2015 grouped 2459 Confirmation of Non-existence of Obligation

1. A;

2. B

Korea Korea Co., Ltd.

May 25, 2016

June 29, 2016

1. The plaintiff B's lawsuit shall be dismissed.

2. The plaintiff A's claim is dismissed. 3. The costs of lawsuit are assessed against the plaintiffs.

On May 2, 2014, it is confirmed that there is no penalty of 22,93,519 won following the termination of the franchise store contract for the plaintiffs against the defendant and there is no interest obligation.

1. Facts of recognition;

(a) Conclusion of convenience store franchise agreements and transfer or takeover agreements;

1) On August 16, 2010, Plaintiff A entered into a franchise agreement (the term of the contract is five years from the opening date) with Defendant Company on the management of convenience stores (hereinafter referred to as “instant franchise agreement”), and around that time, Plaintiff A operated “D store” as referred to in Gwangju Seo-gu C underground 109 (hereinafter referred to as “instant convenience store”).

2) Articles 25(1), 64(1), and 64(2) of the instant franchise agreement stipulate the following:

Article 25 (Remittance Transfer of Sales Funds) ① (1) B (referring to the Plaintiff A) shall transfer the daily gross sales and price reduction, purchase incentives, and other miscellaneous income to A through the bank account designated by A (referring to the Defendant Company) or through a person designated by A (referring to the Defendant Company).Article 64 (Transfer of Business) ① If B intends to transfer to a third party all kinds of rights and obligations under this Agreement, it shall directly introduce the third party (hereinafter referred to as “party”) who intends to take over the rights and obligations under this Agreement, and seek the consent of A. (2) In giving the consent of the preceding 1, it may determine whether A consents to the business system by examining whether A consents to the business system, whether B complies with the new franchise procedure, and whether C-ELVNN franchise system.

3) On July 11, 201, Plaintiff A transferred the instant convenience store and its operating right to E in KRW 14,00,000, and on December 20, 2011, Plaintiff A transferred the said store and its operating right to the same amount to Plaintiff B. Section 6 of the business comprehensive transfer and takeover contract, which was formulated at the time, states that “The transferor must cooperate with the Defendant for all necessary cooperation in the transfer of the contractual relationship with the Defendant company under the name of the transferee.”

(b)not paying sales, remittance, and termination of a contract;

1) The Defendant Company urged Plaintiff A to pay the unaccompanied amount by sending a peremptory notice of contract performance to Plaintiff A four times from January 22, 2013 to April 2, 2014 on the ground that Plaintiff A failed to perform his/her duty to remit money pursuant to Article 25(1) of the instant franchise agreement.

2) On April 29, 2014, the Defendant Company notified the Plaintiff that the contract will be terminated as of May 2, 2014 on the ground that the Plaintiff did not perform the obligation to remit the sales amount (the amount not paid as of April 28, 2014) and that the Plaintiff would not perform the obligation to remit the sales amount (the amount not paid as of April 28, 2014). The notice of termination reached the Plaintiff A on April 30, 2014.

1) The Defendant Company notified the Plaintiff A of the penalty of KRW 22,993,519 (the average monthly fee of KRW 1,916,127 for the year immediately preceding the termination of the instant contract).

2) On December 30, 2014, Defendant Company filed an order for payment with F, signed and sealed as Plaintiff A and Plaintiff A’s wife and as store operating partner in the instant franchise agreement and received payment order with the Gwangju District Court on January 5, 2015 (the amount obtained by deducting total amount of KRW 14,90,000,000, and total of KRW 64,945,069,000, including total of KRW 12,93,519, settled accounts accounts receivable 46,582,778, as claimed by Defendant Company, from total of KRW 77,694,635, including KRW 22,93,519, and settled accounts receivable at KRW 46,58,778, as claimed by Defendant Company).

The plaintiff A and F filed an objection against the above payment order, and accordingly, the Gwangju District Court 2015 Ghana542630 case is currently in progress.

[Reasons for Recognition] Facts without dispute, Gap evidence 1, Gap evidence 8-10, Gap evidence 23, Eul evidence 1, Eul evidence 4, the purport of the whole pleadings

2. Summary of the plaintiffs' assertion

(a) The absence of a penalty due to an implied approval of the transfer of business (Plaintiff A);

After the conclusion of the instant franchise agreement, the Plaintiff requested the Defendant Company to terminate the contract. The Defendant Company refused to terminate the contract on the ground that it does not constitute a ground for termination of the contract, and recommended the Plaintiff to transfer convenience points to E and B. Accordingly, the Plaintiff Company transferred the instant convenience points to the Plaintiff. Accordingly, the Defendant Company recognized the Plaintiff as the actual convenience store operator, and dealt with all affairs concerning the operation of convenience stores, such as the supply and transfer of goods, in consultation with the Plaintiff Company. This is an implied approval of the transfer of business. Since the Defendant Company terminated the contract by taking into account the issue of non-transfer after the transfer of business, the Plaintiff Company is not liable for penalty against the Defendant Company.

