Supreme Court: "Cannot Apply Presumption of Achievement to Conditions with Significantly Low Possibility of Fulfillment"

[Asia Economy Reporter Heo Kyung-jun] The Supreme Court has ruled that if a condition is originally highly unlikely to be fulfilled, the party who would be disadvantaged by the fulfillment of the condition cannot be deemed to have fulfilled the condition even if they obstruct the fulfillment of the condition in bad faith, contrary to the principle of good faith.

The Supreme Court's 2nd Division (Presiding Justice Cho Jae-yeon) announced on the 16th that it overturned the appellate court's partial ruling in favor of plaintiff investor Mr. A in a contractual payment lawsuit against electronics development and sales company B and remanded the case to the Daejeon High Court.

In 2007, Mr. A invested 10 million won in company B and entered into an investment agreement stating that "if sales occur through intellectual property rights, 10% of the profits will be repaid until the amount reaches five times the principal investment amount."

Subsequently, the representative of company B was convicted of fraud under the Specific Economic Crimes Act for deceiving electronics retail store owners by claiming that the company's product would soon be released and receiving contract application fees and advance payments for products.

Accordingly, Mr. A filed a lawsuit in 2017 claiming 50 million won, five times the investment amount, arguing that company B had obstructed the fulfillment of the contract condition under civil law and thus the contract condition should be deemed fulfilled.

Article 150, Paragraph 1 of the Civil Act stipulates that "If a party who would be disadvantaged by the fulfillment of a condition obstructs the fulfillment of the condition in bad faith, the other party may claim that the condition has been fulfilled."

The first trial court ruled in favor of company B, finding that the condition set in the investment agreement between Mr. A and company B was not fulfilled. During the second trial, Mr. A argued that "since company B had no intention from the beginning to develop and mass-produce electronics or generate sales, it can be evaluated as obstructing the fulfillment of the condition in bad faith, and therefore the fulfillment of the condition should be deemed under Article 150, Paragraph 1 of the Civil Act."

The second trial court ruled that "company B made no effort to generate sales as stipulated in the investment agreement and appeared to have no intention from the start to fulfill the condition, thus constituting an unjust obstruction of the fulfillment of the condition in bad faith," ordering company B to pay Mr. A 50 million won.

However, the Supreme Court's judgment differed. It held that if the possibility of fulfilling the condition of generating sales was originally highly unlikely, the fulfillment of the condition cannot be deemed.

The court stated, "The obstruction of the fulfillment of a condition means that, according to social norms, the condition would have been fulfilled if the obstructive act by one party had not occurred, but the condition was not fulfilled due to the obstruction. It does not include cases where the possibility of fulfilling the condition was originally highly unlikely even without the obstruction."

Furthermore, the court added, "Since company B was originally highly unlikely to fulfill the condition of generating sales, it is difficult to recognize that the fulfillment of the condition can be deemed solely based on the obstructive act."

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