users through mp3 searching bar in mp3.baidu.com. Still, it is available to search the lyrics to which the plaintiff has copyrights by the mp3 searching bar in mp3.baidu.com.
After examination, Beijing Superior People’s Court held that the plaintiff has property rights, performers’ rights and audio record producers’ rights over the disputed 351 songs. As to the issue on whether the defendant has committed infringement, the people’s court held that: first, it is held by the people’s court that the act committed by the defendant to provide mp3 searching service to internet users by entering keying words in the searching bar shall be deemed as mp3 searching engine service. Under such services, the “audition” and “download” of the disputed songs by users were undertaken at a third party website by web link to such a third party website and nothing had been uploaded to the server of mp3.baidu.com. However, as to whether the provision of lyric by the defendant by clicking the “lyric” button of the mp3 searching bar had constituted infringement of the right to network dissemination of information, the people’s court held that the “snapshot” of lyric provided by mp3.baidu.com was got by the searching engine through third party website and was stored in the server of mp3.baidu.com. If there was no text of lyric in third party website, the searching engine of mp3.baidu.com will not search any lyric. It can see from the evidences that, however, when clicking the “lyric” button of the mp3 searching bar in mp3.baidu.com, it is available to show the lyrics of the disputed songs directly and at the bottom of the web page, the address of the server of mp3.baidu.com is clearly marked. Therefore, it is enough to believe that the acts committed by defendant to place lyrics in its server to provide lyrics to users by clicking the “lyric” button of the mp3 searching bar in mp3.baidu.com shall be deemed as “duplication” and “upload”, which has constituted broadcasting of other’s works through the internet. The defendant pleaded that the function “snapshot” of lyrics provided by it shall be “automatic cache” of searching results, which shall belong to the “automatic cache” as provided in Article 21 of the Regulation on the Protection of the Right to Network Dissemination of Information and therefore shall be free of liabilities. The people’s court held that the “cache” pleaded by the defendant is actually a storage of some lyrics at the high speed cache storage room in the internet server by the defendant in advance for users to visit, which is not automatically and passively formed by the visiting requests from users before visiting the server. Still, the lyrics provided in the web page of the defendant are not shown in such an original form as demonstrated in the third party website, nor there are the web addresses of the original LRC text in the third party website corresponding to the “snapshot” of lyrics, i.e. the users will not have opportunities to visit the third party website. Even the defendant revises its web page of mp3.baidu.com to show all the “snapshot” of lyrics and the corresponding internet address of third party website, however, as the defendant put the whole text of the lyrics before the source, most of the users will normally still adopt to copy the lyrics from the webpage of mp3.baidu.com rather than third party website. In this connection, the change of “snapshot” of lyrics has not change the usage style by users to obtain the lyrics directly from mp3.baidu.com, which still has caused users to download the lyrics directly from its server and as a result influenced the market interests of third party. In consequence, the act by the defendant is held as infringement.
Article 12 of the Regulation on the Protection of the Right to Network Dissemination of Information provides that if the network service provider, for the purpose of improving the network transmission speed and efficiency, automatically stores and automatically provides to its service target by technical arrangement the works, performances, audio and video records obtained from other net work service provider, no compensation liabilities shall be borne, if certain conditions are met. In this case, although the mp3 searching format of the defendant is obtained by searching engine from third party website, it is stored in the server of mp3.baidu.com. Besides, the “cache” is actually storage of some lyrics at the high speed cache storage room in the internet server by the defendant in advance for users to visit, which is not automatically and passively formed by the visiting requests from users before visiting the server. Therefore, the storage by the defendant is not the “automatic cache” as provided in Article 21 of the Regulation on the Protection of the Right to Network Dissemination of Information. Moreover, the users need not adopt to obtain the lyrics by separating logging on another web page as the defendant has placed all the lyrics before the source of such lyrics, which has objectively caused the users to get the lyrics directly from the defendant’s website. Therefore, such an act shall not be obtaining information from third party by searching engine, but be broadcasting of other’s works through network, which as a result has infringed the rights of copyright owner.
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The New Patent Law Has Perfected the Principle of Exhaustion of Rights and Permitted Parallel Import
Parallel import means that the importer, in the course of international trading, purchases patent products which are legally launched to the market and protected under the exporting country’s patent through legal channels from abroad, and imports such products to the importer’s country without the license of the right owner in the importer’s country who is the also the patent right owner of the exporting country. As the patent product is of low price at foreign market, there are rich price differences after import, therefore, such kind of activities are very common in the electronic products market in China.