B. According to the special circumstances under Article 50 of the franchise agreement, the Defendant Company rejected the Plaintiff Company’s demand for the termination of the contract on the ground that the Plaintiff’s certificate, such as the Plaintiff’s wooden disc, does not constitute “a case objectively proven that it is impossible to operate the store due to the occurrence of cancer, business, or any other disease corresponding thereto, or the closure of the store and natural disaster, etc. under the statutes.” The foregoing provision is null and void because it constitutes “a clause that excludes the customer’s right to rescission or the right to terminate the contract under the Act or limits the exercise of the right to cancel the contract.” Therefore, the Defendant Company’s penalty against the Plaintiff Company A has no effect.

(c) Nullity and excess of penalty provisions (Plaintiffs);

1) Article 54(1) of the instant franchise agreement, which forms the basis for the penalty of the instant case, provides that an amount equivalent to 15 months of the average monthly fee shall be paid by the party responsible for the rescission of the contract as the damages suffered by the other party to the contract. This provision provides uniform and excessive liability for damages regardless of the actual damages arising from the rescission or termination of the contract. This provision constitutes “a clause which, without considerable reason, imposes excessive burden on the customer or unfairly waives the right to restitution of the contract.”

2) Even if the foregoing provision is not null and void, 22,93,519 won of penalty calculated by the Defendant Company is excessively excessive and unfair. Penalty should be reduced to KRW 7,664,506 (average fee per month immediately preceding the termination of the foregoing provision, KRW 1,916,127 per month).

3. Prior to the judgment on the merits (Plaintiff B)

A. We examine ex officio. In a lawsuit for confirmation, the benefit of confirmation is recognized in cases where there is a dispute between the parties as to the present rights or legal status, and thereby, determination as a confirmation judgment is the most effective and appropriate means to eliminate the risk of the Plaintiff’s legal status when the Plaintiff’s risk is dangerous (see, e.g., Supreme Court Decision 2009Da93299, Feb. 25, 2010).

B. The Defendant Company asserted that there was no consent to the transfer of convenience store between Plaintiff A and Plaintiff B. Even after the Plaintiffs entered into a contract for the transfer of business on December 20, 201, the Defendant Company urged the Plaintiff to pay the sales amount of the remittance, and the notification of the termination of the contract was also made to Plaintiff A. The Defendant Company only claims a penalty against Plaintiff A and his/her spouse, and there is no fact that the Defendant Company claims a penalty of KRW 22,93,519, to be paid to Plaintiff B.

In light of these circumstances, in the case of Plaintiff B, it is difficult to deem that there is a dispute over the current rights or legal status, or that there is a need to eliminate the anxiety or risk therefrom. Plaintiff B does not have a benefit to seek confirmation of the absence of the obligation against the Defendant Company, and thus, Plaintiff B’s lawsuit

4. Judgment on the merits (Plaintiff A)

A. Determination on the assertion on approval of transfer of business

1) In light of the following various circumstances, it is difficult to deem that the Defendant Company consented or consented to the business transfer of the Plaintiffs.

A) As seen earlier, Article 64 of the instant franchise agreement intends to transfer the rights and obligations under the contract to a third party, the consent of the Defendant company shall be obtained, and the Defendant company may decide whether to give consent by considering whether the transferee consents to the convenience store franchise system of the Defendant company, whether the transferee complies with the new franchise procedure, and whether convenience store franchise system.

B) If there is a request for consent to transfer of business, it is apparent that the contract clause does not necessarily mean that the Defendant company is not obligated to consent. Even if the person who intends to take over the business is suitable for the operation of the convenience store and there is no particular hindrance to the operation of the convenience store, unless the Defendant company explicitly and implicitly consents to the transfer of business, it shall not be treated equally with the consent to the transfer of business. The transfer of business and the consent thereto are important legal acts that cause the change of the rights and obligations holder.

C) The Defendant Company asserted to the effect that “Plaintiff B” entered into a new franchise agreement with the Defendant Company, received education for the operation of convenience stores, and the Plaintiff B, the assignee, provided a security, and that it did not consent to the transfer of business due to the failure to implement such procedures. Witnesses G and H, the employees of the Defendant Company, stated to the same effect in this Court.

In this regard, Plaintiff A demanded that the Defendant Company pay additional KRW 4,00,000 for the franchise fee on condition of changing the name of its business operator, and that the Plaintiff Company had already paid both educational expenses and franchise fees, and thus, the Plaintiff argued that all of such rights have been transferred to Plaintiff B, the transferee. Ultimately, Plaintiff A is practically a person who has not performed the matters that the Defendant Company did not comply with the terms of the consent to the transfer of business.

