Glossary of South Korean Contract Law Terms

Introduction

This glossary defines key terms used in South Korean contract law, which is codified in Part III (Obligations) of the Civil Code (민법). The terminology reflects the German civil law tradition and Korean judicial interpretation.

Key Terms

Good Faith Principle (신의성실의 원칙 / 신의칙)

The foundational principle of Korean contract law, codified in Article 2 of the Civil Code: “The exercise of rights and the performance of duties shall be in accordance with the principle of trust and good faith.” The principle governs contract formation, performance, and enforcement, and prohibits abuse of rights. It is analogous to the German Treu und Glauben.

Specific Performance (강제이행)

A remedy for breach of contract whereby the obligee demands that the obligor actually perform the promised obligation, rather than paying damages. The Civil Code prioritizes specific performance (Article 389), with damages as a secondary remedy. This contrasts with common law systems where damages are the primary remedy.

Damages for Breach (채무불이행으로 인한 손해배상)

Financial compensation for losses caused by breach of contract. Damages include actual loss (적극적 손해) and lost profits (소극적 손해), limited by the principle of foreseeability (Article 393 — damages must be within reasonably foreseeable scope at contract formation).

Impossibility (이행불능)

A situation where performance of a contractual obligation becomes objectively impossible. If the impossibility is attributable to the debtor, the obligee may claim damages. If attributable to neither party, the obligation is extinguished (Article 537).

Delay of Performance (이행지체)

A form of breach where the obligor fails to perform by the due date despite the possibility of performance. The obligee may demand specific performance, damages, or termination.

Termination of Contract (계약해제)

The right to cancel a contract upon material breach, returning the parties to their pre-contractual positions (restitution). Termination requires notice to the breaching party (Article 543).

Obligation (채무)

A legal duty requiring a person (debtor/obligor) to do or refrain from doing something for another (creditor/obligee). Obligations arise from contract, tort, unjust enrichment, or management of affairs (negotiorum gestio).

Offer and Acceptance (청약과 승낙)

The two-stage process of contract formation. An offer is a definite proposal; acceptance is unconditional agreement. Under the Civil Code, acceptance takes effect when it reaches the offeror (reception theory, Article 531).

Rescission (취소)

The retroactive invalidation of a contract due to a defect in formation (mistake, fraud, duress, or incapacity). Rescission requires a court or party action and differs from voidness, which is automatic.

Prescription (소멸시효)

The statutory time limit for asserting contractual rights. The general prescription period for contractual claims is 10 years (Article 162 of the Civil Code). Commercial claims have a five-year prescription period.

Joint and Several Liability (연대채무)

Where multiple debtors are each individually liable for the full performance of an obligation, with the obligee entitled to demand full or partial performance from any debtor (Article 413). Common in joint venture and partnership agreements.

*Culpa in Contrahendo* (계약체결상의 과실)

Pre-contractual liability arising from fault in contract negotiation, including failure to disclose material information or breaking off negotiations without justification. Recognized by the Supreme Court under the good faith principle.