In a case where the seller claims that “in the case of a partial payment of the contract deposit, he may redeem the share of the money received and cancel the contract,” the case holding that the seller cannot rescind the contract that the seller redeems the share of the money received as a part of the contract deposit.

In a case where the seller claims that “in the case where only a part of the contract deposit is paid, the amount received may be repaid and the contract deposit may be rescinded,” the case holding that if only a double of the amount received as part of the contract deposit can be repaid and the contract deposit can be rescinded, it would be against the intent to determine a certain amount as the contract deposit, and that, in the case where the amount received is a small amount, it would be unfair because the contract can be rescinded freely and the binding force of the contract may be weakened, and even if only a part of the contract deposit is paid, it is reasonable to view that the money as the basis for the cancellation deposit is not “the contract deposit,” but “the contract deposit” rather than “the contract deposit,” and therefore, it cannot be rescinded that the seller redeems the double

Article 565(1) of the Civil Act

Plaintiff (Attorney Choi Young-soo, Counsel for the plaintiff-appellant)

Defendant (Attorney Lee Young-chul, Counsel for the defendant-appellant)

Seoul High Court Decision 2014Na2010739 decided October 23, 2014

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

1. The judgment of the court below

A. The lower court acknowledged the following facts based on evidence.

1) On March 25, 2013, the Plaintiff concluded the instant sales contract with the Defendant to purchase KRW 1401,100,000,000,000 from Seocho-gu Seoul ( Address omitted), and agreed to pay KRW 10,000,000,000, out of the down payment of KRW 110,000,000,000 on the date of the contract, and the remainder of KRW 100,000,000,000,000,000,000

2) Meanwhile, the main contents of the instant sales contract are as follows.

A) Before the buyer pays the remainder, the seller shall compensate for the total sum of the down payment, and the buyer may waive the down payment and rescind this contract (Article 5).

B) Where a contractual default occurs, either the seller or the buyer may demand in writing the other party who has defaulted the contractual obligation to perform the contractual obligation and cancel the contract if the other party has failed to perform the contractual obligation. In such cases, the seller and the buyer may claim damages against the other party, and unless otherwise agreed, they shall conform to the criteria of Article 5 (Article 6).

3) On the day when the instant sales contract was concluded, the Plaintiff remitted KRW 10 million out of the down payment to the Defendant’s bank account.

4) On March 26, 2013, the following day, the Defendant notified a licensed real estate agent who arranged the conclusion of the instant sales contract to cancel the instant sales contract, and terminated and closed the Defendant’s bank account.

5) On the same day, the Plaintiff attempted to remit the remaining down payment of KRW 100 million to the Defendant’s bank account at around 11:30 on the same day, but failed to transfer to the above account closed, and the Plaintiff issued a cashier’s check, and visited the real estate agent’s office by issuing a cashier’s check, and the Defendant closed the Defendant’s bank account from a licensed real estate agent to cancel the instant sales contract.

6) On March 27, 2013, the Plaintiff deposited KRW 100 million as Seoul Eastern District Court No. 1155, on the ground that the Defendant refused to receive the remainder down payment of KRW 100 million as the principal deposit.

7) On March 27, 2013, the Defendant deposited the Plaintiff as the principal deposit and deposited KRW 20 million with the Seoul Central District Court No. 6375 in 2013, and on the same day, the seller deposited 20 million won, which is an amount equal to KRW 10 million received from the buyer due to various circumstances, with the purchaser’s deposit and terminated the instant contract (the instant contract is in the state of the down payment). On March 29, 2013, the Defendant sent a notice of cancellation to the Plaintiff. The said notice reached the Plaintiff on March 29, 2013.

8) On April 24, 2013, the Plaintiff sent a written notification to the Defendant stating that “A licensed real estate agent’s office will visit a licensed real estate agent’s office by paying any balance until April 29, 2013, the remaining date,” and around that time, the said written notification reached the Defendant.

9) On April 29, 2013, the Plaintiff participated in the balance and visited the licensed real estate agent’s office. However, the Defendant did not leave the office.

10) On June 3, 2013, the Plaintiff sent a written notification to the Defendant on June 3, 2013, stating that “If documents necessary for the registration for the transfer of ownership are not delivered by no later than 10:00 a.m. on June 7, 2013, the Plaintiff sent to the Defendant a written notification stating that “if documents necessary for the registration for the transfer of ownership are not given by no later than 10:00 a.m., the said written notification will substitute for the declaration of cancellation through the pertinent written notification without any separate written notification of cancellation.” On June 4, 2

B. Based on the above facts acknowledged, the lower court determined that (1) the instant sales contract was lawfully rescinded on June 7, 2013 by the Plaintiff’s declaration of intent on June 3, 2013, on the ground of the Defendant’s refusal to implement the obligation to transfer ownership under the instant sales contract, on March 26, 2013, on the grounds that (2) the Defendant was obligated to return KRW 10 million paid to the Plaintiff as restitution upon the cancellation of the contract, and (2) the Defendant was obligated to pay KRW 110,000,000,000,000,000 paid to the Plaintiff as compensation for nonperformance, in consideration of the circumstances as indicated in its reasoning, given that the above amount was unduly excessive, and thus, the Defendant was obligated to pay KRW 77,700,000,000,000,000, which was reduced to 70% of the said amount.

