[1] In a case where a party to a delegation contract expressed an intention to terminate a delegation contract on the grounds of the other party’s nonperformance, but in fact fails to meet the requirements for termination of a contract on the grounds of nonperformance of obligation, whether the validity as a voluntary termination under Article 689(1) of the Civil Act is recognized (affirmative in principle)

[2] Whether the other party is liable for damages arising therefrom when the other party has terminated the delegation contract at an unfavorable time, and the scope of compensation / Whether the mandatory has terminated the delegation contract before the handling of affairs is completed at an unfavorable time to the delegating (negative)

[1] Pursuant to Article 689(1) of the Civil Act, each party to a delegation contract may terminate the delegation contract at any time without any special reason. Therefore, even if a party to a delegation contract has expressed his/her intent to terminate the delegation contract on the grounds of nonperformance of obligation of the other party, but in fact fails to meet the requirements for termination of the contract on the grounds of nonperformance of obligation, barring any special circumstance, the declaration of intention is recognized as a voluntary termination pursuant to Article 689(

[2] Under the nature of a delegation contract under the Civil Act, either a contract with or without consideration, or a special relationship between both parties, in principle, each party may terminate at any time, and as a result, the other party shall not be liable to compensate for damages incurred to the other party. However, if the other party has terminated at a time disadvantageous to the other party, the scope of the compensation shall be limited to the damages incurred therefrom, unless the termination is due to unavoidable reasons. However, the scope of the compensation shall be limited to the damages not arising from the termination of the delegation, but to the damages that had not

In addition, even if the mandators are unable to transfer the outcome of the completion of administrative affairs or obtain profits by cancelling the delegation contract in the absence of the completion of administrative affairs while the mandatary performs the affairs entrusted, barring any special circumstance, such as separate special agreement, the delegation contract is planned at the time of the contract that, if the contract is terminated before the administrative affairs are completed, the mandators will not transfer the outcome of the completion of administrative affairs or obtain profits, and thus, it cannot be deemed that the mandates terminate the delegation contract before the administrative affairs are completed at an unfavorable time against the mandators.

[1] Article 689(1) of the Civil Act / [2] Article 689 of the Civil Act

[2] Supreme Court Decision 90Da18968 delivered on April 9, 1991 (Gong1991Sang, 1353)

Crable Co., Ltd. (Attorneys Kim Young-soo et al., Counsel for the defendant-appellant)

Sof Bank Venture Holdings Co., Ltd. (Law Firm Yang Hun-Ga et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2010Na95019 decided June 29, 2012

The judgment below is reversed and the case is remanded to Seoul High Court.

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

1. As to the Defendant’s grounds of appeal as to whether the instant agreement was originally impossible

The lower court determined whether the instant agreement was terminated on the premise that the agreement is valid and feasible, and the occurrence of liability for damages therefrom was incurred. In so determining, the lower court’s rejection of the Defendant’s assertion that the instant agreement was null and void as a contract aimed at providing an original impossibility of performance.

In addition, considering the reasoning of the lower judgment in light of the relevant legal principles and records, such determination by the lower court is justifiable, and contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on the validity of an agreement due to an original impossibility, omitting judgment,

2. As to the legal nature and discretionary nature of the instant agreement and each of the grounds of appeal by the Plaintiff and the Defendant

A. As to the legal nature of the instant agreement

In full view of the circumstances in its holding, the court below rejected all the plaintiff's assertion that the agreement of this case is a delegation of its basic nature, and accordingly, the defendant can arbitrarily terminate the agreement of this case pursuant to Article 689 (1) of the Civil Code. The defendant's assertion that the nature of the agreement of this case is a consignment sales contract, and that the agreement of this case is a non-title contract of the same kind and the contract of this case is part of other contractual relations, and thus, the exercise of the right of termination should be restricted pursuant to Article 689 (1) of the Civil Code.

In full view of the language and text of the instant agreement, the developments leading up to the conclusion of the agreement, and all the circumstances revealed in the reasoning and records of the lower judgment, such determination by the lower court is justifiable. In so doing, contrary to what is alleged in the grounds of appeal by the Plaintiff and the Defendant, there were no errors by exceeding the bounds of the principle of free evaluation of evidence

B. As to whether the instant agreement was terminated voluntarily, etc.

1) Pursuant to Article 689(1) of the Civil Act, each party to a delegation contract may terminate the delegation contract at any time without any special reason. Therefore, even if a party to a delegation contract has expressed his/her intent to terminate the delegation contract on the grounds of nonperformance of obligation of the other party, but in fact fails to meet the requirements for termination of the contract on the grounds of nonperformance of obligation, the said declaration of intent shall be recognized as a voluntary termination under Article 689(1) of the Civil Act, barring