The question is, under such circumstances, whether the monopoly rights of the patent right owner have been infringed? Whether it shall fall under the patent infringement as provided in the Patent Law of China? The pre-revised Patent Law only provides that “anyone uses, promises the sale of or sells a patented product or a product directly obtained from the patented process, which was made or imported by the patentee, or was made or imported with the permission of the patentee and has been sold out, shall not be deemed an infringement of the patent right”. This provision has not given clear definition concerning the issue on whether the re-sale in a country of an imported patent product that is sold out in a foreign country shall have constituted infringement or not. And there are quite a lot different opinions among the theorists, some of them hold that the patent right owner shall not have control over the use and sale of the products for any longer after the patent products have been legally sold out as the monopoly rights have been exhausted through such acts, regardless whether it is sold in domestic country or abroad, as a result, the re-sale by others shall not constitute patent infringement; other theorists hold that the patent rights have strict territoriality and it is available for a single patent to apply for patent rights in various countries under different laws in different countries. As the concrete content and efficiency of the patent are only accepted within a country’s territory, therefore, even the patent rights are exhausted after the patent product is sold out, such exhaustion is only limited to the territory of a country. If it is necessary to resell the product to other countries where the patent rights exist, approval from right owners in importing countries shall be obtained, or it will still be deemed as infringement of importing country’s patent rights. We could see from above that both of such two opinions accept the principle of “exhaustion of rights” and the differences are focused on the scope of “exhaustion of rights”. The first opinion holds that the rights are completely exhausted while on the other hand the second opinion holds that the exhaustion of rights is limited to a single country (or a patent system) only. Clearly, the second opinion does not allow the existence of parallel import and is more favorable to the protection of patent right owner, which is better to reflect the independence of market monopoly owned by patent right owner.
Beyond that, it shall be mentioned that Article 6 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (1994) provides that nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights. Therefore, it is possible for various countries to take flexible position towards the exhaustion of rights. Still, it is re-stated in the Doha Declaration on the TRIPS Agreement and Public Health that the signatories shall, for the purpose of solving public heath problems, have the right to decide their position by themselves towards the exhaustion of intellectual property rights.
In consideration of above facts, the legislation body in China has, during the revision of China Patent Law, finally permitted the parallel import in patent area, which provides that anyone uses, promises the sale of, sells or imports a patented product or a product directly obtained from the patented process that has been sold out by the patent right owner or by the licensed entity, shall not be deemed an infringement of the patent right. In other words, a lot of patent products that are sold at a low price abroad but are sold at a high price in China will be imported into China through parallel import and later sold at a low price to Chinese consumers after the implementation of new Patent Law since October 1, 2009.
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Extraterritorial Laws and Regulations
Relevant Legal Issues concerning the Purchase of Real Property by Foreigners in Australia
It is provided in current Australian law that any foreigner shall not buy any Australian real property until the approval of Australia Foreign Investment Review Board (FIRB). The time for approval is about 30 days. The foreigners, except those holding temporary residence visa or student visa, may only buy new houses. In December 2008, however, the FIRB promulgated a new policy to release the restriction on foreigners to buy second hand houses in Australia: for foreigners holding student visa who want to buy houses for self residence, the price of the second hand house to be purchased is not limited to more than AUD 300,000 for any longer; for foreigners holding temporary residence visa for a valid period of at least 12 months who want to buy houses for self residence, it is available to buy the second hand house of any price.
To close a deal smoothly, and to effectively avoid the outstanding issues, the review and revision of the contract in the course of purchase of house shall be careful and detail. The following issues are those normally ignored by the buyers:
1. It is normally stipulated in the contract on purchase of house that: the buyer cannot terminate the contract for such reasons as un-satisfaction of the feature or quality of the house or for buyer’s owner reasons. Therefore, the buyer shall inspect the house before signing the contract to confirm whether there are defects in the house that deserves repair. Whenever necessary, it shall be stipulated in the contract that the seller shall be responsible for the repair of defects, so as to avoid the payment of interests to the seller for extension of closing date as well as the burden of repairing expenses. In addition, the buyer shall inspect the house before closing to avoid the losses arising out of the differences between the actual circumstances after closing and the description of the seller, for example, losing the furniture and devices that should have been contained in the purchase price.
2. The buyer shall ask the seller to add the acknowledgement and warranty of the feature and quality of the house as the special clauses of the contract, so as to gain the legal ground to recourse the liabilities for breach of contract against the seller. A case of New South Wales State Supreme Court ever stated that: the buyer found that, after signing the contract, the empty land bought had the potential risk of flood, while the municipal government prohibited the construction of house on the land bought by him/her. However, as there is no clause in the contract warranting by the seller that there was no risk of flood, the buyer was not able to terminate the contract and as a result suffered a big loss.
3. The buyer shall inspect that whether the loan documents conform to other legal documents, for example, the buyer shall confirm in advance that whether the loan bank can approve the load on schedule, so as not to delay the closing date of the house. The normal issues are that the bank finds that the name of the borrower in the loan documents is not the same with that on the transfer paper, which as a result delayed the term for examination and approval, and so delayed the closing date. The consequences are the buyer shall pay interests to seller for extension of closing date, or even the possibility to be deemed as breach of contract as the actual delay of time has exceed the stipulation in the contract.