- Republic of Korea
- Daegu District Court
SUPPLY OF GOODS BY INSTALMENTS (ART. 73(2) CISG) - SELLER'S TEMPORARY SUSPENSION OF PERFORMANCE - NOT AMOUNTING TO FUNDAMENTAL BREACH
BUYER'S REFUSAL TO RENEGOTIATE CONTRACT'S TERMS UPON SEVERAL REQUESTS BY SELLER AND ITS DECISION TO BRING AN ACTION AGAINST SELLER - PROBABILITY OF FUTURE BREACH OF CONTRACT - SELLER'S RIGHT TO DECLARE THE CONTRACT TERMINATED (AVOIDED)
(CLOUT abstract no. 1279; abstract prepared by Haemin Lee, National Correspondent).
The Chinese buyer (plaintiff), originally a subsidiary of the Korean seller (defendant), was a distributor of the defendant’s goods in China, later on becoming an independent entity. The two parties entered into an agreement for the supply of goods. The defendant, discontent with the conditions of the agreement including substantially lower prices of the goods compared to the price applied to other buyers, suspended the delivery for a short time. It resumed the delivery after a few weeks with a request to renegotiate the terms when the parties renew the contract. The plaintiff, while refusing to renegotiate the price, asserted that the suspension of the delivery and the unilateral demand for raising the price constituted avoidance of the original agreement. It thus filed for damages.
The court found that as the supply agreement provided for the delivery of goods in installments, and the defendant’s suspension of delivery had been a temporary act, there was no fundamental breach of contract by the defendant. Furthermore, the plaintiff had failed to respond to the defendant’s requests to renegotiate the price of the goods several times, ignored the defendant’s offer to restart the transaction and filed its lawsuit under a presumption that the contract had been avoided. These acts constituted ‘a fundamental breach of contract’ by the plaintiff and provided sufficient grounds for anticipating a ‘fundamental breach with respect of future installments’ as well. The court thus held that the contract was avoided pursuant to the declaration of avoidance subsequently made by the defendant under Article 73(1) and (2), and 25 CISG.
Original in Korean:
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