[1] Where a contract expressly provides for the right of rescission, the method of interpreting the intent of the parties and the matters to be considered

[2] In a case where Party A and Party B entered into a contract for gold production with Party B, stating that “A may cancel the contract where the production is unable to be completed within the prescribed period, in violation of this contract,” but Company A promptly notified the termination of the contract without the notice of performance, the case holding that the lower court erred by misapprehending the legal doctrine, which determined that Party A’s termination of the contract was not effective because it did not meet the requirements for the exercise of the right to statutory rescission

[3] Where the contractor agrees to pay the compensation for delay to the contractor in proportion to the number of days delayed if the contractor fails to complete the delivery within the delivery period, whether the period delayed in the performance of the obligation due to any cause not attributable to the contractor shall be deducted from the period of the compensation for delay (affirmative), and where there is a special agreement to pay part of the remuneration for the contract, whether the period delayed in the payment of the advance shall be deducted from the period of the compensation for delay

[1] In a case where a special provision regarding the right to rescission exists in a contract, it may be a variety of meaningful meaning, such as that the right to statutory rescission is stipulated as a fundamental rule or the right to statutory rescission is reserved. Even when the right to statutory rescission is reserved, there exist cases where the parties have set the grounds for special cancellation in consideration of the purpose of the contract, etc., and the procedures for rescission may be rescinded without a reasonable period of time. Whether the parties have the provisions concerning the right to rescission in a certain intent is a matter of interpretation of intent, and should be reasonably interpreted in accordance with logical and empirical rules, comprehensively taking into account the purpose of the contract, the circumstances surrounding the provisions concerning the right to rescission, the language of the provisions concerning the right to rescission, etc., as a matter of interpretation of intent, and the other party’s genuine intent should be reasonably interpreted in accordance with logical and empirical rules, rather than the general contents, such as that the other party may cancel the contract if there is a default on the other party’s obligation as a reason for cancellation, and the other party’

[2] The case holding that the court below erred by misapprehending legal principles, in case where Gap company and Eul company entered into a contract for the production of gold papers with the provision that "the contract may be rescinded where Eul company is unable to complete the production within the period in violation of this contract," but Gap company promptly notified the termination of the contract without the notice for performance as Eul failed to supply the paper after the expiration of the delivery period, in light of all circumstances, the above provision is not merely a provision on the right of statutory rescission due to non-performance, but it can be deemed that the intent of the parties to decide differently from the exercise of the right of statutory rescission, such as peremptory notice, is reflected in the cancellation procedure, although the contract for the production of gold paper was prepared by Gap company and Eul company, and the contract for the production of gold papers was not effective

[3] Where the contractor agrees to pay the penalty for delay calculated by applying a certain ratio to the contract amount in proportion to the number of days delayed if the contractor fails to complete the delivery within the delivery period, if the contractor delays the performance of his/her obligation due to any cause not attributable to the contractor, the contract shall be deducted from the period of compensation for delay equivalent to the amount of the contract for delay. In addition, in cases where there is an agreement under which the contractor may refuse the commencement of the contract until the payment is made and the contractor shall not be held liable even if the completion of the contract is delayed, the circumstance that the contractor delayed the payment of the advance payment agreed upon to the contractor constitutes a cause for which the contractor cannot be held liable for the delay of the completion of the contract. Accordingly, the contract owner shall be deducted from the period of compensation for delay where the contractor is to pay the advance payment to the contractor.

[1] Articles 105, 543, and 544 of the Civil Act / [2] Articles 105, 543, and 544 of the Civil Act / [3] Articles 390, 398, 536, and 664 of the Civil Act

Sam Young General Machinery Co., Ltd. (Law Firm Sangok, Attorneys Kang Shin-han et al., Counsel for the plaintiff-appellant)

Defendant-Counterclaim (Attorney Han Sung-young, Counsel for defendant-Counterclaim)

Incheon District Court Decision 2012Na17608, 17615 decided January 16, 2014

The part of the lower judgment’s claim for restitution of unjust enrichment among the main claim is reversed, and that part of the case is remanded to the Incheon District Court. The remaining appeals by the Plaintiff (Counterclaim Defendant) and the appeal by the Defendant (Counterclaim Plaintiff) are all dismissed.

The grounds of appeal are examined.

