[1] Cases where a contract may be rescinded or terminated for reasons of change of circumstances, and the meaning of “assessment” as referred to in this context / Whether a contract may be terminated only with the fact that there was any disadvantage to the parties in a continuous contract due to changes in economic conditions (negative)

[2] In a case where a judge recognizes facts based on the result of appraisal, whether it is unlawful (negative in principle)

[3] Whether it is a fact-finding court's exclusive authority to determine facts or rates concerning comparative negligence or limited liability grounds (affirmative in principle)

[1] A contract may be rescinded or terminated on grounds of change of circumstances, as an exception to the principle of contract observance, in a case where the circumstances forming the basis of contract formation are clearly changed, and the parties could not have predicted such changes at the time of contract formation, and thereby maintaining the contract as it is, thereby, would cause a significant imbalance to the interests of the parties or would not achieve the purpose of the contract formation. The circumstances referred to in this context refer to the circumstances forming the basis of contract formation to the parties, and do not include situations that the parties did not use as the basis of contract formation, or circumstances that either party did not put any disadvantage or

Even if a change in economic situation, etc. causes loss to the parties, a contract may not be rescinded on the ground of change in circumstances if it was possible to anticipate the change in circumstances from a reasonable person’s standpoint. In particular, a continuous contract is highly likely to cause unexpected change in circumstances as the gap between the time the contract was concluded and the time the contract was performed. However, even in such a case, the mere fact that the said contract was put at a disadvantage to the parties due to changes in economic

[2] An appraisal is used as a means to assist the court in a case where special knowledge and experience are required in determining certain matters. In a case where a judge recognizes facts based on the result of appraisal, it shall not be deemed that it is erroneous unless it violates the rules of experience or logic.

[3] The fact-finding or the ratio of comparative negligence or the limitation of liability for the fair apportionment of damages in determining the scope of liability for damages due to nonperformance is the exclusive authority of the fact-finding court, unless it is manifestly unreasonable in light of the principle of equity.

[1] Articles 2 and 543 of the Civil Act / [2] Articles 202 and 341 of the Civil Procedure Act / [3] Articles 393, 396, and 763 of the Civil Act

[1] Supreme Court Decision 2004Da31302 Decided March 29, 2007 (Gong2007Sang, 601) Supreme Court en banc Decision 2012Da13637 Decided September 26, 2013 (Gong2013Ha, 1916) / [2] Supreme Court Decision 87Da1354 Decided March 8, 198 (Gong198Sang, 654) / [3] Supreme Court Decision 98Da56416 Decided May 25, 199 (Gong197Ha, 1249) (Gong209 decided October 11, 2012)

See Attached List of Plaintiffs (Law Firm LLC, Attorneys Lee Dong-soo et al., Counsel for the plaintiff-appellant)

Hotel Capital Co., Ltd. (Law Firm Associate, Attorney Im-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2015Na2060762 decided August 18, 2016

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of any statement in the supplemental appellate brief not timely filed).

1. Ground of appeal No. 1

A. misunderstanding of legal principles as to termination of an agreement

The Defendant asserted that the Plaintiff terminated the instant club use contract (hereinafter “instant use contract”) concluded with the Plaintiffs, on the following grounds, while continuously accumulating the enemy while operating the volatile club (hereinafter “instant club”) equipped with facilities, such as rain, physical training place, swimming pool, etc., on the hotel capital building located in Yongsan-gu Seoul (hereinafter “Seoul”). However, the lower court rejected all the Defendant’s assertion on the following grounds.

(1) Article 10 of the Regulations and Article 10 of the Regulations cannot be deemed as a provision stipulating the right to terminate the agreement. Therefore, the Defendant’s assertion that the instant use contract was lawfully terminated pursuant to the termination agreement is not recognized.

(2) Article 5(2) of the instant Rules provides that “In the event that a party does not wish to retire, membership shall continue to exist by paying annual fees.” Barring any special circumstance, the instant use agreement determines the term of existence as one year, and provides renewal thereof through the payment of annual fees, barring any special circumstance, it is difficult to deem that the instant use agreement constitutes a contract with no fixed term of contract. Therefore, the Defendant’s assertion that the instant use agreement constitutes a continuous contract with no fixed term of contract, and thus, the parties may unilaterally terminate the contract at any time, even if

Examining the reasoning of the lower judgment in light of relevant evidence and the record, such determination is justifiable. In so determining, the lower court did not err by misapprehending the legal doctrine on the right to terminate an agreement on continuous contract, contrary to what is alleged in

B. Opinion of misapprehension of legal principles as to termination of a contract due to changes in circumstances

(1) A contract may be rescinded or terminated on grounds of change of circumstances as an exception to the principle of contract observance in a case where the circumstances underlying the basis of contract formation have been significantly changed, and the parties could not have foreseen at the time of the contract formation. The maintenance of the contract as it is, thereby, would cause a significant imbalance to the interests of the parties or would not achieve the purpose of the contract formation (see, e.g., Supreme Court Decisions 2004Da31302, Mar. 29, 2007; 2012Da13637, Sept. 26, 2013). The term “case” refers to the circumstances that form the basis of the contract formation to the parties, and the circumstances in which the parties did not take the basis of the contract formation, or circumstances in which either of the parties did not put any disadvantage or risk due to changes, do not include any circumstances in which the

