Korea - Chapter 8 - Force Majeure and Hardship in the Asia-Pacific Region
David MacArthur is Co-head of the International Arbitration practice of Anderson Mori & Tomotsune in Tokyo, Japan and has 14 years of experience working in the Republic of Korea;
Yongman BAE is a Partner (attorney) at BKL in the Republic of Korea;
Junu KIM is a Partner (attorney) at BKL in the Republic of Korea;
Jiho KIM is an Associate (attorney) at BKL in the Republic of Korea.
Originally from Force Majeure and Hardship in the Asia-Pacific Region
I. Force Majeure
A. Background and definition of force majeure in Korea
1. Does Korea recognize force majeure or any other legal concept similar to force majeure such as frustration, etc. (in the following: “force majeure”)? Are there any statutory provisions or is there any case law setting forth the definition of force majeure?
While there are several explicit references to “force majeure” in Korean statutory law, they are all found in niche legal contexts. Specifically, the term is explicitly mentioned only in certain provisions related to promissory notes, transportation/cargo shipping and employment/industrial accident compensation insurance, respectively, as set out below in section B.7. There is no general statutory principle of force majeure and no explicit definition of the term.
However, a handful of Korean court decisions have considered and applied the concept of force majeure in other legal contexts. In those cases, the courts have generally taken the position that a “force majeure event” may result in an impossibility to perform contractual obligations without any negligence of the obligor, thereby limiting any liability for such non-performance. Korean law provides that when a party defaults on its contractual obligations because the “performance has become impossible and where this is not due to the obligor’s negligence,” the counterparty cannot claim damages. Conversely, the party so defaulting “is not entitled to counter-performance (by the obligee).”
The general standard or test established by the Supreme Court of Korea to determine when an event qualifies as a “force majeure event” was articulated in a 2008 decision, where the Court considered a dispute in which a housing supplier sought to avoid liability for liquidated damages for delay by arguing that the delayed move into the housing was attributable to a force majeure event. The Court there found that an intervening event that prevents a party from performing its contractual obligations can be considered such a “force majeure event” if it meets the following two requirements:
(i) the cause of the event was beyond the control of the party asserting the force majeure; and (ii) there has been no possibility to foresee or avoid the event.