The meaning of the refusal of performance under the English contract law and the method of determining whether the parties expressed their intent of refusal of performance / Where the parties have shown a negative or passive attitude in the performance of the contract, whether it can be readily concluded as a clear and conclusive declaration of intent of refusal (negative)

In the English Contract Law, the doctrine of breach of contract is recognized under the English Contract Law. If one of the parties unfairly expresses his/her intent to refuse performance and the other party accepts it before the contract is concluded, the other party can immediately avoid the future performance obligation and resolve the contract, and claim damages for the reason of breach of contract (see, e.g., Hochter v De lav [1853] 118 E.R. 922; Heyman v Darws Ltd. [1942] A.C. 356).

The rejection of performance means that the other party cannot be expected to perform his contractual obligations any more than the obligor’s contractual obligations by expressing, or engaging in, the other party’s intent to perform an important contractual obligation and/or act before the due date becomes due after the conclusion of the contract (see the above Heyman v Darw Ltd.).

The issue of whether the obligor expressed his/her intent to refuse performance is an objective matter to be determined. From the standpoint of the other party to a contract that makes a reasonable accident, it can be recognized if the obligor has to completely refused the performance of his/her contractual obligations and expressed his/her intent to do so (1922). The expression of intent to refuse performance is not necessarily required to be explicitly stated or specific or verbally, but can be implicitly made through an act or a series of actions that are externally revealed. However, the refusal of performance should be clearly, clearly and definitely determined [1982] (see, e.g., Supreme Court Decision 97Da1984, Mar. 1, 198; 570] 1 Lloodyd's Rep.570; 207Da2974, Nov. 4, 200].

Articles 1 and 25(1) of the Private International Act

Bankruptcy Debtor Co., Ltd. 21st century trustee in bankruptcy, the bankruptcy debtor Co., Ltd. 21st century trustee in bankruptcy, the bankruptcy debtor Co., Ltd., the 21st century trustee in bankruptcy and the 21st century trustee in bankruptcy.

Korea Development Bank (Law Firm Subdivision, Attorneys Lee Gyeong-won et al., Counsel for the defendant-appellant)

Case Capital Co., Ltd. (Attorneys Son Ji-yol et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2013Na2010367, 2010374 decided October 8, 2014

The appeal is dismissed. The costs of appeal are assessed against the Defendant-Counterclaim Plaintiff, including the part resulting from participation in the appeal.

The grounds of appeal are examined.

1. Factual basis

The facts found by the court below are as follows.

A. The 21st century shipbuilding Co., Ltd., a shipbuilding company (hereinafter “the 21st century shipbuilding”) concluded a shipbuilding agreement with the lower court on each of the instant vessels on the instant vessels. The Plaintiff’s Intervenor (Counterclaim Defendant) issued an advance payment guarantee (R/G) to each of the instant vessels. The Defendant (Counterclaim Plaintiff; hereinafter “the Defendant”) entered into a security transfer agreement with the instant vessel on the first installment payment (2.5 million US dollars) between the instant vessel and the wing and the instant vessel. Upon entering into a security transfer agreement with the instant vessel construction agreement, the Defendant (Counterclaim Plaintiff; hereinafter “the Defendant”) was authorized to exercise the right to the instant 21st century shipbuilding vessel at the time of the instant shipbuilding agreement.

B. Since the first installment payment, the 21st century vessel and the Defendant had been well aware of these circumstances. However, the 2008 vessel did not find the acquirer due to the decrease in the stock price due to the financial crisis that began from the second half of the year 2008, the 21st century vessel and the 21st century vessel agreed to adjust the purchase price and the delivery date on November 10, 2009.

C. On December 28, 2009, immediately after the above amendment agreement was concluded, a creditor financial institution’s joint management proceeding under the former Corporate Restructuring Promotion Act for the 21st century shipbuilding (hereinafter “the workout proceeding”). On the ground that the accounting firm’s actual inspection plan prepared during the workout proceeding was difficult to raise funds, the instant vessel was excluded from construction of each of the instant vessels on the ground that the wing had a difficulty in raising funds.

