[1] Even where a contract is rescinded or terminated by agreement, if the other party expresses his/her intent to make a special agreement to compensate for damages or to reserve his/her claim for damages, whether such special agreement should be paid (affirmative), and the party who bears the burden of proving the existence of such special agreement (=the party who asserts

[2] In a case where Gap corporation entered into an entrusted operation agreement with Eul corporation on the side of the council of occupants' representatives with Eul corporation, determined that "the management authority shall terminate the contract if Gap corporation violated important matters stipulated in the contract," and "the management authority shall compensate Gap corporation's investment money and compensation for damages if Gap corporation did not violate the contract but the contract is terminated," but Eul's council of occupants' representatives notified Eul that it should terminate the contract, and then Eul's council of occupants' representatives should agree to terminate the contract and seek a payment of investment money and compensation for damages against Eul corporation's council of occupants' representatives pursuant to the above provision, the case affirming the judgment below which held that Eul's council of occupants' representatives is liable to pay Gap corporation the agreed amount because the above provision applies to Gap corporation's contract termination for reasons other than serious violation

[1] Where a contract is rescinded or terminated by agreement, it shall not be claimed for damages due to nonperformance, unless there are special circumstances. However, if the other party has made a special agreement to compensate for damages or has expressed his/her intent to withhold a claim for damages, the damages shall be paid according to such special agreement or intent. The fact that such special agreement for damages exists or that the claimant reserved

[2] In a case where Gap corporation entered into an entrusted operation contract with Eul corporation on the part of the council of occupants' representatives with Eul corporation on the part of the council of occupants' representatives (hereinafter "Entrustment contract"), the management body determined that Gap corporation may terminate the contract if Gap corporation violated important matters stipulated in the contract, and "the management body shall compensate Gap corporation's investment funds and damages invested in Gap corporation if Gap corporation did not violate the contract but the contract is terminated", but Eul's council of occupants' representatives notified Eul of the termination of the entrustment contract, and Gap corporation's council of occupants' representatives agreed to terminate the entrustment contract and sought payment of investment funds and damages against Eul corporation's council of occupants' representatives pursuant to the above provision, the case affirming the judgment below's determination that Eul's council of occupants' representatives is not limited to "the case where Gap company did not violate the matters stipulated in the Entrustment contract, but the entrustment contract is terminated on the grounds of non-performance of obligation of Eul corporation's council of occupants' representatives, and thus, Gap company's entrustment contract was terminated on the ground that Gap company's above contract was terminated due to a significant economic loss.

[1] Articles 105, 390, 543, and 551 of the Civil Act; Article 288 of the Civil Procedure Act / [2] Articles 105, 543, and 551 of the Civil Act

[1] Supreme Court Decision 86Meu1147, 1148 Decided April 25, 1989 (Gong1989, 796) Supreme Court Decision 2013Da8755 Decided November 28, 2013

AN Co., Ltd. (Law Firm Shin, Attorneys Kim Tae-tae et al., Counsel for the plaintiff-appellant)

○○○○○○ apartment Council of Residents (Law Firm Taeho, Attorneys Kim Jong-ho et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2019Na201228 decided October 15, 2020

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Case summary

The reasoning of the lower judgment and the record reveal the following facts.

A. On February 18, 2014, the Plaintiff entered into an agreement on the consignment operation of the Center (hereinafter referred to as “contract on consignment”) with respect to the ○○○○○○○○ apartment in Michuhol-gu, Incheon, for a period of contract between April 1, 2014 and March 31, 2019, with respect to the ○○○○○○○○ apartment, a company that entrusted the management of the apartment (hereinafter referred to as “ratiosan Development”), a company that is the joint-use area.

Article 9(1) of the Entrustment Contract provides that “A (managing Body) may terminate this contract if the Plaintiff violated any of the important matters stipulated in this contract: Provided, That this shall not apply in the event of a violation due to force majeure, such as natural disasters.” Article 9(2) provides that “A does not violate the terms and conditions of the contract of B, but if the contract of B is terminated, A shall compensate for the investment and damages invested in the Center within one month from the date on which the contract of B is terminated (hereinafter “instant provision”).”

B. Around July 2016, the head of Michuhol-gu Incheon Metropolitan City requested opinions and evidentiary documents on whether residents' sports facilities are used for profit (lease of facilities, business operation, etc.) and around September 2016, the head of Michuhol-gu issued a corrective order on the ground that mountain development was in violation of the Act even though the operator, other than the management entity, could not use the residents' sports facilities for profit. The head of Michuhol-gu notified the head of the Michuhol-gu prior notice to the effect that the development was scheduled to impose an administrative fine of five million won on March 10, 2017, as the rate development did not report the result of correction.

C. Around April 12, 2017, the Defendant issued a corrective order to the Plaintiff as above, and the Plaintiff’s business registration was closed on November 21, 2016, notified the termination of the entrustment contract on the ground that the contract was closed, demanding the Plaintiff to answer in writing as to when the time of termination of the contract was specified.