Meanwhile, according to the evidence No. 18, the defendant company asserted that "the defendant company may not consent to the transfer of business as well as the convenience store of this case operated by the plaintiff A without consent, and as well as the convenience store of this case operated by the plaintiff A, the defendant's other convenience store operated by the plaintiff B cannot give consent to the transfer of business."

D) The Plaintiffs do not argue that the Defendant Company explicitly consented to the transfer of business. Moreover, even upon examining all the evidence submitted by the Plaintiffs, it is insufficient to acknowledge that the Defendant Company implicitly accepted the Plaintiffs’ transfer of business, and there is no other evidence to acknowledge this otherwise.

As alleged by the Plaintiffs, even if the Defendant Company consulted with the Plaintiff Company on the operation of convenience stores, such as the supply of goods, transfer of sales, and deposit of settlement money, this is merely a fact that the Plaintiff Company consenteds to the Plaintiff Company’s performance of the fundamental obligations stipulated in the instant franchise agreement, such as the obligation to transfer sales for the Plaintiff, and it is difficult to deem that the change of the parties to the instant franchise agreement was approved. Rather, the Defendant Company only against the Plaintiff the important legal act that the parties to the contract, such as the request for transfer of sales, termination of the contract

2) Accordingly, the parties to the instant franchise agreement are still the Defendant Company and the Plaintiff A. On a different premise, the Plaintiff’s assertion that the contractual party does not bear a penalty based on the termination of the contract due to the failure to pay sales.

B. Determination as to the allegation that the contract termination clause is null and void due to special circumstances

For the following reasons, Article 50(2) of the instant franchise agreement cannot be deemed null and void as it constitutes a provision that excludes customers from the right to cancel or terminate the contract, or that limits the exercise of such right. The Plaintiff A’s assertion on this part is rejected.

1) According to Eul evidence 1, Article 50(2) of the instant franchise agreement provides that "A or B may immediately terminate the instant franchise agreement upon written notice to the other party, where it is objectively proven that the operation of the store is impracticable due to the occurrence of cancer, business, or the disease corresponding thereto, or the closure of the store, natural disaster, etc. under the relevant statute or due to other reasons."

2) This is an exceptional provision that recognizes the termination of a contract in exceptional circumstances where it is difficult to maintain the contract, even though one of the parties to the contract is not responsible for the grounds for the termination under Articles 52 (A) and 53 (B) during the term of the contract. In a case where a contract is widely recognized during the contract period as a party’s intent, it would cause unexpected damages to the other party. As such, limiting the grounds for termination is reasonable. Moreover, it cannot be deemed to exclude or limit the right to rescission or termination under the law.

3) Although the grounds for termination of a contract stipulated in the foregoing provision include a partial indefinite concept, there are inevitable aspects due to the nature of the content of the provision. It does not seem that the foregoing provision does not seem to have reached the extent that a party to a contract and the defendant company in a superior position would allow a significant arbitrary judgment as to the existence of the grounds for termination of a contract (in this respect, it is different from the justifiable grounds recognized by the plaintiffs as an example of unfair contract terms). Determination on the invalidity and excessive assertion of penalty provisions is different from the "justifiable

1) Determination on the assertion that the penalty clause be null and void

For the following reasons, Article 54(1) of the franchise agreement, which forms the basis for the penalty of this case, does not constitute a clause that unfairly unfavorable to customers, or a clause that imposes an obligation of restitution due to the cancellation or termination of a contract, which imposes an obligation of restitution on customers, such as unfairly excessive damages for delay, etc., and thus cannot be deemed null and void. The Plaintiff A’s assertion on this part cannot be accepted.

A) According to the evidence B No. 1, Article 54(1) of the instant franchise agreement provides that “When the contract was terminated by either Party A or B pursuant to Articles 52 and 53, the responsible party shall pay the other party the amount equivalent to the average monthly fee for the 15 months of the other party’s average monthly fee (including the lost profit for the remaining period of the contract).”

B) As alleged by the Plaintiffs, the provisions on penalty for breach of contract under Article 54(1) stipulate liability for damages equivalent to the average monthly fee of 15 months, regardless of the remainder of the contract, and actual damages. Damage caused by termination of the contract may vary at the time of termination of the contract. Therefore, it is true that there is room to deem it appropriate to differential determine the estimated amount of damages depending on the length of the remainder

However, the penalty clause of Article 54(1) is premised on the termination of a contract under Articles 52 and 53. Article 52 is the provision on the termination of a contract by the Defendant Company, and Article 53 is the provision on the termination of a contract by the convenience store store owner. Therefore, since the penalty clause of Article 54(1) applies to all parties to the contract, it cannot be deemed disadvantageous to the customer only.