D. On May 3, 2010, the 21st century shipbuilding: (a) confirmed the implementation schedule including the schedule for building each of the instant vessels; (b) maintained that schedule until July 1, 2010, and prepared to build each of the instant vessels; (c) sent a notice that some of the material supply contracts concluded to build each of the instant vessels would be revoked.

E. On July 15, 2010, the 21st century shipbuilding notified that it would carry out steel cutting on the hull number CSN-267 vessels on July 15, 2010. On July 30, 2010, the 21st century vessel carried out steel cutting without the participation of the wing, and notified the wing of the fact that the steel cutting was carried out on several occasions, including notification of the fact that it was carried out at the time, along with a confirmation form signed by the American Ship Survey Officer (hereinafter “ABS”).

F. According to each shipbuilding contract of this case, the second installment is paid at the time of a vessel cutting down. wing did not pay the second installment by the due date, and the 21st century shipbuilding notified the cancellation of each shipbuilding contract of this case.

G. On August 25, 2010, the Defendant notified that each of the instant shipbuilding contracts was cancelled on the ground that the vessel did not build a vessel despite the delivery date under each of the instant shipbuilding contracts or the vessel was rejected under each of the instant shipbuilding contracts, and that it is difficult for the Defendant to expect performance of its duties. Thereafter, the Defendant notified the rescission on the grounds of the delay in delivery of each of the instant vessels.

H. On June 17, 2013, the 21st century shipbuilding was declared bankrupt and Nonparty 1 was appointed as a bankruptcy trustee, and thereafter, the trustee in bankruptcy changed to the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”) and taken over the instant legal proceedings.

2. Applicable law and issues of the instant case

Each shipbuilding contract of this case has foreign elements and must determine the governing law in accordance with the Private International Act. Article 25 of the Private International Act provides that the governing law of the contract shall be determined explicitly or implicitly by the parties to the contract. Since the governing law of each shipbuilding contract of this case is stipulated in the English law, the governing law of each shipbuilding contract of this case is the English law.

The main issue of the instant case pertains to the construction contract of each of the instant vessels, which was the 21st century shipbuilding and the Defendant, who was authorized to exercise contractual rights under the contract of the 21st century shipbuilding and the 21st century shipbuilding, was lawfully rescinded by anyone. In other words, whether steel cutting was performed as the requirements for the second installment payment of the wing (ground of appeal No. 1) and whether the 21st century shipbuilding may be deemed to have expressed its intent to refuse performance (ground of appeal No. 2) and whether the 21st century shipbuilding delayed the delivery of each of the instant vessels (ground of appeal No. 3).

3. Judgment on the grounds of appeal

A. Whether steel cutting was performed as a requirement for the occurrence of the obligation to pay the second installment of the wing;

The lower court, on the following grounds, determined that the exercise of the right to cancel the 21st century shipbuilding, which was caused by the breach of the obligation to pay the second installment payments, was lawful.

The purpose of deceiving the Defendants is not to deem that each of the instant steel cutting was not actually carried out or that it was carried out for the purpose of deceiving the Defendants without any genuine intent to build a vessel. Even if the steel cutting was carried out in a certain form, the second installment payment date comes from the notification of the drieder who carried out the steel cutting and the confirmation of the Prepaid Association verifying the notification. The second installment payment date was the date of the second installment payment, even if the wing was notified of the

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court’s determination is justifiable. In so determining, the lower court did not err by misapprehending the legal doctrine regarding contractual interpretation, or by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules.

B. Whether the 21st century conciliation team’s expression of intent to refuse performance under English law can be seen as having expressed its intent to refuse performance

(1) Under the English contract law, the English contract law recognizes the doctrine of breach of contract prior to the due date. If one of the parties unfairly expresses his/her intent to refuse performance and the other party accepts it before the due date, the other party may immediately withdraw from his/her obligation to perform the contract and cancel the contract (which means the concept that covers rescission and termination under the Korean Civil Act) and claim damages for reasons of breach of contract (see, e.g., Hochter v. R. 922; Heyman v. Darws Ltd. [1853].

