The ambulance supplier of the Han Hong Foundation has been placed under investigation. What legal risks are hidden in the charity procurement contract?
Recently, the ambulance supplier of the Han Hong Love and Charity Foundation (hereinafter referred to as the "Han Hong Foundation") was placed under investigation by the market supervision and administration department for suspected violations of laws and regulations. As soon as the news broke, it quickly drew public attention. As one of the most credible charitable organizations in China, the Han Hong Foundation has performed prominently in disaster relief operations, and the compliance of its procurement processes has naturally become a focal point of public scrutiny. Behind this incident lies not only the fate of a single enterprise, but also the legal liability and risk prevention issues faced by charitable organizations in procurement, donation, contract performance, and other aspects. This article will analyze the key legal points in charitable procurement from a lawyer's perspective, in light of the Charity Law, the Bidding Law, the Civil Code, and other relevant regulations, and provide practical recommendations for public welfare institutions and suppliers.
The Legal Nature and Contract Validity of Charitable Procurement
The procurement behavior of charitable organizations is essentially a civil contract act, governed by the Contract Book of the Civil Code. If the sales contract concluded between the Han Hong Foundation and the ambulance supplier does not violate the mandatory provisions of laws and administrative regulations, and both parties' expression of intent is genuine, the contract is valid. However, charitable procurement has its particularities: its funds often originate from social donations and constitute public funds, so the procurement process must adhere to higher standards of transparency and compliance.
According to Article 55 of the Charity Law, when charitable organizations conduct procurement activities, they shall sign written contracts in accordance with the law and properly preserve relevant records. If a supplier engages in fraudulent practices, such as making false representations during bidding or performance, or passing off inferior goods as quality products, such conduct may not only constitute a breach of contract, but may also give rise to liability for culpa in contrahendo or tort liability due to fraud. In this incident, if the supplier has indeed been placed on file for investigation due to product quality or qualification issues, the Han Hong Foundation, as the purchaser, has the right to claim rescission of the contract, refund of payment, and compensation for losses in accordance with the contractual provisions.
It is worth noting that when charitable procurement contracts involve public interests, courts will place greater emphasis on achieving the contract's purpose during trial. For example, if an ambulance has safety hazards, even if the contract has already been performed, the charitable organization may still demand compensation from the supplier based on product liability disputes, rather than merely contract disputes. This reminds suppliers that transactions with charitable organizations are not a "one-off deal"; subsequent product quality and after-sales service are equally subject to strict legal scrutiny.
Application and Misconceptions of Bidding and Tendering Procedures in Charitable Procurement
Many members of the public believe that charitable organizations must undergo public tender procedures when making procurements, but the law does not take a one-size-fits-all approach. Article 3 of the Tendering and Bidding Law stipulates that only projects involving large-scale infrastructure, public utilities, and other matters related to public interest and public safety are subject to mandatory tender requirements. Charitable organizations' procurement activities are not necessarily subject to mandatory tender rules, unless they use government funds or fall under projects that are legally required to undergo tendering.
However, as a well-known public fundraising foundation, the Han Hong Foundation's procurement activities are governed by the Charity Law and the Regulations on the Administration of Foundations. A foundation shall adhere to the principles of "openness, fairness, and justice," and significant procurements should be conducted through competitive methods to select suppliers, so as to reflect donors' intentions and the efficiency of fund utilization. In practice, charitable organizations often adopt methods such as invited bidding, competitive negotiation, or price inquiry; however, if the procedures lack transparency, they are liable to give rise to public scrutiny.
This supplier's investigation may involve fraudulent bid documents or benefit transfer issues. If collusive bidding is found, relevant entities may face fines, disqualification from bidding, or even criminal liability under Article 53 of the Bidding and Tendering Law. For charitable organizations, although purchasing non-compliant products due to failure to strictly review supplier qualifications may not necessarily result in administrative penalties, the reputational damage would be incalculable. Therefore, charitable organizations should establish a strict supplier admission mechanism, verify documents such as business licenses, production permits, and quality certifications, and retain review records for audit purposes.
