Buying "DooDoo Eternal King NFT" for a Lifetime of Hassle-Free Parking? Things to Know Before Purchasing Functional NFTs

NFTs are digital certificates based on blockchain technology that can be used for applications such as digital identity, digital art, music copyrights, membership cards, and vouchers. In recent years, many brands in Taiwan have joined the NFT trend, integrating existing services and incorporating marketing innovations.

The Taiwan automotive financial services platform iParking recently launched the "Car Man Metaverse" NFT project, which offers various functions such as lifetime free parking and free parking during specific periods. Among the limited issuance of two thousand NFTs, there are two hundred NFTs with lifetime free parking functionality, sparking discussions in the community. However, this project not only encountered technical errors during issuance but has also recently been covered in the media due to usage controversies. What consumer disputes should be noted when purchasing NFTs?

Case Study: What to Do When Services Do Not Meet Expectations After Purchasing Functioning NFTs?

The media outlet ETtoday received reports from the public that after spending 400,000 TWD in the NFT secondary market to purchase the "Forever King" NFT, which offered a lifetime of free parking, a person encountered a situation where their usual parking location was removed, leaving them feeling deceived. iParking responded by stating that the service provided to NFT buyers allows them to park in over 100 cooperating parking lots. iParking provides online services and collaborates with offline parking management companies. If a specific location stops renewing the contract, iParking will have to suspend services at that location.

Although iParking promised to provide services for all cooperating parking lots without guaranteeing the permanence of individual parking locations, the individual believed that the service did not meet their expectations and requested a refund. Ultimately, iParking promised to repurchase the NFT at a price of 0.5 ETH, approximately 660 USD, compared to the initial purchase price of 0.58 ETH, to refund all holders.

In traditional purchases of memberships or vouchers, there are usually detailed contract terms or usage regulations to define the rights and obligations of both parties, which must comply with consumer protection laws. However, when they are converted into NFTs, how does it differ?

Interview with the Director of the Taiwan Virtual Currency Anti-Money Laundering Association - Attorney Cat Tong, what is her opinion on this matter?

Review: Attorney Cat Tong | Is it a Tribute or Plagiarism to Issue NFTs in the Second Creation Curse Battle?

1. Is the Parking NFT of DooDoo House considered a Standardized Contract?

Attorney Cat Tong: According to the definition in Article 2 of the Consumer Protection Act, a standardized contract refers to terms containing standardized contract terms. Standardized contract terms are pre-drafted contract terms proposed by business operators for the conclusion of similar contracts with a majority of consumers, presented in various forms such as written, subtitles, postings, signs, the internet, and other diverse methods.

If the regulations related to the DooDoo House NFT meet the above definition, it can be explained as pre-drafted terms proposed by business operators and considered a type of standardized contract.

2. If DooDoo House mismanages and closes down, how can holders of functioning NFTs such as lifetime free parking protect their rights?

Attorney Cat Tong: Taking the DooDoo House dispute as an example, NFT holders have a relatively easier process in resolving subsequent disputes since they can identify the operating entity. In most NFT projects where the operating entity cannot be found, NFT holders may have no means of seeking compensation. If the operating entity of DooDoo House goes bankrupt, according to relevant regulations, dissolution, liquidation, and bankruptcy procedures should be carried out. NFT holders have the opportunity to request the company to settle debts based on their creditor status. If the original agreed-upon service cannot be provided, they may receive monetary compensation proportionally.

3. DooDoo House's website statement: "*The project party reserves the right to change and terminate empowerment, and reserves the final interpretation right. If there are any relevant changes, they will be announced on the website without further notice." Is such a statement establishing contract change content legally valid?

Attorney Cat Tong: Not only DooDoo House's website, but many websites and even paper contracts may include such a provision to ensure operational flexibility for the company or management team. Once such a clause is included in the agreement between the company and the consumer, it binds both parties.However, it is worth noting that Articles 11 to 14 of the Consumer Protection Act limit standardized contracts, making such statements potentially invalid. If during litigation, a consumer disputes such a provision as unfair, there is a chance that the statement may be deemed invalid in the case judgment.

It is important for businesses to note that in case of disputes over terms, courts tend to interpret in favor of consumers. Therefore, such statements are not absolute, and it is advisable to clearly define terms and notify consumers of any changes to avoid potential disputes or negative impact on the company's image and reputation.

4. If a single parking location is closed, does it affect the rights to "lifetime free parking"?

Attorney Cat Tong: Whether the closure of a single parking lot is considered a breach by DooDoo House depends on the content of the expressions of intent at the time. The main controversy lies in whether the service explicitly specifies a particular parking lot.Based on the regulations provided by the service provider iParking, parking services are limited to supported locations, indicating that stations may be closed at any time due to factors related to cooperating operators. Interpreted according to this regulation, the temporary closure of a single parking lot may not constitute a violation of the agreement.

The source of this dispute may stem from the lack of clear provisions regarding station closures on the NFT minting activity website or Discord community, causing consumers to feel caught off guard. It is recommended that for common consumer issues or matters significant to consumers, clear provisions should be explicitly stated or published on the activity website to avoid subsequent disputes.

5. Are resalable, fluctuating-value empowerment NFTs legally defined as commodities or securities?

Attorney Cat Tong: In 2019, Taiwan issued interpretations to define which virtual currencies possess securities characteristics. Although the scope of the interpretation at that time mainly covered cryptocurrencies and not NFTs, the basis of this interpretation, the SEC v. W. J. Howey Co. case in the United States in 1946, used the Howey Test to determine whether the subject is a security.

That is, if: 1) an investor contributes funds; 2) to a common enterprise or project; 3) with the expectation of profit; 4) primarily from the efforts of the issuer or a third party, then the subject is considered a security. Following this logic, if an NFT has profit-sharing functions, it is more likely to be classified as a security.

There is currently no clear interpretation available for businesses to determine if NFTs are securities. Applying the rules of the Howey Test to cryptocurrencies or NFTs lacks judicial precedents in practice. Hence, the detailed logic for determining whether cryptocurrencies or NFTs are securities will be a topic worth monitoring in the future.

6. How should consumers protect their rights when physical industries use NFTs to provide membership cards, vouchers, and other functions?

Attorney Cat Tong: Carefully read the text in Discord such as the Roadmap, major announcements, rules, etc., and save them. Pay special attention to whether there are other normative documents to comply with, such as the terms of use on the official website or the membership terms for registered members, as these agreements are the basis of the rights and obligations of both parties.

For example, the rules of the DooDoo House NFT state that compliance with iParking's regulations is required, and iParking also specifies regulations regarding station closures. These are important agreements that may affect consumers or NFT holders. If there are any doubts about the terms or areas where the operating team's writing is unclear, consumers can inquire directly with the management team to obtain clearer responses for more precise agreements to follow.