Dongjin Lee, On Notice of Performance and Tender as Requirements for Mutual Contract Termination — Supreme Court Decision 2022.10.27 2022Da238053, Yeungnam Law Journal, Vol.57(2023.12), pp.93-121.
<Abstract>
The pretext of article 544 of Korea’s Civil Code stipulates that a reasonable period of additional time shall be set and a notice of performance shall be made in order to terminate a contract. If the obligor neither performs nor offers the tender of performance of its obligations within that period, the obligee can terminate the contract. In a decision rendered on Oct. 27, 2022, case no. 2022Da238053, the Supreme Court holds that the invalid notice of termination shall be reinterpreted into or valid as a notice of performance, and that the conclusion of a trust agreement for securing a debt alone does not constitute the actual tender of payment. The former is an application of existing case law, while the latter is new. The former ruling is, however, not only unjust in theory, but also would lead to an unjust result in practice, which is demonstrated in the very case. Fortunately, there were material breaches of contracts in all the cases that previously applied this case law and recognized termination, while the termination was eventually denied for other reasons in the case where there was no material breach and the obligee sought opportunistic termination. In contrast, the aforementioned decision affirmed termination despite the absence of material breach. The latter holding is also unjust, as the tender of payment can also be provided orally when it comes to an executory contract, and the conclusion of a trust agreement for securing a debt can constitute the oral tender of performance with excluding termination.
<Keywords>
termination of contract, notice of performance, tender of performance, material breach, trust for securing a debt
Dongjin Lee, On Notice of Performance and Tender as Requirements for Mutual Contract Termination — Supreme Court Decision 2022.10.27 2022Da238053, Yeungnam Law Journal, Vol.57(2023.12), pp.93-121.
<Abstract>
The pretext of article 544 of Korea’s Civil Code stipulates that a reasonable period of additional time shall be set and a notice of performance shall be made in order to terminate a contract. If the obligor neither performs nor offers the tender of performance of its obligations within that period, the obligee can terminate the contract. In a decision rendered on Oct. 27, 2022, case no. 2022Da238053, the Supreme Court holds that the invalid notice of termination shall be reinterpreted into or valid as a notice of performance, and that the conclusion of a trust agreement for securing a debt alone does not constitute the actual tender of payment. The former is an application of existing case law, while the latter is new. The former ruling is, however, not only unjust in theory, but also would lead to an unjust result in practice, which is demonstrated in the very case. Fortunately, there were material breaches of contracts in all the cases that previously applied this case law and recognized termination, while the termination was eventually denied for other reasons in the case where there was no material breach and the obligee sought opportunistic termination. In contrast, the aforementioned decision affirmed termination despite the absence of material breach. The latter holding is also unjust, as the tender of payment can also be provided orally when it comes to an executory contract, and the conclusion of a trust agreement for securing a debt can constitute the oral tender of performance with excluding termination.
<Keywords>
termination of contract, notice of performance, tender of performance, material breach, trust for securing a debt