On or before April 17, 2017, the Plaintiff sent the following official notices to the Defendant. “Around May 31, 2017, the Plaintiff agreed to the termination of the consignment agreement and proposed to accept and transfer all matters concerning the Center on or before May 31, 2017. The Plaintiff is not in violation of significant matters prescribed in the consignment agreement or termination of the contract due to reasons attributable to the Plaintiff, and the Defendant is obliged to compensate the Plaintiff for all of KRW 869,609,840 that the Plaintiff invested in the Center by June 17,

Around April 18, 2017, the Defendant sent the following official text to the Plaintiff. “The Plaintiff’s consent to the termination of the consignment agreement is accepted. The cause attributable to the termination of the contract lies in the Plaintiff, and the Plaintiff is not entitled to assert ownership with respect to the sports facilities and the part that performed interior works pursuant to Article 12(3) of the consignment agreement. Even if reimbursement for the investment portion as alleged by the Plaintiff is made, the Plaintiff shall agree on the amount of reimbursement by means of depreciation assessment, etc. due to the deterioration of the facilities, etc.

D. The Plaintiff filed the instant lawsuit against the Defendant seeking the payment of investment amount and damages pursuant to the instant provision.

2. Whether the provision of this case is applied (Ground of appeal No. 1)

A. Where a contract is rescinded or terminated by agreement, barring any special circumstance, no claim for damages due to nonperformance shall be filed, but if the other party has made a special agreement to compensate for damages or has expressed his/her intent to withhold a claim for damages, the damages shall be paid according to such special agreement or intent. The fact that such special agreement for damages exists or that a claim for damages was reserved is proved by the party asserting such agreement (see Supreme Court Decisions 86Meu147 and 1148, Apr. 25, 1989; 2013Da8755, Nov. 28, 2013).

B. The lower court determined that the instant provision applies to the termination of an entrustment contract for reasons other than the Plaintiff’s serious breach of contract, including the termination of agreement as follows.

(1) On April 17, 2017, the Plaintiff responded to the Defendant as of May 31, 2017, and the Defendant did not raise any objection thereto. The Plaintiff did not operate the Center from June 1, 2017. Therefore, it is reasonable to deem that the consignment contract was terminated on May 31, 2017 by agreement between the Plaintiff and the Defendant.

(2) Article 9 of the consignment contract is divided into paragraphs (1) and (2). Paragraph (1) provides that if the Plaintiff violates the important matters stipulated in the consignment contract, the termination right shall be vested in the Defendant. If so, the instant provision is based on the premise that the contract is terminated due to reasons other than the exercise of the Defendant’s right to termination as stipulated in

(3) As to the requirements for the Defendant to pay to the Plaintiff an agreed amount equivalent to investment and damages, the instant provision only provides that “if the contract is terminated due to the Defendant’s nonperformance of obligation, it shall not be limited to the case where the contract is terminated”.

(4) According to an entrustment contract, the Plaintiff may operate the center for five (5) years from April 1, 2014 (Article 3), but invests (Article 875,00,000) to install sports facilities in the center and perform internal construction (Article 2(1)), and only the amount of service charges that the Defendant consulted with the occupant using the center may be collected (Article 6(4)).

If the entrustment contract is terminated before the lapse of five years of the contract period, a huge economic loss will occur to the plaintiff. The plaintiff and the defendant appear to have the provision of this case, regardless of the plaintiff's cause attributable to the plaintiff, if the entrustment contract is terminated, the defendant would compensate for the plaintiff's economic loss within

C. Examining the reasoning of the lower judgment in light of the aforementioned legal doctrine and the record, the lower judgment was justifiable and did not err by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or by misapprehending the legal doctrine on the termination of agreement.

3. Whether the Plaintiff violated the contract (Ground of appeal No. 2)

A. The lower court determined that the Defendant was liable to pay the agreed amount to the Plaintiff pursuant to the instant provision, and rejected the Defendant’s assertion that the entrustment contract was terminated due to the Plaintiff’s fault as follows.

(1) The defendant asserts that the plaintiff did not confirm or explain to the defendant whether the contract violated the law of the entrustment contract, and that he had urged the defendant to conclude the entrustment contract by deceiving the defendant.

However, the provision of this case excludes the application of the case where the plaintiff did not perform his obligations under the entrustment contract on the premise that the entrustment contract is valid. Thus, it does not affect the application of the provision of this case to the plaintiff who was in the process of concluding the contract.

(2) The Defendant asserts that the Plaintiff did not make an investment in the agreed amount; the Plaintiff consented to the use of the Center by an outside person; did not submit the current status of users to the management office; transferred the right of lease to a third party without permission; and violated the consignment contract by failing to submit a tax invoice on investment funds. However, such matters did not mention the Defendant’s cancellation of the consignment contract to the Plaintiff on April 12, 2017, and did not agree on this ground.

(3) On November 21, 2016, the competent tax office cancelled the Plaintiff’s business registration ex officio. However, it is difficult to find that the Plaintiff failed to properly perform its obligations under the consignment contract. The Plaintiff appears to normally operate the center until May 31, 2017 when the consignment contract was terminated.

(4) An entrustment contract was terminated by agreement on May 31, 2017. Therefore, even if the Plaintiff did not operate the center after June 1, 2017, it cannot be deemed that it violated significant matters stipulated in the entrustment contract. Furthermore, even if the Plaintiff did not refund membership fees to the resident who is a member, it is a matter between the resident and the Plaintiff, barring special circumstances.

B. Examining the reasoning of the lower judgment in light of the record, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules, or by misapprehending the legal doctrine on contractual interpretation and delegation, etc., without exhaust all necessary deliberations

4. Conclusion

The Defendant’s appeal is dismissed as it 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.

Justices Lee Dong-won (Presiding Justice)