C) Penalty for breach of contract under Article 54(1) includes damages equivalent to the lost profit that the other party could have gained during the remainder of the contract period. Damage equivalent to lost profit would vary depending on the remainder of the contract period. If the contract period remains longer, the amount equivalent to 15 months of the average monthly fee may be predicted to the extent that the actual amount of damages is less than the actual amount of damages. As such, in cases where the contract period remains, the convenience store owner may be favorable in accordance with the application of the above provision. Of course, it may be possible, and this is also the case of the Defendant Company, the other party to the contract, which is the other party to the contract. The foregoing provision itself cannot be readily concluded to be disadvantageous to

D) The instant franchise agreement aims to operate convenience stores and is expected to operate at least five years for a long period of time (Article 48(1) of the franchise agreement). The Defendant Company establishes an investment and business plan on the premise of the contract period, provides customers with business initial management skills, and installs and leases business facilities and equipment for the purpose of opening convenience stores. In certain cases, the Defendant Company is also required to ensure the minimum level of operating profits (Article 47(1) of the franchise agreement), and when the contract is terminated in advance, the Defendant Company is required to take such efforts and expenses again (this is also the same from the perspective of convenience store owner as Plaintiff A as well as the Defendant Company). If a franchise store becomes unable to do diving business due to termination of the contract, it would affect the external credit or reputation of the Defendant Company.

2) Determination on the excessive assertion of penalty

In light of the following circumstances, it is difficult to 22,993,519 won of the penalty imposed by the Defendant Company against the Plaintiff A is unreasonable. The Plaintiff’s assertion on this part is rejected.

A) The Defendant Company notified the termination of the instant franchise agreement on the ground that the Plaintiff Company did not transfer the sales amount under Article 25(1) of the instant franchise agreement. The obligation to transfer sales amount is one of the most fundamental and important obligations of the instant franchise agreement. As to the obligation to transfer sales amount, Article 25(2) of the instant franchise agreement provides that “one-day transfer is a result of Party A’s permission and cooperation in 7-ELVN management, not a money that may be freely disposed of, but a loan of Party A, instead of a money that may be disposed of, it is supported by Party A’s credit.” As such, Party B shall not be notified in advance to Party A in advance and appropriate or discretionary consumption for the payment of the approved expenses. As a contractual provision, the meaning that one party owes the obligation under the instant franchise agreement is explained.

B) At the time of notification of the termination of the contract by the Defendant Company, the amount of the Plaintiff Company’s unaccompanied amount cannot be said to be less than KRW 31,962,542 as of April 28, 2014.

C) The instant franchise agreement was concluded on August 16, 2010, and the period of the agreement is five years from the opening date of convenience stores. Defendant Company notified the Plaintiff of the termination of the franchise agreement on April 29, 2014. Although the opening date of convenience stores is unclear on the record, if the opening date of convenience stores is near the signing date of the instant franchise agreement, the remaining contract period at the time of the termination of the instant franchise agreement appears to be approximately one year and four months. There is no big difference between the base period (15 months) for calculating penalty under Article 54(1) of the instant franchise agreement and the base period for calculating penalty (15 months).

D) Article 54(1) of the instant franchise agreement provides for an amount equivalent to 15 months’ average monthly commission for the one-year period prior to the termination of the contract as a penalty. However, the Defendant Company’s penalty amounting to KRW 22,93,519, which the Plaintiff Company notified to A is an amount equivalent to average monthly commission of KRW 1,916,127, an amount equivalent to 12 months. The Defendant Company filed a claim for reduction of part of penalty by itself

E) The proviso of Article 25(2) of the instant franchise agreement provides that when a convenience store franchisee fails to perform his/her duty to remit sales proceeds without any justifiable reason, the Defendant Company should pay the delayed payment of KRW 10,000 per day of delay to the Defendant Company. It appears that the Defendant Company did not separately request the Plaintiff Company A to pay the delayed payment additional charges.

F) Plaintiff A asserts that the penalty should be reduced to KRW 7,664,506 (average fee of KRW 1,916,127 per month for the immediately preceding one year) on the basis of the Fair Trade Commission’s corrective order.

However, as Plaintiff A is also the person, the part for which the Fair Trade Commission’s corrective order was issued is related to penalty for early termination as stipulated in Article 51 of the instant franchise agreement. This is a provision recognizing the termination of a contract on the premise of certain damages, even if there are no special circumstances during the contract period. Article 54(1) of the instant franchise agreement, which is the basis for the penalty for breach of contract, is distinguishable as it is based on the premise of termination under Articles 52 and 53 of the franchise agreement, mainly

5. Conclusion

Therefore, the plaintiff B's lawsuit is dismissed as illegal, and the plaintiff A's claim is dismissed as it is without merit. It is so decided as per Disposition.

Judges Kim Yong-han