1. As to the ground of appeal by the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”)

A. As to the ground of appeal on the part of the claim for restitution of unjust enrichment

1) In cases where a special provision regarding the right to rescission exists in a contract, it may be meaningful, such as that the right to statutory rescission is stipulated as a fundamental rule or the right to statutory rescission is reserved. Even in cases where the right to statutory rescission is reserved, there exist cases where the parties have set the grounds for special cancellation in consideration of the purpose of the contract, etc., and the procedures for rescission may be rescinded without a reasonable period of time. Whether the parties have the provisions concerning the right to rescission in a certain intent is a matter of interpretation, and should be reasonably interpreted in accordance with logical and empirical rules, comprehensively taking into account the purpose of the contract, the circumstances surrounding the provisions concerning the right to rescission, the language of the provisions concerning the right to rescission, etc., as a matter of interpretation of intent, and should be reasonably interpreted in accordance with logical and empirical rules, taking into account the following as a whole: Provided, That the other party’s default as the grounds for cancellation is not the same as that one of the parties may cancel the contract, but rather, it is necessary to consider when determining the genuine intent of the parties.

2) After finding the facts as stated in its reasoning, the lower court determined that the grounds for cancellation under Article 6 of the instant contract, i.e., where the Defendant (Counterclaim Plaintiff; hereinafter “the Defendant”) could not complete the production within the period in violation of the contract, provided that the Defendant did not perform his/her obligations. In substance, the lower court determined that the Plaintiff’s expression of intent to cancel on May 4, 201 is unlawful, on the grounds of the Defendant’s nonperformance, not an exercise of the right to rescind the contract in the instant contract, but an exercise of the right to rescind the contract on the ground of the Defendant’s nonperformance, on the grounds that the Plaintiff did not exercise the right to rescind the contract, which was specifically reserved in the instant contract. However, there is no evidence to acknowledge that the Plaintiff notified the performance of the obligation within a reasonable period of time or could cancel the contract without a peremptory notice.

3) However, the record reveals the following facts.

① In concluding the instant contract with the Defendant on behalf of the Plaintiff’s representative director, the Nonparty witness of the lower court, the Nonparty, who was the Plaintiff’s regular director, demanded the Defendant to “as the Plaintiff was supplied with the gold-free machine part from March 201 to the Defendant, and supplied it to the multi-picker Co., Ltd., Ltd., which is the Plaintiff’s customer, since the Plaintiff was supplied with the 1 gold-free machine part from March

② The instant contract agreement was prepared by the Defendant first prepared by reflecting the Plaintiff’s demand, and was written by modifying it. Of total contract amount of KRW 140,000,000 (excluding value-added tax), KRW 70,000 (excluding value-added tax) shall be paid in cash, and the remainder of KRW 70,000,000 (excluding value-added tax) shall be paid after the completion of trial operation and the submission of defective performance securities; however, Article 6 of the contract shall be included in the agreement, reflecting the Plaintiff’s demand on compliance with the delivery period.

(3) Article 6 of the above contract provides, “The plaintiff may rescind the contract in cases where the defendant is unable to complete the production within the period of time in violation of the contract, or where he/she suffered losses as he/she is deemed unable to complete the production due to a serious operational situation, and at this time, the down payment shall be returned, and the plaintiff may separately

4) According to the above facts, while entering into the instant contract, the Plaintiff and the Defendant have a special provision on the right to cancel the said contract through negotiations on the specific terms and conditions, and the content thereof is different from the general provisions on the right to cancel the contract, such as the waiver of the contract deposit or the cancellation by repayment of a double amount, etc. In addition, with respect to the right to cancel on the ground of the Plaintiff’s non-performance of obligation, such as the payment of the contract, only the right to cancel on the ground of the Defendant’s non-performance of obligation. Furthermore, with respect to the right to cancel on the ground of the Plaintiff’s non-performance of obligation, without any specific provision, specified cases where the Defendant is unable to comply with the delivery deadline or cannot complete the production due to a serious managerial situation. Of them, the Plaintiff’s need to demand the Defendant to perform the production by fixing a reasonable period or has no substantial significance. In doing so, it may not be ruled out that the Plaintiff did not agree to the effect that, in light of its nature, the remaining grounds for cancellation as well as the one contract provision.

In full view of such various circumstances, Article 6 of the instant contract provides that “the Plaintiff may rescind a contract in cases where the Defendant is unable to complete the production within the period in violation of the contract,” not merely provides for the right to statutory rescission due to nonperformance, but also provides for the grounds for revocation with limited liability in the instant contract and reflects the intent of the relevant party to decide differently from the exercise of statutory rescission rights, such as peremptory notice, in the procedure for rescission.

