- Republic of Korea
- Seoul High Court
AVOIDANCE OF CONTRACT - CONTRACT TO BE PERFORMED BY INSTALMENTS - FAILURE BY SELLER TO DELIVER ONE INSTALMENT GIVES GOOD GROUNDS FOR AVOIDANCE (ARTS 25 AND 73(2) CISG)
DAMAGES (ART. 74 CISG) - SUBSTITUTE TRANSACTION - DIFFERENCE BETWEEN CONTRACT PRICE AND PRICE IN THE SUBSTITUTE TRANSACTION (ART. 75 CISG)
RIGHT TO CLAIM DAMAGES (ART. 74 CISG) – LOSSES SUFFERED DUE TO BREACH – TRANSPORTATION COSTS
SET-OFF- MATTER EXCLUDED FROM CISG (ART. 4 CISG) - DOMESTIC LAW APPLICABLE
[CLOUT abstract no. 1281; abstract prepared by Haemin Lee, National Correspondent]
The plaintiff, a Chinese company, concluded a sales contract with the defendant, a Korean company, under which the plaintiff agreed to deliver duck feathers to the defendant in multiple shipments. The defendant was to make payment upon receipt of each shipment. The plaintiff delivered several shipments to a location specified by the defendant and received payment.
When the plaintiff failed to deliver one shipment the defendant had to buy an equivalent amount of goods in replacement from another company. After this, the defendant notified the avoidance of the contract to the plaintiff.
The court noting that the parties had their place of business in different states, both contracting states to the CISG, determined that the Convention would apply. The court also noted that as per Article 4 CISG, the Convention only governs the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. Therefore, the defendant’s claim for a set off among other claims was not governed by the CISG and would have to be determined by private international law. Article 26 of Korean Private International Law provides that the governing law of a set off is the seller’s law, which means that Chinese law was the governing law in this regard.
As to the plaintiff’s failure to deliver one of the installments of duck feathers, the court stated that it constituted a fundamental breach of contract and gave the defendant grounds to conclude that a breach of contract would occur also with respect to future installments. Therefore, the contract, except for the orders already completed, was to be considered avoided pursuant to Articles 25 and 73 CISG.
Since the defendant had to buy duck feathers from another company in replacement of the goods not delivered, the plaintiff should pay for the difference between the contract price and the price in the substitute transaction, as per Articles 74 and 75 CISG, as well as further damages such as the air transport cost.
Original in Korean:
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