I. Foreword
 
Scarce but densely populated, the land of Taiwan is inherently high-priced. With the day-to-day progress of industries and businesses, the need for land is even more pressing.  As such, the sales or transactions of land have been ever-increasing. In the process of the sales of land, the contracts are either written by the parties themselves or drafted by housing agencies or legal agents on the parties' behalf. Some people may be careful enough to seek a lawyer's assistance in drafting the sales contracts. Assuming that the contracting parties perform the contract in good faith, no disputes will arise between them and the contract will go through with ease. However, because the land transactions often involve more than small money, i.e., New Taiwan Dollars in the amount of millions, tens of millions or even hundreds of millions, if only one party fails to perform, disputes will arise between the parties. The better scenario would be for both parties to make way and compromise through negotiations. Otherwise, only a lawsuit may bring this to an end.  The legal issues presented at bar after the defense and attack as conducted by both parties oftentimes determine the eventual outcome of the case. It's not unusual, however, that these issues are frequently ignored by the parties who signed the contract or by the intermediary or agents who assisted in the signing thereof, or even by the lawyer at the time when they first executed the contract.  It is clear, then, that the sales of land only appear to be simple-once you look further into the transactions, the complexity of the legal issues is even more apparent and cannot be ignored.  In particular, when executing a contract for the sales of land, one should pay attention to the validity of the contract.  With respect to the sales of farmland, one issue that is repeatedly raised by the parties in a lawsuit is whether the contract is good.  If the contract is invalid, all the efforts are in vain.  And, very often, the parties did not understand that the contract they executed was null and void from the very beginning, which came as a tremendous shock.  Due to the limited space, this article is focused only on some examples which are frequently seen in my career as a practicing attorney.                                    


II. Impossibility As the Subject Matter of Contact:
 
Paragraph 1, Article 246 of the Civil Code provides: "A contract shall be void if the subject matter of the contract is impossible to tender. Provided, however, that such contract shall remain valid if the impossibility is removable and the parties to the contract have expected to tender their performance after such impossibility is removed." Clearly, it is essential that the subject matter of a contract be possible to perform. In other words, if the subject matter of a contract is objectively impossible to tender, the contract is considered null and void by the law; but if it is subjectively impossible to tender, the contract remains valid. The following are some common cases where the contracts for the sales of land are void:
 

1. Sales of Farmland-Where Buyers Do Not Have the Self-Cultivating Capacity:

 
Article 30 of the Taiwan Land Rules provides: “The ownership of private farmland shall be transferred only to such transferees as can cultivate the land themselves after the transfer is effected. Such farmland may not be transferred so as to result in co-ownership thereof; provided, however, that it is transferred by means of inheritance. If the preceding paragraph is violated, the transfer of ownership shall be void.” Private farmland shall mean: (a)land designated as farmland or pastures under the Law for Zoning and Planning; (b)land designated as agricultural areas, fields in protected areas, or dry land under Urban Planning Law; (c)areas where zoning is enforced but land category is yet to be determined; or fields or dry land where urban planning or zoning is not enforced; and (d)farmland situated within national parks.[1] With respect to the sales of the aforementioned land, the buyers shall have the self-cultivating capacity or the contracts are void. Furthermore, the court shall ex officio investigate whether or not such self-cultivating capacity exists without regard to the parties' claim or defense. This can be affirmed by Supreme Court Precedent 64-Tai-Shang-1352, which says: “Article 30 of the Taiwan Land Rules provides that the ownership of private farmland shall be transferred only to such transferees as can cultivate the land themselves after the transfer is effected.
Moreover, with respect to the existence or non-existence of such self-cultivating capacity, the court shall ex officio investigate and determine it so as to form a basis for its judgment even without the parties' claim or defense. If the buyer who did not have the self-cultivating capacity actually purchased private farmland, he or she was using an impossible tender as the subject matter of the contract. Under Paragraph I. Article 246 of the Civil Code, the contract shall be null and void." In addition, with respect to contract for the sale of private farmland with a person who did not have the self-cultivating capacity, the contract shall be void in accordance with the first half of Paragraph I, Article 246 of the Civil Code unless the situations as set forth in the proviso of Paragraph I and Paragraph II thereof exist. If the parties to the contract did not expect to transfer the sold farmland after it becomes non-farmland, the void contract will not revive even though the farmland actually turned into non-farmland. [2]It should be noted, however, that if the transfer of ownership of the joint property is made to be the subject matter of a sales contract by one of the owners-in-common, it is not considered to be an impossible tender as the subject matter of a contract. Although such act of disposition as the transfer of ownership did not come into effect because it was not recognized by other owners-in-common, the sales contract itself was not invalid.[3]
 

