Although the terms and conditions of the electricity supply contract, etc. entered into with a large number of electricity expropriations, if electricity is used for purposes other than for each type of contract, a penalty equivalent to twice the evaded amount of the electricity charges shall be imposed. However, there is no provision that the evaded electricity charges themselves or damages may be claimed, and only the evaded amount shall be added to the amount of value-added tax, the extinctive prescription period applicable to the legal nature of the penalty and the liability for the payment thereof

The terms and conditions applicable to a contract for the supply of electricity that applies to a contract for the supply of electricity between a large number of electricity units, and if electricity is used for a purpose other than for each type of contract, a penalty equivalent to twice the evaded amount of electricity charges arising therefrom shall be imposed. However, in the event that there are circumstances where there are no provisions allowing the evasion of electricity charges itself or for claiming damages separately and there is no provision allowing the addition of value-added tax equivalent thereto only for the evaded amount, it is reasonable to deem that the penalty for breach of the above terms and conditions also has the nature of liquidated damages and penalty. Furthermore, the liability for penalty for breach of a contract for breach of a contract for breach of a specific type of contract does not constitute a claim under Article 163 subparag. 1 of the Civil Act to which the short-term extinctive prescription period of three years applies, i.e., a claim for the payment of money within a period of one year. However, “act of supplying electricity to business” falls under basic commercial activities under the Commercial Act (Article 46 subparag. 4 of the Commercial Act), and Article 64 of the Commercial Act applies to a penalty for breach of a contract.

Article 2, Article 46 subparag. 4, and Article 64 of the Commercial Act; Article 163 subparag. 1 of the Civil Act

Korea Electric Power Corporation (Law Firm Sejong, Attorneys Gyeong-il et al., Counsel for defendant-appellant)

Defendant (Attorney Lee Yong-hoon, Counsel for defendant-appellant)

Seoul Western District Court Decision 2011Na6612 decided November 11, 2011

The part of the lower judgment against the Plaintiff is reversed, and that part of the case is remanded to the Panel Division of the Seoul Western District Court.

The grounds of appeal are examined.

1. The terms and conditions applicable to the terms and conditions of the electricity supply contract concluded between a large number of electricity users, and the penalty equivalent to twice the evaded amount of the electricity charges resulting from the use of electricity for any purpose other than for each type of contract shall be imposed. However, in the event that there are circumstances such as where there are no provisions allowing the evasion of the electricity charges itself or for claiming damages, and where there are no provisions allowing the addition of value-added tax equivalent only to the evaded amount, it is reasonable to deem that the penalty in accordance with the said terms and conditions has the nature of

In addition, the obligation to pay penalty for violation of a standardized contract by type of contract is not itself the obligation to pay the electricity fee arising from the supply of electricity, and thus, Article 163 subparag. 1 of the Civil Act, to which the three-year short-term extinctive prescription applies, does not constitute “claim for the purpose of paying money for a period of less than one year”. However, the term “act of supplying electricity to a business entity” constitutes a basic commercial activity under the Commercial Act (Article 46 subparag. 4 of the Commercial Act), and the Commercial Act applies to a public corporation by which the power supplier is a public corporation unless otherwise provided for in the statutes (Article 2 of the Commercial Act). As such, the obligation to pay penalty based on such a power supply contract also applies to a claim arising from a commercial activity

2. According to the reasoning of the judgment below, the court below rejected the Plaintiff’s claim that the statute of limitations expired prior to the expiration of the period of extinctive prescription under Article 163 subparag. 1 of the Civil Act, on the ground that the Defendant’s defense accepting the Defendant’s compensation for damages and the penalty constitutes a claim for payment of money within a three-year period of short-term extinctive prescription under Article 163 subparag. 1 of the Civil Act, on the ground that, on the ground that the Defendant entered into an agreement on the supply of electricity with the Plaintiff on the supply of electricity and that the Defendant used electricity for housing in violation of Article 65 of the Plaintiff’s basic terms and conditions for the supply of electricity as well as Article 44 of the aforementioned terms and conditions, Article 29 of the Enforcement Rule, and the Plaintiff’s internal rules, the difference (e.g., evaded amount), additional charges equivalent to the aforesaid amount, value-added tax on the evaded amount, and electric fund calculated under the relevant Acts and subordinate statutes.

However, in light of the above legal principles, the judgment below erred by misapprehending the legal nature of the obligation to pay the penalty and the legal principles on the period of extinctive prescription, which affected the conclusion of the judgment. Therefore, the ground of appeal that the judgment below erred by misapprehending the legal principles is with merit.

3. Therefore, the part of the lower judgment against the Plaintiff is reversed and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices

Justices Kim Chang-suk (Presiding Justice)