2. The grounds of appeal are examined.

A. As to the allegation in the grounds of appeal regarding the “collection of deposit money”

1) As long as the Plaintiff recovered KRW 100 million from June 7, 2013, the Defendant asserts that the obligation to pay down payment was not fulfilled. Therefore, the lower court’s determination that was made on the premise that the Plaintiff fulfilled the obligation to pay down payment was erroneous.

2) However, the lower court determined that the instant sales contract was rescinded on the ground of the Defendant’s refusal of performance, and such determination by the lower court is not based on the premise that the Plaintiff paid the down payment, and thus, the fact that the Plaintiff deposited KRW 100 million out of the down payment and recovered does not affect the conclusion of the judgment (and, according to the record, the record only recognizes the fact that the Plaintiff, upon the Defendant’s refusal to receive the down payment by closing the bank account, deposited KRW 100 million in the court, but recovered the said deposit as part of restitution on June 7, 2013.).

The Supreme Court precedents cited in the grounds of appeal are different from the instant case, and it is inappropriate to invoke the instant case.

3) Therefore, this part of the ground of appeal is without merit.

B. As to the ground of appeal stating that “the instant sales contract was already rescinded due to the Plaintiff’s failure to pay the down payment.”

1) The defendant asserts that the sales contract of this case was naturally rescinded by Article 4 of the Special Agreement for the Non-performance of the plaintiff's obligation to pay the down payment, and thus, the defendant's refusal to pay the down payment is not likely to be an issue.

2) According to the records, Article 4 of the Special Terms and Conditions of the instant sales contract provides that "where 100 million won is not paid by March 26, 2013, the contract shall be rescinded without a peremptory notice, unless there is a separate promise." The Plaintiff deposited the remaining down payment KRW 100 million from March 27, 2013. However, the Plaintiff’s failure to pay KRW 100 million to the Defendant by March 26, 2013 was due to the Defendant’s closure of the Defendant bank account with intent to not receive KRW 100 million, the Plaintiff is not liable for the Plaintiff’s failure to pay KRW 100 million to the Defendant by March 26, 2013. Therefore, it cannot be deemed that the instant sales contract was rescinded under a special agreement under Article 4 on the part of the Plaintiff’s failure to pay the down payment obligation.

3) The ground of appeal on this part is without merit.

C. As to the ground of appeal stating that “where part of the contract amount is paid, the amount received may be repaid and the contract may be rescinded.”

1) The defendant asserts that the contract of this case is binding until the plaintiff pays the down payment in full, so the defendant may rescind the contract of this case even if he redeems a double of KRW 10 million which he received as part of the down payment. The judgment below otherwise determined that the court below erred by misapprehending the legal principles as to the rescission of the contract in a case where only part of the down payment was paid.

2) However, as seen earlier, it is reasonable to view that the Plaintiff paid the down payment of KRW 110 million. As such, the Defendant is entitled to rescind the instant sales contract by repaying a double of the down payment. The ground of appeal on a different premise is without merit.

3) Even if the Plaintiff paid only KRW 10 million out of the down payment of KRW 110 million, this part of the grounds of appeal on the following grounds is without merit.

A) In principle, one of the parties can not rescind the contract in mind after the conclusion of the contract. However, in a case where the contract for down payment was made in addition to the principal contract, the rescission may be made pursuant to Article 565(1) of the Civil Act. However, in a case where the parties agree to pay the down payment first and the balance later and later to pay the down payment in full, the contract for down payment shall not be concluded unless the issuer pays the remainder or in full (see Supreme Court Decision 2007Da73611, Mar. 13, 2008).

B) Even if only a part of the contract deposit is paid as alleged by the Defendant, it is reasonable to view that the amount, which serves as the basis for the cancellation fee, is not “the contract deposit that was actually received” but “the contract deposit” rather than “the contract deposit that was actually received. If a sales contract can be rescinded by repaying only a double amount of “the contract deposit actually received”, this would not only be contrary to the intent to determine a certain amount as the contract deposit, but also, if the amount received is a small amount, it would be unfair because the contract can be freely rescinded and the binding force

Therefore, this case's sales contract cannot be rescinded that the defendant redeems the amount that he received as part of the down payment. In this regard, this part of the ground of appeal is without merit.

4) Ultimately, either mother or this part of the ground of appeal cannot be accepted.

D. As to the allegation in the grounds of appeal that “the provisions of Article 6 of the instant sales contract concerning the determination of damages cannot be applied”

1) As to the Defendant’s assertion that Article 6 of the sales contract of this case on the estimate of the amount of damages cannot be applied, the lower court cited the judgment of the first instance court, and held that Article 6 of the sales contract of this case is an estimate of the amount of damages set at KRW 110 million, which is the down payment, and that the contract of down payment falls under the contract of sales and purchase, which would normally be cancelled at will by one of the parties to the sales and sale contract under Article 565(1) of the Civil Act. On the other hand, the estimate of the amount of damages means that one of the parties to the contract agrees in advance to reduce the difficulty in proving the occurrence of damages and preventing the occurrence of the dispute in preparation for the case where one of the parties to the contract fails to perform his obligation, and thus, it is different in its legal nature from the estimate of the contract of down payment and the amount of damages, and therefore, it does not necessarily mean that the contract of down payment and the liquidated amount of damages are not able to be determined even

2) Examining the relevant legal principles and records, the lower court did not err by misapprehending the legal doctrine on the contract deposit and the estimate of damages.

3. Conclusion

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 Min Il-young (Presiding Justice)