2. Farmland Shall Not Be Transferred to Form Co-ownership Except through Inheritance:

 
In accordance with the aforesaid Paragraph I, Article 30 of the Taiwan Land Rules, private farmland may not be transferred so as to result in co-ownership thereof except that it is transferred by means of inheritance; otherwise, the transfer of ownership shall be null and void. In order to prevent farmland from being finely divided and to prohibit the partitioning of original property for the purpose of advancing greater utility of farmland, Article 30 of the Statute for the Development of Agriculture has similar provisions. Supreme Court Precedent 64-Tai-Shang-331 says: “In order to expand the scale of operation of farms and to prevent fine division of farmland, currently each parcel of cultivated land may not be partitioned and transferred to result in co-ownership thereof. This is unambiguously prescribed by Article 33 of the Statute for the Development of Agriculture. The land to be purchased and sold by both parties in the case at issue is categorized as a field, and is not for a total but a partial sale. Since the Appellant could not alter the category of the land and partition it or transfer it to form a co-ownership with the Appellee, this case is one in which an impossible tender is used as the subject matter of the contract. According to the first half of paragraph II, Article 246 of the Civil Code, it shall be null and void. Moreover, the situations as contemplated under the proviso thereof and Paragraph II thereof did not exist. As such, the Appellee's request that the Appellant repay the fifty thousand NTD that is already paid is not inconsistent with the law."[4] Clearly, in principle, private farmland may not be transferred to result in co-ownership thereof, or the transfer shall be void. This is meant to carry through the legislative intent that farmland may not be partitioned or transferred to form co-ownership thereof. However, if the farmland originally belonged to the co-owner and he or she merely sold his or her share by transferring it to the buyer while maintaining the co-ownership with other co-owners, the act shall not be subject to the prohibitions as imposed by the aforesaid article, nor will an issue of impossibility arise therefrom. In addition, it should be noted that the purpose of Article 22 of the Statute for the Development of Agriculture, which provides that the prescribed land shall not be partitioned, is designed to prevent the fine division of farmland, but not to disallow the co-owners of farmland to extinguish the co-ownership by methods other than the distribution of the original property. And, the purpose of the resort to the partitioning of joint property is to extinguish the co-ownership. As for the method of partitioning, it shall be the court's authority to determine whether it be distribution of the original property or the sale of such property and distributing the proceeds thereof to each of the co-owners, without being bound by the parties' claims. If the court denied the request for partitioning simply because no distribution of the original property was conducted as to the dry land at issue, it is apparently inconsistent with the law.[5]
 

3. If the Buyer of Farmland Does Not Have Self-Cultivating Capacity when Purchasing the Farmland, How Can the Sales Contract Successfully Stand?

 
"The ownership of private farmland shall be transferred only to such transferees as can cultivate the land themselves after the transfer is effected. Such farmland may not be transferred so as to result in co-ownership thereof; provided, however, that it is transferred by means of inheritance. (Paragraph I) If the preceding paragraph is violated, the transfer of ownership shall be void. (Paragraph II)” “A contract shall be void if the subject matter of the contract is impossible to tender.” The foregoing provisions are clearly set forth by Article 30 of the Taiwan Land Rules and Paragraph I, Article 246 of the Civil Code, respectively. However, Supreme Court Precedent 70-Tai-Shang-2791 says: “The first part of Paragraph I, Article 30 of the Taiwan Land
Rules simply provides that the ownership of private farmland shall be transferred only to such transferees as can cultivate the land themselves after the transfer is effected. It does not forbid a person who cannot cultivate the land himself to agree on the further transfer of ownership to a person who can at the time of the purchase of such farmland. With respect to the sales of farmland at issue, since it was specifically agreed in the contract that the Appellant may appoint anyone to be the transferee of record, it is, therefore, not considered to be in violation of the provision of Article 30 of the Taiwan Land Rules and thus deemed as void ab initio if Lin Chang-Tsun, the transferee of record as appointed by the Appellant, was indeed a person who can cultivate the land himself.” As such, it is evident that a party to the sale of farmland may still have a way to cure his or her problems even if he or she does not have the capacity to self-cultivate the land so long as the aforementioned requirements are satisfied. The Supreme Court further elucidated the issue in its Precedent 78-TaiShang-1976, by saying: “If a parcel of farmland was sold to a person without the capacity to self-cultivate it, the sales contract should be void because of its objective impossibility; if, however, it was at the same time agreed that the purchaser should appoint anyone with the self-cultivating capacity to be the transferee of record or that any specific third person with such capacity to be duly recorded as the transferee, it was then not a contract whose subject matter is impossible to tender as contemplated under Paragraph I, Article 246 of the Civil Code. And, as such, the contract should still be deemed as good.” It is even clearer that, in order to make the sales contract stand, a purchaser with no self-cultivating capacity is advised to enter into an agreement that “the purchaser should appoint anyone with the self-cultivating capacity to be the transferee of record or that any specific third person with such capacity to be duly recorded as the transferee.” Otherwise, he or she was using an impossible tender as the subject matter of the contract. If so, under the provision of Paragraph I, Article 246 of the Civil Code, the sales contract shall be null and void.
 
