Dr. Boeun Chang is an Associated Professor at the Faculty of Law School, Hankuk University of Foreign Studies in Korea. She has taught the Korean civil code including property law, contract law and torts. Her research focuses on long-term contracts and consumer law these days.
Before joining the Law School in 2017, she had worked as a corporate lawyer for more than 11 years at Kim & Chang, which is the biggest law firm in Korea.
Prof. Chang received her Ph.D. from Seoul National University in 2017, her LL.M. from Harvard Law School in 2013, and her B.A. in Law from Seoul National University in 2002. She is admitted to the Korean bar and the New York bar.
Change of circumstances in Korean contract law – an exception to pacta sunt servanda
Abstract:
Pacta Sunt Servanda is a fundamental principle in Korean contract law. Therefore, a breach of contract causes the liability for damages, and termination of the contract if it is material. Compulsory performance is recognized in principle, unlike some other common law countries where specific performance is allowed only in certain cases. In addition, the concept of efficient breach is not generally accepted in Korea, as contracts have sanctity beyond the economic interests of the parties.
However, with the emergence of new contracts and rapid social changes, sometimes it is not in line with good faith if the contract should be fulfilled as it is. In particular, the Korean court explicitly mentions that the change of circumstance doctrine is an exception to the principle of Pacta Sunt Servanda. While it denied the change of circumstances doctrine traditionally, it declared in 2007 that a contract may be terminated on grounds of a change of circumstances if (i) an objective factual circumstance underlying the contract has materially changed; (ii) such change was unforeseeable at the time of execution.
Despite approving the doctrine in principle, there had been no case that Korean court actually adopted it as a basis of termination. However, the Supreme Court acknowledged the termination of the contract for the reason of change of circumstances in December last year, which confirmed that it was not a theoretical declaration but a practical norm.
In the paper, Prof. Boeun Chang would like to introduce the meaning of change of circumstances from the perspective of Korean contract law. It will be also noteworthy how this doctrine can function in rapidly changing social situations. In particular, since we are facing unprecedented situations due to the COVID19, it may have some implications.