Hooray! Finally someone cares what laws of my country China sound like so that I can have a chance to talk about it, in English though. There are a lot interesting topics in private property area of China law. It seems the principle that bona fide purchaser is entitled to the property they purchased, subject to different requirements in different jurisdictions, has become one of the most recognized universal value or legal principles around the world. China has a different name for them – bona fide third party – but do share some similar tests to satisfy for being a bona fide purchaser in the U.S. law. In this journal entry, the focuses will be the tests of bona fide third party in China law and exceptions therein.
Why is it called bona fide third party rather than a simple term as “purchaser”? The answer is quite straight forward: because this doctrine or so-called policy applies not only in a sale contract, but also is applicable to almost all other commercial activities such as business transaction, creation of lien or collateral, private property sale contract and even in an disputed auction, etc. One more legal concept in China law that is significantly related to bona fide parties is bona fide acquisition, could be poorly translated, which means the involved third party retain the entitlement of the involved subject matter based on proven fact that they are bona fide third party.
What elements does the bona fide third party test include? Basically, there are three elements required for being a bona fide third party: the transferee involved was bona fide when the transaction was made, reasonable consideration paid in exchange for the entitlement of the subject matter and registration done already for real property involved or delivery done for non-real property. In addition, knowledge of defect of rights or illegal history of the subject matter is the most recognized test to determine whether the transferee was bona fide third party. For example, if a purchaser of a car had no idea that the car was actually borrowed from others by the seller when he made the decision to buy the car, then they are deemed bona fide, and if the purchaser paid a reasonable price, and before any claim filed against the buyer the car had already been delivered to the buyer, they are entitled to the subject matter. We now have a poor owner lost their ownership of the lovely car. What can they do? Sue the seller (borrower) for recovery of any damages and fees incurred therein.
Most of time, a buyer does not really need to worry about getting rip off entitlement of goods they paid with reasonable price. But when goods purchased, even with reasonable considerations, were stolen goods or lost goods, the purchaser can never be a bona fide third party and get ownership of it unless the original ownership never finds them out and file suits against them for recovery. This is the exception of bona fide acquisition. What can they do now? Sue the seller (thief or lucky dogs) for damages and fees.