2) According to the reasoning of the judgment below, the court below found on April 5, 2006 that the defendant declared that the contract in this case was terminated on the following grounds: (a) construction works for the purpose of developing real estate and construction contractors for the purpose of the development of real estate could not be the actual acquirer of the two-use land; (b) even though the agreement in this case provides for the partnership as the main acquirer of the two-use land, the purpose of the agreement in this case is likely to be realized because the association is not equipped up until now; and (c) the plaintiff expressed his intent to terminate the contract in this case on the grounds that the method of offering the real estate of the two-use land while borrowing the purchase price from the financial institution could bring about the problem of criminal breach of trust and the problem of violation of the Fair Trade Act; and (b) in full view of the circumstances in the judgment, each party can at any time terminate the contract based on the specific trust relationship between both parties, and thus, the agreement in this case was terminated pursuant to Article 689(1) of the Civil Act.

In light of the aforementioned legal principles and records, such determination by the court below is just, and contrary to the Plaintiff’s grounds of appeal, it did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal principles on the interpretation of voluntary termination and disposal documents

3) On the grounds indicated in its reasoning, the lower court determined that it cannot be readily concluded that the Defendant renounced the right to terminate the contract under Article 689(1) of the Civil Act at the time of the instant agreement.

Examining the circumstances revealed in the text of the instant agreement and the process of its conclusion in light of the records, such determination by the lower court is justifiable. In so doing, contrary to what is alleged in the Plaintiff’s grounds of appeal, there were no errors by misapprehending the legal doctrine on

4) Even after the termination of the instant agreement, the Plaintiff’s assertion that the delegation relationship continues to exist pursuant to Article 691 of the Civil Act is premised on the Defendant’s obligation to continue to perform the business of transferring the purchaser’s status pursuant to the instant agreement to the Plaintiff or to the nominal lender designated by the Plaintiff, even after the termination of the instant agreement. However, even after the termination of the instant agreement, the lower court did not explicitly determine whether the delegation relationship continues to exist pursuant to Article 691 of the Civil Act, but the Defendant’s obligation to transfer the right to request the delivery of shares pursuant to the instant agreement that the Defendant owed to the Plaintiff upon the termination of the instant agreement was impossible without the Defendant’s consent to transfer the right to request the delivery of shares to the Plaintiff, and thus, the Defendant did not bear any default liability following the nonperformance of the instant agreement. In so doing, the lower court did not acknowledge that the Defendant did not undertake any duty of delegation under Article 691(1)1 of the Civil Act to the Plaintiff or the Plaintiff’s name truster designated by the Plaintiff for the purpose of the Plaintiff.

Therefore, such judgment of the court below is not erroneous in the misapprehension of judgment as to the application or analogical application of Article 691 of the Civil Code, contrary to the plaintiff's ground of appeal.

3. As to the Defendant’s grounds of appeal on the occurrence and scope of liability for damages arising from voluntary termination

A. Whether there was an inevitable reason for termination

In light of the relevant legal principles and records, the court below's decision that the defendant terminated the contract of this case without any inevitable reason is just and there is no error in the misapprehension of legal principles as to inevitable reasons under Article 689 (2) of the Civil Act.

B. Regarding the existence and scope of liability for damages caused by termination of an unfavorable time

1) Under the Civil Act, a delegation contract, whether it is a contract with or without consideration, may be terminated at any time by either party to a delegation contract based on a special fiduciary relationship between both parties, and as a matter of principle, the other party shall not be obliged to compensate for any damages incurred by the other party. However, if the other party has terminated at a time disadvantageous to the other party, the other party shall compensate for any damages incurred therefrom, unless the termination is due to unavoidable reasons. However, the scope of the compensation is limited to damages not arising from the fact that the delegation was terminated but from the fact that the scope of the compensation

In addition, even if the mandators are unable to transfer the outcome of the completion of the administrative affairs or obtain profits by cancelling the delegation contract in the course of the performance of the affairs entrusted by the mandatarys, barring any special circumstance such as special agreement, the delegation contract is planned at the time of the contract as it is naturally expected that if the contract is terminated prior to the completion of the administrative affairs regardless of the time of the contract, the mandators will not transfer the outcome or obtain profits from the completion of the administrative affairs. Thus, it cannot be deemed to have terminated the delegation contract before the mandatary completes the administrative affairs (see, e.g., Supreme Court Decisions 90Da18968, Apr. 9, 191; 98Da64202, Jun. 9, 200).

