- Republic of Korea
- Suwon District Court
TERMINATION (AVOIDANCE) OF CONTRACT - SELLER'S RIGHT WHERE BUYER FAILED TO PAY TOTAL CONTRACT PRICE (ART. 53 CISG)
EFFECTS OF AVOIDANCE - RESTITUTION BY SELLER OF THE PRICE RECEIVED (ART. 81 (2) CISG)
BUYER'S RIGHT TO DAMAGES (ART. 74 CISG) - TO BE SET-OFF AGAINST SELLER'S CLAIM TO PAYMENT OF TOTAL PRICE
SET-OFF- MATTER EXCLUDED FROM CISG (ART. 4 CISG) - DOMESTIC LAW APPLICABLE
(CLOUT abstract no. 1280; abstract prepared by Haemin Lee, National Correspondent)
The Korean buyer (plaintiff) entered into a contract with the seller from the United States of America (defendant) to import thirteen cars. However, after paying the price of one car, the plaintiff refused to pay further, claiming it was not a party to the contract in question. According to the plaintiff, the buyer named in the contract was a separate corporation. Subsequently, the defendant discontinued the delivery of the cars it had been shipping. The plaintiff claimed this constituted a ground for avoidance of the sales contract and brought suit to recover its original payment. The defendant asserted that the contract had been avoided due to the plaintiff’s breach of contract; therefore the plaintiff’s original payment is set off by the defendant’s claim for damages.
The court found that the plaintiff was in fact a party to the contract, and that the plaintiff had committed a “fundamental breach of contract” by denying its being a party to the contract and failing to pay the total sales price. Despite this, the defendant was still obliged to return the plaintiff’s payment with interest and with compensation for any damages caused by the delayed return, pursuant to Articles 81(1) and 81(2) CISG. However, the plaintiff’s claim was to be set off against the defendant’s claim with the plaintiff receiving its original payment less the amount of damages owed to the defendant.
The court limited the plaintiff’s liability to transportation costs and storage expenses in assessing the damages, in consideration of Article 74 CISG, which provides that “damages for breach of contract by one party consist of a sum equal to the loss ... [and] may not exceed the loss which the party in breach foresaw or ought to have foreseen as a possible consequence of the breach of contract.” As the CISG does not have provisions to calculate the set off, California state law was applied.
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