Division of Legal Liability between Product Quality and Donated Materials
Ambulances are special-purpose vehicles that are directly related to the safety of patients' lives, and their production and modification must comply with mandatory national standards. If an ambulance provided by a supplier has quality defects that cause an accident during use, how should liability be allocated? Article 1202 of the Civil Code stipulates that if a product defect causes harm to others, the producer shall bear tort liability. If a charitable organization, when purchasing, knowingly or should have known that the product was non-compliant and still purchased it, it may bear joint and several liability for failing to fulfill its reasonable duty of care.
In judicial practice, charitable organizations often appear in the capacity of "donors," but if they directly purchase goods, they fall under the category of "buyers," and their legal status is no different from that of ordinary consumers. If the Han Hong Foundation can clearly stipulate quality standards, acceptance clauses, and after-sales liability in its procurement contracts, then in the event of supplier breach, it may, in accordance with Article 582 of the Civil Code, require repair, rework, replacement, or compensation for losses. In addition, if the supplier is suspected of commercial bribery or false advertising, charitable organizations should also take care to preserve evidence and promptly report to the market regulatory authorities to avoid becoming involved in administrative investigations themselves.
For the public, donating is not simply a matter of "donating and being done with it." According to Article 42 of the Charity Law, donors have the right to inquire about the use of donated property. If they discover that a charitable organization has violated the agreed purpose, they may demand correction or even revoke the donation. Therefore, charitable organizations must ensure that their procurement processes are legal and compliant; otherwise, they may face the risk of lawsuits from donors. In this incident, the Han Hong Foundation proactively responded publicly and cooperated with the investigation, which is precisely a proactive measure taken to avoid such risks.
How Public Welfare Institutions Can Build a Procurement Compliance System: Practical Advice from Lawyers
Facing the lesson of suppliers being placed under investigation, public welfare institutions should start with institutional development to prevent legal risks. First, they should formulate a "Procurement Management Measures" that clearly defines tiered approval authority for procurement amounts, supplier selection criteria, contract review procedures, and acceptance processes. Second, they should establish a supplier blacklist system, applying a one-vote veto to suppliers with records of bribery, fraud, or other violations. Third, they should bring in independent auditors and legal counsel to participate in major procurement projects, ensuring procedural legality.
Meanwhile, charitable organizations should make good use of contract clauses to protect their own rights and interests. For example, in sales contracts, they may include "security deposit clauses" or "quality warranty periods" to require suppliers to provide performance guarantees; clearly stipulate ownership of intellectual property rights and confidentiality obligations to prevent technology leakage; and agree on dispute resolution methods, such as arbitration or the choice of litigation venue, to reduce the cost of rights enforcement. For large-sum procurements, consideration may also be given to purchasing commercial insurance to transfer potential product liability risks.
For suppliers, partnering with charitable organizations is both a business opportunity and a responsibility. Enterprises should ensure that their products have all necessary qualifications and excellent quality, avoiding short-sighted actions that cross legal red lines. Once placed under investigation, they not only face administrative penalties but may also be added to the list of untrustworthy entities, affecting future operations. Therefore, suppliers should proactively cooperate with investigations, actively make corrections, and seek assistance from professional lawyers to assess legal consequences and develop response strategies.
The Han Hong Foundation incident serves as a wake-up call for the entire philanthropy industry. Charity is never a trivial matter—every use of funds carries the public's trust. Whether for charitable organizations or suppliers, only by treating compliance as the bottom line can they go further on the path of public welfare. Guangdong Zhiming Law Firm has long focused on public interest legal services and can provide professional support to charitable institutions in procurement compliance review, contract drafting, dispute resolution, and more, helping the public welfare sector develop healthily on the track of the rule of law.
Public welfare requires passion, but it also needs legal safeguards. It is hoped that this incident will prompt industry reflection, ensuring that every ambulance carries the original intention of legality and compliance, heading toward those who truly need help.