III. The Relationship between the Preemptive Right to Purchase and the Validity of Sales Contract
 
1. The Preemptive Right to Purchase under Article 34-1 of the Taiwan Land Rules:
 
(1) Each co-owner may freely dispose of his or her own share of the jointly owned land or constructional structures, which is clearly provided for under paragraph I, Article 819 of the Civil Code. Paragraph IV, Article 34-1 of the Taiwan Land Rules provides: “If and when one co-owner sells his or her share, other co-owners have the preemptive right to jointly or severally purchase such share at an identical price." This paragraph merely applies to such disposition as sale. The legislative intent was to prevent the share of the co-owner from falling onto the hands of a stranger. The preemptive right to purchase the co-owner's shares is thus vested with other co-owners so as to reduce the number of co-owners to the fullest extent possible, thereby facilitating the management, use and disposition of jointly owned land. Such preemptive right to purchase is a statutory preemptive right to purchase. Each of such other co-owners has an identical right. It is in compliance with the law whether the actual purchaser is one or more of such other co-owners. If there are more than one purchaser, all such purchasers shall jointly exercise the preemptive right to purchase according to their respective previous ratios or shares. It is deemed to be applicable to the sequestration or auctioning conducted by the court as to the shares of jointly owned land or constructional structures as the interpretation so requires.[6] If any other co-owner(s) wish to dispose of the jointly owned land or constructional structures in its entirety in accordance with the provisions of Paragraph I of this Article, he or she shall notify the other co-owners of his or her share and inquire if they are willing to preemptively purchase the same. Those co-owners who do not consent to the disposition have the preemptive right to jointly or severally purchase such share at an identical price pursuant to this paragraph, allowing the jointly owned land to remain in the hands of previous co-owners. The object to be purchased is the share belonging to the co-owner, but not all of the jointly owned land. In cases where co-owners sell their shares to each other, the preceding provisions do not apply.[7]
 
(2) With respect to the co-owners' preemptive right to purchase as set forth in this article, no similar provisions exist here as do the second half of Paragraph II, Article 104 of the Taiwan Land Rules and Paragraph III, Article 15 of the Statute for the Three-Seven-Five Reduction of Rents for Cultivated Land. Nor is there any clear provision authorizing such to be applied mutatis mutandis, thus precluding it from being interpreted as the respective provisions as contained in those two articles. The preemptive right as set forth in this article is a right to request the entry into of sales contract whose exercise is premised on the effective existence of conducts of purchase and sale as between a co-owner and a third party. In addition, the provision of Article 125 of the Civil Code will apply that such right shall extinguish if not exercised within fifteen years. Therefore, it is merely a right under the principles of obligations and the privity exists among co-owners without the force and effect as against any third party. Therefore, if a co-owner did not seek to inquire the other co-owners about their willingness to preemptively purchase when selling his or her share, but instead executed a sales contract with a third party and completed the registration of alteration of rights regarding land, such registration shall be considered good. Other co-owners may merely seek damages through judicial channels in accordance with Article 226 of the Civil Code.
 
2.The Preemptive Right to Purchase under Article 104 of the Taiwan Land Rules:
 
Article 104 of the Taiwan Land Rules provides: “When the building site is offered for sale, the superficiary, pawn (tien) holder or lessee shall have the preemptive right to purchase it on the same terms as are offered to any other person, and when the house on the site is offered for sale, the owner(s) of the site shall have the preemptive right to purchase it on the same terms as are offered to any other person. The priority of such owners shall be determined according to the order of their registrations. The preemptive right referred to in the preceding paragraph shall be deemed to have been waived if the person having such preemptive right does not express his or her intention to make the purchase within ten days upon receipt of the notification regarding such sales. The sales contract between the seller and a third person will not stand against a person who has the preemptive right to purchase if the seller did not notify such person.” Based on the aforesaid provisions, however, the following items should also be noted:
 
(1) When the building site is offered for sale, only the lessee, pawn holder or superficiary have the preemptive right to purchase it.
 
