Supreme Court: Rental Companies Not Responsible When Customers Do Not Receive Supplier's Goods

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Supreme Court in Seocho-dong, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kim Daehyun] The Supreme Court has ruled that rental companies (financial lessors) cannot be held responsible simply because rental customers did not properly receive goods from suppliers.

On the 4th, the Supreme Court's First Division (Presiding Justice Kim Seonsu) overturned the lower court's ruling that dismissed rental company A's lawsuit seeking the return of a penalty of over 100 million won from daycare operator Yoon Mo and remanded the case to the Seoul Southern District Court.

In January 2016, Mr. Yoon signed a supply contract with company B to receive electronic whiteboards, tablets, and educational content for use at his daycare center, and separately signed a rental contract with company A to pay rental fees for these items. In accordance with the prior agreement, company A also paid company B over 160 million won for the goods.

According to the rental contract, Mr. Yoon agreed to pay company A a total rental fee of over 220 million won over 36 months, in monthly installments of 6 million won. However, company B failed to properly supply the goods to Mr. Yoon’s daycare center, and in August 2017, Mr. Yoon requested termination of the rental contract with company A.

Company A then notified Mr. Yoon to pay the remaining rental fee of about 100 million won as a penalty, but Mr. Yoon’s side refused, arguing that “company A did not faithfully fulfill its obligation to supply the rental goods.”

The first trial ruled in favor of company A. The court stated, “According to the initial agreement, Mr. Yoon cannot refuse to pay the rental fee on the grounds of service interruption by company B,” and ordered payment of about 100 million won to company A.

However, the second trial dismissed company A’s claim, holding that company A was responsible for the customer not receiving the goods.

The court pointed out, “Mr. Yoon repeatedly requested correction, claiming that the core rental goods, the content, were not supplied, but company A’s provision of content remained insincere.”

The Supreme Court ruled based on Article 168-3, Paragraph 1 of the Commercial Act that “company A is not responsible for supplying the goods.”

Unless the rental company explicitly agrees to guarantee direct supply of goods, the company only has the obligation to assist the rental customer in receiving the goods, and cannot be considered to bear the duty of delivery, inspection, or confirmation of the goods.

The court stated, “The lower court judged that the rental contract was terminated due to company A on the premise that company A bore the obligation to supply rental goods,” and “this is a misinterpretation of the legal principles regarding financial lease contracts,” thus remanding the case.

This content was produced with the assistance of AI translation services.