(a) Criteria for determining whether the estimated amount of damage compensation is unreasonably excessive;

B. The case reversing the judgment of the court below on the ground that there was an error in the misapprehension of legal principles and incomplete hearing in the misapprehension of legal principles as to the reduced amount of KRW 90,00,000 for the agreed liquidated damages in the real estate sales contract of KRW 983,00,000; and

A. Under Article 398(2) of the Civil Act, the phrase “unfairly excessive cases” in which the court may reduce the estimated amount of damages pursuant to Article 398(2) means cases where, whether there is no damage or not, the amount of damages is less than the estimated amount of damages. Considering the economic status of the contractor, the purpose of the contract, the details of the scheduled amount of damages, the transaction practices and other circumstances, it shall be deemed that the payment of such estimated amount of damages results in the loss of fairness by imposing unfair pressure on the debtor in the position of the economically weak

B. The case reversing the judgment of the court below which reduced the amount of KRW 90,000 as agreed in the real estate sales contract of KRW 983,00,000 for the reason that it was unfairly excessive in amount of KRW 90,000 for the agreed amount of damages and there was an error in the misapprehension of legal principles

A. Article 398(2) of the Civil Act

A. Supreme Court Decision 89Meu10811 Decided December 12, 1989 (Gong1990, 257)

Han-do et al., Counsel for the plaintiff-appellant-appellee

Attorney Kim Jae-hwan et al.

Seoul High Court Decision 90Na16582 delivered on October 17, 1990

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

We examine the Plaintiffs’ grounds of appeal.

1. The freedom of contract, along with the principle of private ownership and the principle of fault liability, forms the foundation of modern private law, but the unlimited permission of freedom of contract may result in harsh consequences by unfairly pressureing the contracting parties who are in the position of the economically weak. As such, the State needs to enter into a contract or interfere with the conclusion or content of the contract in order to eliminate the substantial inequality between the parties and ensure fairness. Reduction of the estimated amount of compensation for damages under Article 398(2) of the Civil Act is not a form of restriction on the freedom of contract.

Therefore, the limitation of the freedom of contract should be done within the necessary limit on the basis of the principle of trust and good faith, which is the rule principle of civil law, and arbitrary limitation should be noted that it is not permissible because it infringes on the essence of freedom of contract.

The liquidated damages under Article 398 of the Civil Act are set in advance the amount of damages to be paid by the obligor in the event of nonperformance. The purpose of the liquidated damages is to ensure the performance of obligations by providing psychological warning to the obligor in addition to preventing disputes in advance by excluding any difficulty in proving the occurrence of damages and the amount of damages, and preventing disputes in a simple manner. Thus, even if the obligor proves that there is no actual occurrence of damages or that the amount of damages is less than the estimated amount of damages, the obligor shall not be exempted from paying the estimated amount of damages

Therefore, "unfairly excessive cases where the court may reduce the estimated amount of damages" under Article 398 (2) of the Civil Code means cases where the payment of such estimated amount of damages is deemed to result in the loss of fairness by imposing unfair pressure on the debtor who is in the position of the economically weak, by considering the economic status of the contractor, the purpose of the contract, the details of the scheduled amount of damages, the transaction practices and other circumstances.

2. According to the reasoning of the judgment below, the court below held on May 15, 1989 that the defendant sold the real estate of this case to the plaintiffs 983,00,000 won for the down payment, 90,000 won for the intermediate payment on the day, 300,000 won for the intermediate payment on June 21, 1989, and 593,000,000 won for the intermediate payment was paid in exchange for documents and redemption necessary for the registration of ownership transfer of the real estate of this case, but it was paid in excess of 179,50,000 won for the plaintiffs' acceptance of the rent deposit for the real estate of this case and deducted it from the remainder from the balance. The court below held that the defendant is liable for damages if the defendant violated the contract, and that the defendant unilaterally received 90,000,0000 won for the remaining intermediate payment from 00,000 won until 90,000 won for the reasons that the defendant and the above part payment for the contract of this case were not received.

3. The court below cited various grounds for reduction, however, according to the records, it is difficult to readily conclude that the estimated price of this case is excessively excessive solely for these reasons, since the reason considered by the court below was mainly registered as a joint ownership of the defendant and the non-party stronger land at the time of the sales contract of this case, and that the plaintiff could have known such circumstances, the contract deposit itself, and the time interval from the contract to the contract termination contract conclusion, and that there is a short interval from the contract conclusion to the contract termination termination. (The record reveals that the above strongness is between the defendant and the non-party.

In addition, although the business practices are included in the factors of reduction cited by the court below, it is the general business practice to determine the 10% amount of the purchase price as the down payment in the real estate trade transaction and to agree it as a penalty, and the penalty stipulated in the contract of this case is recognized to be less than the amount equivalent to 10% of the purchase price. In general, in order to reduce the estimated amount not exceeding the amount recognized under the transaction practice, there is a large amount of the estimated amount, or there is a lack of the reason why the difference between the contract and the contract cancellation is short, and the actual amount of damage (in this case, the loss of the performance profit will result in the loss of the performance profit) and the estimated amount shall not be considered in comparison with the actual amount of damage (in this case, the loss of the performance profit) and the estimated amount, taking into account the economic status of the contracting party, the purpose of the contract, the circumstances leading to the compensation for damages, and all other circumstances, the above reasons for the above consideration cannot be found in the record.

After all, the court below erred by misapprehending the legal principles on the reduction of the estimated amount of damages and incomplete deliberation, which affected the conclusion of the judgment, and thus, is therefore justified.

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

Justices Song Man-man (Presiding Justice)