(2) When the house on the building site is offered for sale, only the owner of the site has the preemptive right to purchase it.
 
(3) It is required that the house and building site belong to different owners when the house or the building site is offered for sale.
 
a. If a lessee spent money for the construction of the house on the lessor's behalf and they both had agreed that the house still belongs to the lessor, the situation would be different from the situation where the lessee simply leased the building site for the construction of a house, in which case the house would belong to the lessee.As such, Paragraph I, Article 104 of the Taiwan Land Rules will not apply.
 
b. When the house on the site is offered for sale, the owner(s) of the site shall have the preemptive right to purchase it on the same terms as are offered to any other person. This has been provided for in the bottom part of Paragraph I, Article 104 of the Taiwan Land Rules. However, it only refers to the cases where the building site is leased. If the building site is unlawfully occupied, the said Article shall not apply.
 
c. When the house on the site is offered for sale, the owner(s) of the site shall have the preemptive right to purchase it on the same terms as are offered to any other person. This has been provided for in the bottom part of Paragraph I, Article 104 of the Taiwan Land Rules. However, it shall mean that the lessor has the preemptive right to purchase the lessee's house on the same terms as are offered to any other person when the house is offered for sale. If the building site and house belong to the same person who sold them one after the other to two people, the said Article shall not apply.
 
d. Paragraph I, Article 104 of the Taiwan Land Rules provides: “When the building site is offered for sale, the lessee shall have the preemptive right to purchase it on the same terms as are offered to any other person, and when the house on the site is offered for sale, the owner(s) of the site shall have the preemptive right to purchase it on the same terms as are offered to any other person.” The legislative intent thereof is to afford one of the owners of the building site and of the house with the preemptive right to purchase the building site or house from the other when the latter offers the building site or house for sale if the said building site and house do not belong to the same owner.
 
Whether the owner of the house leased the site for the construction thereof or he bought the house and leased the building site from his predecessor, Article 104 of the Taiwan Land Rules will apply.[8]
 
e. Before its amendment was promulgated on July 24, 1975, Paragraph I, Article 104 of the Taiwan Land Rules provided that “when the building site is offered for sale, the lessee shall have the preemptive right to purchase it on the same terms as are offered to any other person, and when the house on the leased site is offered for sale, the owner of the site shall have the preemptive right to purchase it on the same terms as are offered to any other person." Upon the amendment, the scope thereof has been expanded and it provides that "when the building site is offered for sale, the superficiary, pawn (tien) holder or lessee shall have the preemptive right to purchase it on the same terms as are offered to any other person," and that "the priority of such owners shall be determined according to the order of their registrations." The house as referred to in the Article is not limited to that of the lessee's. Therefore, under its consistent literal interpretation, the house of a superficiary or pawn (tien) holder's shall also be included.
f. Paragraph I, Article 104 of the Taiwan Land Rules provides: “When the building site is offered for sale, the superficiary, pawn (tien) holder or lessee shall have the preemptive right to purchase it on the same terms as are offered to any other person, and when the house on the site is offered for sale, the owner(s) of the site shall have the preemptive right to purchase it on the same terms as are offered to any other person.” It refers to the cases where the house and the building site belong to different owners, and where the owner of the house created such privity as superficies, pawn (tien) or lease with respect to the land.
 
(4) The said preemptive right to purchase applies only as to the sales of the building site or the house. No such preemptive right may be claimed in such cases as inheritance, gift, expropriation, etc., except for an auction conducted through compulsory execution.[9]
 
3. The Nature of the Preemptive Rights to Purchase under Paragraph IV, Article 34-1 and Article 104 of the Taiwan Land Rules:
 
(1) “The preemptive right to purchase as mentioned in Paragraph IV, Article 34-1 of the Taiwan Land Rules is a right under the principles of obligations. This can be ascertained by looking into the different languages employed in this Article and those in Paragraph II, Article 104 of the same Rules and in Paragraph III, Article 15 of the Statute for the Three-Seven-Five Reduction of Rents for Cultivated Land. Since the appellees have completed the registration for the transfer of ownership as between themselves for the sale of the share(s) of the land at issue, the appellant's claim that such registration of transfer of ownership should be canceled and that such share(s) be sold to him and registered under his name, based on the preemptive right to purchase set forth in Paragraph IV, Article 34-1 of the Taiwan Land Rules, shall not be granted.”(Supreme Court Precedent 66-Tai-Shang-1530)
 
