- Republic of Korea
- Seoul High Court
BUYER'S OBLIGATION - PAYMENT OF PRICE (ART. 53 CISG)
BUYER'S FAILURE TO OPEN L/C ACCORDING TO CONTRACTUAL SPECIFICATIONS - AMOUNTING TO FUNDAMENTAL BREACH - SELLER'S RIGHT TO AVOID (TERMINATE) CONTRACT (ART. 64(1)(A) CISG)
(CLOUT abstract no. 1278; abstract prepared by Haemin Lee, National Correspondent).
The seller, an Australian company, entered into a contract with the defendant, a Korean company, for the export of cotton seeds. The defendant accordingly opened a letter of credit (“L/C”) in favour of the plaintiff. However, the L/C included conditions not contemplated in the contract, which the defendant refused to remove despite the plaintiff’s requests. The plaintiff declared the contract avoided and claimed for the damages caused by the defendant’s breach.
Noting that under Articles 53 and 54 CISG, the defendant is obliged to pay for the goods received from the plaintiff in compliance with the formalities required by the contract, the court ruled that the defendant’s failure to open the L/C in a manner conforming to the plaintiff’s contractual terms constituted “a fundamental breach of contract”, justifying the plaintiff’s declaration of avoidance pursuant to Article 64(1)(a) CISG. But even had there been no “fundamental breach”, the defendant’s refusal to honor the plaintiff’s request for revision of the L/C, despite the plaintiff’s granting of additional time to do so, created valid grounds for avoidance under Article 64(1)(b) CISG. The court thus found in favor of the plaintiff.
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