The Supreme Court has ruled that if a termination ground is clearly stated in a presale contract, the contract can be terminated without examining whether the breach is serious.
According to legal circles Wednesday, the Supreme Court's Second Division (presiding Justice Eom Sang-pil) recently overturned a lower court ruling against the plaintiff in a deposit refund lawsuit filed by buyer A against developer B, and sent the case back to the Daejeon District Court.
A acquired buyer status for a unit in an officetel building in Daegu in May 2022. The presale contract for the officetel contained an agreed termination clause stating that "the buyer may terminate the contract if the seller receives a corrective order under Article 9 of the Building Sale Act."
In December 2023, B received a corrective order under the Building Sale Act from the head of Dalseo-gu Office in Daegu, on grounds that its presale advertisement omitted matters concerning whether a district unit plan had been established and whether an educational environment protection zone had been designated.
In response, A filed the lawsuit in March 2024, arguing that the corrective order against B constituted an agreed ground for termination and declaring the presale contract terminated. A claimed a total of 43.51 million won, including the 39.18 million won deposit and interim payment loan interest.
The first and second trials did not accept A's claim. The reasoning was that even with a termination clause, termination could only be made if, considering the specific content of the corrective order, the breach was serious enough to make achieving the purpose of the contract difficult, or such that the buyer would not have entered into the presale contract had they known of the breach. The second trial court explained that "the corrective order at issue resulted from a minor breach."
However, the Supreme Court sided with A. The court ruled that since the objective meaning of the contractual language was clear, the right of termination had arisen. The Supreme Court explained, "When contracting parties have set out an agreed ground for termination in a dispositive document, if the objective meaning of its language is clear, the existence and content of the expression of intent must be recognized as stated in the language, absent special circumstances," adding that "the termination clause states that 'the buyer may terminate the presale contract if the seller receives a corrective order under Article 9 of the Building Sale Act,' and the objective meaning of its language is clearly and unequivocally expressed." The court further held that "it is difficult to interpret the language, contrary to its objective meaning, as meaning that whether the right of termination has arisen must be examined by considering the severity of the breach that caused the corrective order or the impact of the breach on achieving the purpose of the contract."