(2) Paragraph I, Article 104 of the Taiwan Land Rules provides that a lessee has the preemptive right to purchase the building site on the same terms as are offered to any other person when it is offered for sale. Before the article was amended on July 20, 1975, the rights and obligations only arose as between the lessee and the owner of the building site. Namely, mere privity of obligations took place. If the owner of the leased building site violated this obligation by selling the site to a third person and completing the registration of the transfer of ownership, the lessee may merely seek damages from the owner of the leased building site, but shall not disclaim the validity of the contract under which the third party purchased the building site. (Refer to Supreme Court Precedent 47-Tai-Shang-152) The existing Paragraph II of the Article, which provides for seller's failure to notify the person having the preemptive right to purchase, was added on July 20, 1975, when the Rules were amended. Thereafter, the preemptive right to purchase was given the force and effect of a right over things. In the case at bar, the Appellees were making sales of the building site at issue as between themselves and had completed the registration of the transfer of ownership thereof on March 25, 1974, when the prior law was yet to be amended. Despite his failure to notify the Appellant who might preemptively purchase it, the aforesaid article shall not apply under the principle of non-retrospection of law.
 
(3) Although other co-owners may preemptively purchase a co-owner's share at the same price in accordance with Paragraph IV, Article 34-1 of the Taiwan Land Rules when the co-owner sells his or her share, such right is merely a right under the principles of obligations, but not one that has the relative effect of rights over things as that of a lessee of a parcel of land for the construction of a house when the lessor offers his or her land for sale.
 
4. Which shall prevail when Paragraph IV, Article 34-1 and Article 104 of the Taiwan Land Rules coincide with each other?
 
(1) Article 104 of the Taiwan Land Rules merely provides that a lessee has the preemptive right to purchase the building site on the same terms as are offered to any other person when it is offered for sale. It does not limit the lessee's preemptive right to purchase the jointly owned building site to the situation where all of the co-owners wish to sell. If it so limits, the lessee will not be able to gain ownership of the building site when co-owners of such site sell their respective shares severally or one after another, thereby defeating the intent of Article 104 of the Taiwan Land Rules. Therefore, if one of the co-owners of a leased jointly owned building site sells his or her share, the lessee of such building site shall have the preemptive right to purchase it on the same terms as are offered to any other person. The lessee's preemptive right to purchase also prevails over that of other co-owners as set forth in Paragraph IV, Article 34-1 of the same Rules.
 
(2) The legislative aim of the preemptive right to purchase under Paragraph I, Article 104 of the amended Taiwan Land Rules is to avoid the separation of land ownership and land use. If the provision thereof is violated, the sales contract shall not be used as against the person with the preemptive right to purchase. Clearly, the said preemptive right to purchase has a stronger effect than that of the co-owners. Furthermore, the existing land policy of avoiding fractional remainders of land and the dispersion of land ownership concerns farmland and vacant land. If a third person has already built a house on the surface of the land, it will be unnecessary to protect a co-owner of the building site by affording him or her the preemptive right to purchase. Hence the preemptive right to purchase as set forth in Paragraph I, Article 104 of the Taiwan Land Rules should be considered to prevail over a co-owner's preemptive right to purchase.[10]
 
IV. The Amended Taiwan Land Rules Have Removed the Restrictions of the Transfer of Ownership of Private Farmland:
 
Article 30 of the Taiwan Land Rules provides: “The ownership of private farmland shall be transferred only to such transferees as can cultivate the land themselves after the transfer is effected. Such farmland may not be transferred so as to result in co-ownership thereof; provided, however, that it is transferred by means of inheritance. If the preceding paragraph is violated, the transfer of ownership shall be void.” The provision is designed to expand the scale of operation of farms and to prevent fine division of farmland for the purpose of facilitating the development of agriculture. However, in coordination with the passing of the Statute for the Development of Agriculture, which provides for the conditional approval of the construction of farmhouses on newly purchased farmland, the Taiwan Land Rules have abolished the provisions limiting the assignees and successors to those who have the capacity to cultivate the land themselves. This is the key provision to the liberalization of free farmland transactions. In other words, after the repeal of the said Article, the contract for the sale of land as entered into by a purchaser who does not have the capacity to cultivate the land, shall remain in full force and effect.
 
V. Epilogue
 
In the present day, the transactions regarding land have never ceased to pause, and the disputes resulting therefrom are not at all a rare scene. Thus, an appropriately drafted contract appears to be exceptionally important. A contract involves the status of a party to the contract while various issues concerning the disposition of jointly owned farmland and the preemptive right to purchase oftentimes affect the validity of a sales contract. It is not unusual that unforeseen damage arises from the inattention of a contracting party. For these reasons, I have wholeheartedly offered this paper for your reference.