[1] In a franchise agreement that constitutes a continuous contractual relationship, the period for exercising the right to request the renewal of a franchise agreement under the Fair Transactions in Franchise Business Act has expired; in a case where there is no separate agreement on the renewal or extension of the term of a franchise agreement, or the period for exercising the right to request renewal of a franchise agreement has expired, whether the parties shall agree on the renewal of a franchise agreement (affirmative)

[2] In a case where Party A, who entered into a franchise agreement with Party B, and operated a franchise store for about 12 years after entering into the franchise agreement with Party B, but Party B demanded Party B to comply with the franchisor’s important business policy manual, but Party A refused to renew the franchise agreement on the ground that Party A refused to comply with the demand, and Party A sought damages against Party B, the case holding that Party B was liable for damages by unfairly refusing the renewal of the franchise agreement by abusing its superior trade position

[1] Article 13(2) of the Fair Transactions in Franchise Business Act (hereinafter “Franchising Business Act”) provides that “The franchise business operator’s right to request the renewal of the franchise agreement may be exercised only within the extent that the entire period of the franchise agreement, including the initial period of the franchise agreement, does not exceed ten years.” In a franchise business agreement that constitutes a continuous contractual relationship, the period for exercising the right to request the renewal of the franchise agreement under the Franchising Business Act has expired, and where there is no separate agreement on the renewal or extension of the term of the agreement or the period for exercising the right to request the renewal of the agreement of a franchisee agreed under the agreement has expired, the parties shall agree on the renewal, etc. of the agreement. In such cases, the franchisor shall be free to decide on whether to accept the request for renewal of the franchise agreement and to agree on the renewal thereof by themselves. However, the foregoing shall not apply where there are special circumstances that do not permit the refusal of the franchisor’s right to request renewal against the good faith principle in light of the developments, purpose or content

[2] In a case where Gap entered into a franchise agreement with Eul, which operated a franchise headquarters for about 12 years after Eul entered into the franchise agreement with Eul, but Eul refused to renew the franchise agreement on the ground that Eul violated the franchisor's important business policy, but Gap refused to comply with the franchisor's request, and Gap sought damages against Eul, the case holding that Eul is liable for damages on the ground that Eul's refusal to renew the franchise agreement is not permissible against the principle of good faith, even if Gap's refusal to renew the franchise agreement is not acknowledged after the lapse of 10 years from the date on which Eul entered into the franchise agreement with Eul and the right to request the renewal of the franchise agreement is not recognized, in light of all the circumstances, even if Eul's refusal to renew the franchise agreement was not allowed against the principle of good faith, on the ground that Eul's refusal to renew the franchise agreement unfairly by abusing its superior trade position and refusing to renew it unfairly

[1] Article 13(1)2 and (2) of the Fair Transactions in Franchise Business Act / [2] Article 13(1)2 and (2) of the Fair Transactions in Franchise Business Act

[1] Supreme Court en banc Decision 2010Da30041 Decided July 15, 2010 (Gong2010Ha, 1582), Constitutional Court en banc Decision 2009Hun-Ma582 Decided June 30, 201 (Hun-Ga17, 985)

Plaintiff

Defendant (Law Firm KLF (KLF, Attorneys Kim Jin-jin, Counsel for the defendant-appellant)

Daegu High Court Decision 2019Na21232 decided October 31, 2019

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 brief filed after the deadline).

1. Article 13(2) of the Fair Transactions in Franchise Business Act (hereinafter “Franchising Business Act”) provides that “The franchise business entity’s right to request the renewal of the franchise agreement may be exercised only within the extent not exceeding ten years in total, including the initial period of the franchise agreement.” In a franchise agreement that constitutes a continuous contractual relationship, the period for exercising the right to request the renewal of the agreement under the Franchise Business Act has expired, and where there is no separate agreement regarding the renewal or extension of the term of the agreement or the period for exercising the right to request the renewal of the agreement of a franchisee agreed under the agreement has expired, the parties shall agree on the renewal, etc. of the agreement. In such cases, the franchisor shall have the right to self-determination and decide on whether to accept the request for renewal of the franchise agreement and to agree on renewal, etc.: Provided, That the foregoing shall not apply where there are special circumstances not permitted contrary to the principle of good faith in light of the developments, purpose or content of the relevant franchise agreement, the development of the agreement, the interests of the parties, and the unique characteristics of the franchise agreement (see Constitutional Court en banc Decision 201015Da.

2. Review of the lower judgment, the first instance judgment as cited by the lower court, and the records reveals the following facts and circumstances.

A. The Defendant, under the trade name of “(trade name omitted)”, is a person who operates a franchis franchisor that runs a clock retail business, etc., and the Plaintiff was operating a franchis store (trade name omitted) in a region for about 12 years.

B. Article 15(3) of the franchise agreement between the Plaintiff and the Defendant provides that the Plaintiff’s right to request the renewal of the agreement may be exercised only within the extent that the entire period of the franchise agreement, including the initial period of the franchise agreement, does not exceed ten years. Therefore, the period of exercise of the right to request renewal of the agreement under Article

C. The Plaintiff was found to have attempted to spread a place in the instant franchise store using a weapon without using a blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick blick

D. However, the Defendant’s cooking manual does not expressly state that it is correct to use the place place, and the meaning of the language and text relating to the method of using the place place is unclear. Therefore, the Plaintiff’s use of a weapon in the process of using the place place in which the Plaintiff did not appear to have intentionally attempted to put the Defendant’s cooking manual, and it seems to be merely an act done in order to improve the method of using the place.

E. The Plaintiff demanded that the Defendant present an accurate presentation as to which portion of the cooking manual was violated, but the Defendant issued a second demand for correction to the effect that it is similar to the first demand for correction.

F. Since the second demand for correction, the Defendant did not comply with the Plaintiff’s demand for correction, obstructed the core unity of franchise business, and did not comply with the standard manuals set by the franchisor, and notified the Plaintiff that the Defendant would refuse to renew the franchise agreement on the ground that “the terms and conditions or business policies ordinarily applicable to other franchisees are not accepted by the franchisee,” under Article 13(1)2 of the Franchise Business Act.

G. However, it does not appear in the record that the Plaintiff used a weapon that is not a ushesheshel for cooking a simple device after the Defendant’s first demand for correction. Moreover, the Plaintiff used a ushel for cooking as the Defendant’s demand from the time when the first demand for correction was made to the Defendant, while requesting the cancellation of the first demand for correction.

H. The Plaintiff, who operated business over about 12 years in one region with the trade name “(trade name omitted)”, appears to incur considerable property damage due to the Defendant’s refusal to renew the contract. However, even if the Plaintiff’s franchise agreement is renewed, it does not seem that the Defendant would incur considerable damage.

3. Examining the above facts and circumstances in light of the aforementioned legal principles, even if the Plaintiff’s right to request the renewal of a franchise agreement or the right to request the renewal of a franchise agreement under the Franchise Business Act is not acknowledged after the lapse of 10 years from the date on which the Plaintiff entered into the franchise agreement with the Defendant, the Defendant’s refusal to renew the franchise agreement appears to have any special circumstance that would not be permitted against the good faith principle. Ultimately, the lower court, on the grounds stated in its reasoning, deeming the Defendant to have abused its superior trade position and unfairly refused the renewal of the franchise agreement and imposed disadvantages on the franchisee, and recognized damages as stated in the judgment on the grounds of unfair trade practices prohibited by the Franchise Business Act, is justifiable. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by exceeding the bounds

4. Therefore, the appeal is dismissed, 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 Kim Jong-hee (Presiding Justice)