5) Therefore, the lower court should have determined the validity of the termination of a contract by further specifically examining the following: (a) the Plaintiff and the Defendant specifically specified the provisions on the termination of contract in the process of concluding the instant contract; (b) whether the Plaintiff’s demand for performance was made even if the Defendant did not deliver the instant gold-type 1 after the delivery period; and (c) the reasons why the Plaintiff notified the rescission of the contract immediately without the written demand. Nevertheless, the lower court concluded that the Plaintiff’s termination of a contract was null and void due to the reasons stated in its reasoning. In so doing, it erred by misapprehending the legal doctrine on the reservation of the right to rescind the contract and the interpretation of expression of intent; and (b) failure to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit; and (c) as long as the Defendant received the allegation in the grounds

B. As to the ground of appeal concerning the part on the claim for delay among the claim for the principal lawsuit

1) Where the contractor agrees to pay the penalty for delay calculated by applying a certain ratio to the contract amount in proportion to the number of days delayed if the contractor fails to complete the delivery within the delivery period, if the performance of the obligation is delayed due to any cause not attributable to the contractor, the contract shall be deducted from the period for liquidated damages for the corresponding period. In addition, where there is a special agreement under which the contractor shall pay part of the contract for delay, the contractor may refuse the commencement of the work until the provision is made, and thereby, the contractor shall not be held liable for default even if the completion of the work is delayed, the circumstance that the contractor delayed the payment of the advance payment agreed upon to the contractor constitutes a cause not attributable to the contractor. Accordingly, the contractor shall be deducted from the period for liquidated damages for delay for which the contractor shall pay the advance payment in proportion to the delayed period.

2) According to the reasoning of the lower judgment and the record, ① the Plaintiff and the Defendant entered into the instant contract on November 2, 2010 and specified the delivery period of the Defendant as of March 15, 201. However, the contract deposit is set at KRW 70,00,000 (excluding value-added tax) equivalent to 50% of the total price without specifying the delivery period; ② the Defendant did not complete the delivery within the delivery period, and ③ the Plaintiff issued a promissory note with KRW 53,90,000 on November 30, 201, and paid the Defendant the total sum of KRW 70,000,000 on deposit and value-added tax by paying KRW 23,100,000 on December 23, 2010, ④ the delivery period of the instant contract amount as of April 1, 2015 to the Plaintiff.

3) In light of the above facts, in particular, the facilities subject to the instant contract are produced in line with the Plaintiff’s unique requirements, and the amount of KRW 70,00,000 (excluding value-added tax) as down payment is up to 50% of the total facility cost, etc., it cannot be deemed that the said down payment has the same nature as the deposit for entering into a contract. Rather, it is reasonable to deem that the Defendant, who is the contractor, has the nature of advance payment that pays part of the monthly remuneration to facilitate services without difficulties in securing materials or paying wages. Nevertheless, since the Plaintiff paid down payment one month after entering into a contract, the Defendant could not have commenced or refused the manufacture of facilities, which are subject to a contract, from November 2, 2010 to December 2, 2010, which was the date of entering into the contract.

In light of the above legal principles, the Defendant’s delayed delivery of the instant gold-type 2 should be excluded from the period of compensation for delay for one month, which is one-month delayed performance due to the Plaintiff’s failure to pay the amount equivalent to the down payment stipulated in the instant contract, due to the cause not attributable to the Defendant.

In the same purport, the lower court is justifiable to regard the period for which the Defendant is liable to pay liquidated damages as three days. In so doing, the lower court did not err by misapprehending the legal doctrine on the time of the liquidated damages.

2. As to the Defendant’s ground of appeal

A. The burden of asserting and proving the completion of work in a contract for work is against the contractor seeking payment of remuneration for the result of work (see Supreme Court Decision 94Da26684, 26691, Nov. 22, 1994). In order to have the completion of the work in a contract for the supply of crops, the main structure of the subject matter shall be constructed as agreed and shall be recognized as having the performance generally required by social norms (see Supreme Court Decision 2004Da21862, Oct. 13, 2006).

B. The lower court rejected the Defendant’s claim seeking payment of the remainder of the gold punishment 2, on the ground that there is insufficient evidence to prove that the main structure of the gold punishment, which the Defendant intended to deliver to the Plaintiff on May 25, 201, had been constructed as agreed upon and had the capabilities generally required by social norms.

Examining the reasoning of the lower judgment in light of the foregoing legal doctrine and the record, the lower court’s determination is justifiable. In so determining, contrary to what is alleged in the grounds of appeal, there were no errors by either violating logical and empirical rules or by misapprehending the legal doctrine on bilateral contract and the degree of performance provision. Supreme Court Decision 2010Da89050 Decided October 25, 2012, which is alleged in the grounds of appeal by the Defendant, differs

3. Conclusion

Therefore, the part of the judgment of the court below regarding the claim for restitution of unjust enrichment is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The remaining appeal by the plaintiff and the defendant's appeal are all dismissed. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kwon Soon-il (Presiding Justice)