Even if a change in economic situation, etc. causes loss to the parties, a contract may not be rescinded on the ground of change in circumstances if it was possible to anticipate the change in circumstances from a reasonable person’s standpoint. In particular, a continuous contract is highly likely to cause unexpected change in circumstances as the gap between the time the contract was concluded and the time the contract was performed. However, even in such a case, the mere fact that the said contract was put at a disadvantage to the parties due to changes in economic

(2) According to the judgment of the court of first instance as cited by the court below, the following facts are recognized.

(A) Since 1988, the Defendant operated the instant club in the hotel capital building. The Plaintiffs concluded the instant use contract with the Defendant to use the instant club by directly paying the admission fee, deposit, and annual fee, or by acquiring membership rights of the instant club by acquiring membership rights of the instant club, and became a party to the instant use contract, and used the instant club as an individual member or family member by paying the annual fee to the Defendant.

(B) The Defendant, while operating the instant club, raised the annual fee from 2002 to 2012 on five occasions. The sales revenue has decreased from October 1, 2009 to September 30, 2013, while the cost expenditure has increased due to price increase, and the Defendant’s entire business has been deficited during the period from October 1, 2012 to September 30, 2013.

(C) On September 12, 2013, the Defendant notified the Plaintiffs that “The operation of the instant club is suspended as of September 30, 2013 because it is no longer possible due to the continuous occurrence, etc. of the instant club,” and notified the Plaintiffs that the deposited money is returned.” The Defendant suspended the operation of the instant club on September 30, 2013 following the announcement.

(D) Even after September 30, 2013, the Defendant continued to be in a state of fitness, and around 2015, the hotel rating fell from Class 2 to Grade 1.

(E) Meanwhile, according to the credit analysis report with the Defendant, which was made around September 2013, the Defendant’s corporate assessment rating was assessed as AA+ (the immediately preceding corporate assessment rating is also AA+) that it is a company with the highest level of credit ability for commercial transactions and sufficient response to environmental changes. The cash flow rating was assessed as a CF1 that it is a liquidity excellent enterprise with the highest level of cash flow creation ability. Watch rating was assessed as having been normal, that there was no recent change in the internal and external environment. The net income for the year 2012 was KRW 1.934 billion.

(3) According to the above facts, it is difficult to view that circumstances, such as the reduction of new members, the increase of the number of members, and the increase of the expenses for the maintenance and management of facilities, cited by the Defendant on the grounds of hostile accumulation, are the circumstances constituting the basis of the instant use contract, and as a matter of principle, the Defendant, inasmuch as there is no significant change in economic situation, should be deemed to have decided to leave the risk following the change. Furthermore, it is difficult to view that the Defendant, while operating the instant club, has reduced the sales since 2009 and accumulated the deficit from the end of 2012, is not a significant change in circumstances that could not have been predicted at the time of the contract.

In light of the foregoing legal doctrine, the lower court’s determination to the same purport is justifiable. In so determining, the lower court did not err by misapprehending the legal doctrine on termination due to changes in circumstances.

2. The second ground for appeal

An appraisal is a means for the court to use such knowledge and experience as a means to assist the court in making a determination on certain matters. In a case where a judge recognizes facts based on the result of appraisal, it cannot be said that the judge is erroneous unless it violates the rules of experience or logic (see Supreme Court Decision 87Meu1354, Mar. 8, 198).

In full view of the market price appraisal by the appraiser of the first instance trial, the lower court calculated the damages suffered by the Plaintiffs due to the nonperformance of the instant use agreement.

Examining the reasoning of the lower judgment in light of the aforementioned legal doctrine and the evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal doctrine on the illegality of appraisal method and the calculation of damages, as otherwise alleged in the grounds of appeal.

3. Ground of appeal No. 3

In determining the scope of liability for damages due to nonperformance, the fact-finding or the rate of limitation of liability for the purpose of offsetting negligence or ensuring fair burden of damages is the exclusive authority of the fact-finding court unless it is manifestly unreasonable in light of the principle of equity (see, e.g., Supreme Court Decisions 98Da56416, May 25, 1999; 2010Da86709, Oct. 11, 2012).

Examining the reasoning of the lower judgment in light of the aforementioned legal principles and records, the lower court’s fact-finding or its determination on the grounds for limitation of liability cannot be deemed considerably unreasonable in light of the principle of equity, and thus, the Defendant’

4. Conclusion

The Defendant’s appeal is dismissed as it is without merit, and the costs of appeal are assessed against the Defendant. It is so decided as per Disposition by the assent of all participating Justices on the bench.

[Attachment] List of Plaintiffs: Omitted

Justices Park Poe-young (Presiding Justice)