The rejection of performance means that the other party cannot be expected to perform his contractual obligations any more than the obligor’s contractual obligations by expressing, or engaging in, the other party’s intent to perform an important contractual obligation and/or act before the due date becomes due after the conclusion of the contract (see the above Heyman v Darw Ltd.).

The issue of whether the obligor expressed his/her intent to refuse performance is an objective matter to be determined. From the standpoint of the other party to a contract that makes a reasonable accident, it can be recognized if the obligor has to completely refused the performance of his/her contractual obligations and expressed his/her intent to do so (1922). The expression of intent to refuse performance is not necessarily required to be explicitly stated or specific or verbally, but can be implicitly made through an act or a series of actions that are externally revealed. However, the refusal of performance should be clearly, clearly and definitely determined [1982] (see, e.g., Supreme Court Decision 97Da1984, Mar. 1, 198; 570] 1 Lloodyd's Rep.570; 207Da2974, Nov. 4, 200].

(2) The lower court rejected the Defendant’s assertion on the following grounds: (a) there is no ground to deem that the right of rescission was established due to the refusal of performance which is recognized under the English common law.

① It is true that each of the instant shipbuilding contracts was concluded and approximately three years elapsed, and the steel cutting was not conducted until the scheduled date for delivery of each of the instant vessels. However, the 21st century shipbuilding concluded a material supply contract including engines before and after the conclusion of the contract. The delay in delivery of a vessel was due to the fact that the Plaintiff did not start the construction of the vessel because the wing did not find the buyer at the time and did not pay the construction cost. Therefore, it cannot be deemed that the 21st century shipbuilding delayed or even did not neglect the delivery date of the vessel without justifiable grounds.

② The steel cutting of each vessel of this case was conducted in accordance with the design drawings based on the agreement annexed to the instant case, and the steel was prepared for the construction of each vessel. Since it was proved that the steel cutting was carried out with a confirmation letter stating the signature of a ABS ship inspector, it is not readily denied.

③ Considering that the 21st century shipbuilding revoked a partial material purchase contract and carried out steel cutting in front of a certain schedule of its own notification, the 21st century shipbuilding appears to have been doubtful to a certain extent as to the acceptance and the possibility of proceeding of each shipbuilding contract of this case. It appears that the 21st century shipbuilding was carried out with steel cutting to a certain extent for the purpose of finally determining whether to continue the contract. However, it is difficult to deem that it was carried out for the purpose of falsity or deception.

④ In an accounting firm’s on-site report prepared during the 21st century Shipbuilding’s workout process, the instant vessel was excluded from the shipbuilding agreement. However, this is not due to the fact that wing had difficulty in raising funds, not due to the fact that the instant vessel was in the 21st century shipbuilding. Rather, the 21st century shipbuilding tried to maintain the external proposal to exclude the instant vessel from the process of normalizing management.

(3) Examining the reasoning of the lower judgment in light of the foregoing legal doctrine, the lower court’s determination is justifiable. In so determining, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine regarding contractual interpretation and refusal of performance under the English law, or by exceeding the bounds of the

C. Whether the 21st century shipbuilding delayed the delivery duty of each of the instant vessels

The lower court determined that the Defendant could not be deemed to have exercised the right of rescission due to the delay in the delivery date of the vessel of the 21st century. For that reason, the 21st century shipbuilding could not set up against the Defendant due to the due date extended through the wing modification agreement, but it did not pay the cost for each of the shipbuilding contracts of the instant case on the grounds that the payment for each of the shipbuilding contracts was not made. Accordingly, the delivery date of the instant vessel was automatically extended according to each

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court’s determination is justifiable. In so determining, the lower court did not err by misapprehending the legal doctrine on the Defendant’s right of rescission

4. The Defendant’s appeal is dismissed as it is without merit, and the costs of appeal are assessed against the losing party, including the part arising from the participation in the appeal. It is so decided as per Disposition by the assent of all participating Justices

Justices Park Poe-young (Presiding Justice)