2) Examining the records in light of the above legal principles, even if the Defendant was unable to acquire shares of the instant dual-use land after the termination of the instant agreement prior to the completion of the management of its affairs, it was naturally planned from the time of the instant agreement as an effect of the exercise of the right of termination of delegation, and thus, it cannot be deemed that the Defendant terminated the instant agreement at an unfavorable time with the sole fact that the Defendant acquired shares of the instant dual-use land and subsequently transferred it to the Plaintiff. Moreover, the damages incurred by the termination of the instant agreement, which the Plaintiff was ultimately unable to transfer shares of the instant dual-use land, are damages incurred by the termination of the instant agreement, and do not constitute the location damage if the instant agreement had not been terminated at an adequate time. Therefore, it is difficult to view that the damages were compensated pursuant to Article 689(

In addition, according to the facts acknowledged by the court below, the plaintiff and the defendant entered into the agreement of this case on February 24, 2006, which was after the plaintiff was selected as the priority negotiation object of the sale procedure of the pair-use land of this case on February 17, 2006. Thus, even if the defendant had already terminated the agreement of this case from the time of entering into the agreement of this case to the time of termination of the agreement of this case, even if the defendant had already been selected as the priority negotiation object, it is difficult to accept the two-use land by entrusting the plaintiff with the vicarious execution of the sale procedure of this case to another person. Thus, if the contract of this case was terminated before the termination of the contract of this case, it is difficult to see that the plaintiff could ultimately delegate the vicarious execution of the sale procedure of this case to the other person

3) Nevertheless, the lower court did not examine whether there was another reasonable time to terminate the instant agreement, whether there was a loss incurred by the Plaintiff if the agreement was terminated at the pertinent time, and whether the agreement was terminated at the pertinent time, and determined that the Plaintiff was liable to compensate the Plaintiff for the loss equivalent to the performance profit that the Plaintiff could have gained by acquiring shares of a pair of solvents from the Defendant if the instant agreement was terminated.

In so doing, the court below erred by misapprehending the legal principles as to the requirements and scope of damages under Article 689(2) of the Civil Act, thereby adversely affecting the conclusion of the judgment. The defendant's ground of appeal assigning this error is with merit.

4. As to the Plaintiff’s ground of appeal as to whether liability for damages arises due to nonperformance of obligation under Article 684(2) of the Civil Act

For the reasons indicated in its holding, the lower court determined that it was impossible for the Defendant to transfer to the Plaintiff the right to request a transfer of shares pursuant to the share purchase agreement of this case, which was acquired in its own name on April 10, 2006 under Article 684(2) of the Civil Act, to the Plaintiff, barring any special circumstances, on the ground that the instant agreement was terminated by termination, and that the Defendant notified the Defendant on April 8, 2006 that “the possibility of granting the Plaintiff a principal position in the subject transaction” may be deemed to include “the purport of transferring the right to request a transfer of shares pursuant to the instant share purchase agreement to the Plaintiff.” However, the lower court determined that the Defendant’s transfer of the right to request a transfer of shares pursuant to the instant share purchase agreement of this case was not possible as it declared against the Plaintiff on April 10, 2006 without the consent of the contracting parties.

In light of the relevant legal principles and records, the judgment of the court below is just, and contrary to the allegations in the plaintiff's grounds of appeal, there were no errors in the misapprehension of legal principles as to liability for default

5. As to the Plaintiff’s ground of appeal on the existence of liability for damages arising from a tort violating confidentiality

The lower court rejected the Plaintiff’s assertion that the Defendant breached the duty of confidentiality in bad faith on the ground that, upon the termination of the instant agreement, in order to transfer to the Plaintiff the right to request the delivery of shares under the instant contract for the purchase and sale of shares held by the Defendant, the actual transferee of the B&P was the Plaintiff.

In light of the relevant legal principles and records, although the part of the court below's explanation of its reasoning is somewhat inappropriate, the conclusion of the court below's rejection of the plaintiff's assertion is just and acceptable. Meanwhile, since the court below judged as above under the title "decision on the defendant's non-performance of obligation or liability for damages caused by illegal acts", this part of the court below's determination is included in the purport of rejecting the claim for damages compensation liability due to illegal acts in violation of the duty of confidentiality. Thus, contrary to the plaintiff's ground of appeal, it did not err by exceeding the bounds of the principle of free evaluation of evidence against the logical and empirical rules

6. Conclusion

Therefore, without examining the remaining grounds of appeal by the Plaintiff and the Defendant, the lower judgment is reversed, and 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 on the bench.

Justices Lee Ki-taik (Presiding Justice)