[1] Cases where a contract can be rescinded or terminated on the grounds of change in circumstances as an exception to the principle of contract observance

[2] In a case where Party A entered into a lease agreement with Party B for the purpose of constructing a model house for the housing construction project and specified the above purpose in the lease agreement with Party B as the special terms on the lease agreement; Party B was unable to construct a model house on the said land after being notified by the head of a local government on the return of the report on the construction of a temporary building; Party B requested Party B to terminate the lease agreement and refund the lease deposit, the case holding that the above lease agreement was legally terminated upon Party A’s termination notification, and Party B

[1] A contract may be rescinded or terminated on grounds of change in circumstances as an exception to the principle of contract observance, in a case where the circumstances underlying the basis of contract formation are clearly changed, and the parties could not have predicted it at the time of contract formation, and thereby maintaining the contract as it is would cause serious imbalance to the interests of the parties or could not achieve the purpose of the contract formation.

[2] In a case where Party A entered into a lease agreement with Party B for the purpose of constructing a model house for the purpose of housing construction project and specified the above purpose in the lease agreement as the special terms on the lease agreement; Party B was unable to construct a model house on the said land after being notified by the head of the local government of the return of the report on the construction of a temporary building; Party B requested Party B to terminate the lease agreement and refund the lease deposit, the case holding that the above lease agreement was legally terminated by Party A’s termination notice, and Party B was obligated to refund the lease deposit to Party B on the ground that the construction of the model house was not based on the establishment of the above lease agreement, since Party A could not construct the model house, and Party A could not achieve the purpose of the lease agreement since it was impossible to build the model house

[1] Articles 2 and 543 of the Civil Act / [2] Articles 2 and 543 of the Civil Act

[1] Supreme Court Decision 2016Da249557 Decided June 8, 2017 (Gong2017Ha, 1457)

Plaintiff

Defendant

Suwon District Court Decision 2018Na87538 decided July 7, 2020

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 supplemental appellate briefs not timely filed).

1. A contract may be rescinded or terminated on grounds of change in circumstances as an exception to the principle of contract observance, in a case where the circumstances underlying the basis of contract formation are clearly changed, and the parties could not have predicted it at the time of contract formation, and thereby maintaining the contract as it is would cause serious imbalance to the interests of the parties or would not achieve the purpose of the contract execution (see Supreme Court Decision 2016Da249557, Jun. 8, 2017).

2. The lower court determined as follows.

A. As to the instant land on February 17, 2016 between the Plaintiff and the Defendant, the instant lease agreement was concluded between KRW 100,000,000 per annum, and KRW 30,000,000 per annum, and KRW 30,000,00, with respect to the period of three years, the Plaintiff may request the Defendant to return the lease deposit after the termination of the lease agreement as a party to the lease agreement.

B. On February 17, 2017, the instant lease agreement was lawfully terminated by the Plaintiff’s notice of termination, and the Defendant is obligated to refund the lease deposit to the Plaintiff. The detailed reasons are as follows.

(1) The Plaintiff and the Defendant concluded a lease contract for the purpose of constructing a model house for the instant project, and the said purpose was stipulated in the instant lease contract as stipulated in the special agreement, and it should be deemed as a very important matter in the lease contract. Since the Defendant was well aware of the progress of the instant project as a promoter of the Promotion Committee for the ○○ Village Small Project, which promoted the instant project, and thus, it can be deemed that the Plaintiff was aware of the fact that there was no reason to use the instant land in the event that the model house is not constructed

(2) On April 21, 2016, the Plaintiff received a notification of the return of the report on the construction of a temporary building from the Yongsan City, and received the notification of the return of the application for the return of the approval of the housing project plan on August 8, 2016, and became unable to construct a model house on the instant land. The Defendant also became aware that the instant land cannot be constructed at that time.

(3) A lessor is obligated to keep the leased object in adequate conditions for the use and profit-making of the leased object and to maintain the conditions necessary for the use and profit-making even during the existence of the contract (Article 623 of the Civil Act). The instant land has been occupied by the Nonparty without permission from the time of the conclusion of the instant lease agreement to the present day, and is used for the purpose of installing temporary temporary materials for manufacturing the leased object, and storing various materials.

(4) The construction of a model house is a circumstance that serves as the basis for the establishment of the instant lease agreement. As it is impossible to construct a model house, the purpose of the Plaintiff’s lease agreement cannot be achieved, and the Defendant cannot be deemed to have delivered the instant land to the Plaintiff in a state that allows the Plaintiff to use and benefit from the instant land. The maintenance of the instant lease agreement as it is ought to be deemed to constitute

3. Examining the reasoning of the lower judgment in light of the record, the lower judgment 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 doctrine regarding the termination of a contract due to changes in circumstances.

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

Justices Lee Dong-won (Presiding Justice)