(a) The nature of the down payment in a case where the seller violates the contract by receiving the down payment between the parties, and the seller agrees to lose the right to claim the return of the down payment if the buyer violates it; and

B. Criteria for determining whether the estimated amount of damage compensation is unreasonably excessive

A. In the conclusion of a sales contract, if the seller violates the above contract while receiving the down payment between the parties, if the buyer pays a double the down payment to the buyer and agrees to lose the right to claim the return of the down payment, it shall be deemed that the buyer has agreed to pay the down payment, and such agreement has the nature of the liquidated damages, barring special circumstances.

B. In cases where the estimated amount of damages is unreasonably excessive, it refers to cases where the estimated amount of damages is deemed unfairly excessive in light of the general social norms, taking into account all the circumstances such as the parties’ status, purpose and content of the contract, the anticipated motive of the amount of damages, the ratio of the estimated amount of damages to the amount of debts, the amount of expected damages, and the current transaction practices.

Article 398 of the Civil Act

Supreme Court Decision 86Meu2070 Decided May 12, 1987, Decision 65Da1420 Decided September 7, 1965, Supreme Court Decision 87Meu2291 Decided January 12, 1988

[Defendant-Appellee] Plaintiff 1

Defendant (Attorney Hong-soo et al., Counsel for defendant-appellant)

Seoul High Court Decision 88Na22102 Decided April 7, 1989

The part of the judgment below against the defendant is reversed and that part of the case is remanded to the Seoul High Court.

We examine the grounds of appeal.

(1) As determined by the court below, in concluding a sales contract on the instant real estate between the defendant and the defendant, if the defendant violated the above contract, the plaintiff shall pay the down payment to the plaintiff, and if the plaintiff violated this contract, it shall be deemed that he agreed to lose the right to claim the return of the down payment, and such agreement has the nature of the liquidated damages unless there are special circumstances. Therefore, the court below's decision that the amount of the down payment received between the plaintiff and the defendant as the liquidated damages is proper, and there is no error in the misapprehension of legal principles as to the down payment such as the theory of lawsuit, and therefore, it is not reasonable for the court below to consider the amount of the down payment received between the plaintiff and the defendant as the liquidated damages.

(2) According to the reasoning of the judgment below, when the plaintiff and the defendant enter into a sales contract to sell the real estate at Won 935,000,000, the court below held that it is reasonable to reduce the purchase price to KRW 95,000,000, which is calculated as the amount of damages for non-performance of obligation under the sales contract, by considering the amount of the purchase price and the motive leading up to the plaintiff's conclusion of the contract and the termination of the contract of this case or the amount of damages, and all other circumstances shown in the argument of this case.

However, in cases where the estimated amount of compensation for damages is unreasonably excessive, the court below should consider whether the estimated amount of compensation for damages of this case is unfairly excessive in light of the general social norms in light of all the circumstances such as the position of the parties to the contract, purpose and contents of the contract, the motive behind the scheduled amount of compensation for damages, the ratio of the estimated amount of compensation for damages to the amount of the debts, the amount of expected damages, the size of the estimated amount of damages, and the transaction practices at the time of the contract, and determine whether the estimated amount of compensation for the damages of this case is unfairly excessive in light of the general social norms.

The decision of the court below that did not reach this point is erroneous in the misapprehension of legal principles as to cases where the liquidated damages amount is unfairly excessive, and thus, it is reasonable to discuss this point.

Therefore, the part of the judgment below against the defendant is reversed, and that part of the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Song Man-man (Presiding Justice)