Legal Remedies for a Breach of Contract Between Companies

There are many situations in which a sales agreement between two companies will encounter problems.  The most common is when a company fails to provide goods after payment was sent or fails to pay after goods were sent.  For example, Company A agrees to purchase goods from Company B and sends payment for the goods.  However, Company B fails to send the goods.  Or on the flip side, Company A agrees to purchase goods from Company B.  Company B sends A the goods, but Company A does not send payment.   

If the company that failed to perform their end of the bargain is located in Korea, they can be sued.  Of course one should always try to fix the problem by contacting the company first.  However, if the company refuses to cooperate, the last option is to sue.  In that case, the process in Korea follows this path (please be aware that the steps outlined below are for the most common case, and the steps may vary according to each case's unique facts):

1.      Perform an asset check (length: 2 to 3 weeks): there is no point in suing a company, if they do not have any funds to pay for your damages. Therefore the first step is to perform an asset check. Asset checks are conducted by a third party specializing in these matters.  

2.      Temporary attachment/injunction (length: 1 to 4 weeks): depending on the type of asset and the nature of the dispute, it is possible to apply to the court for a temporary attachment or injunction.  This prevents the breaching party from getting rid of assets to avoid paying after the case is over.

3.      Filing criminal charges to the Prosecutor  (length: 3 to 9 months): While it does not always apply, it is possible to file a complaint to the Prosecutor for fraud.  This method encourages parties who have hidden assets (assets not in the company's name) to try to settle in order to receive more favorable treatment from the court.

4.      Notice (length: 1 to 2 weeks): It is generally considered common courtesy to let the other party know that you are planning to filing a suit.  Sometimes this encourages the party to settle before suit is filed.

5.      Filing a Civil Complaint/Civil Proceedings (length: 6 months to 1 year and 6 months): The suit will involve the facts of case, and the court will determine whether there was a breach of contract, and what the money awarded should be.  If the party is successful, the court will issue a judgment awarding money damages.

6.      Appeal (length: 6 month to 1 year): Unlike some countries, in Korea, it is fairly common for the losing party to appeal.  The appeal rate of civil cases in Korea is 40%, so one should be aware that the total length of their case may be longer than they anticipate.

7.      Compulsory execution of the judgment (length: 2 weeks to 6 months depending on the property type *real estate needs to be foreclosed so that takes 6 months to 1 year): If the court issues a judgment awarding damages to the victim, but the breaching party still refuses to pay, the victim needs to seek compulsory execution of the judgment.  This means that the court will order the breaching party's assets to be liquidated and paid to the victim, until the judgment amount is satisfied. 

Again, please be aware that each fact is unique to the case.  Especially in breach of contract cases, the length and nature of the case greatly depends on the type of assets being used to pay for the damages.  For e.g. cash is the easiest since the breaching party simply needs to pay the victim; on the other hand, real estate is the most complicated and lengthy since it needs to be foreclosed, put up on sale, and sold before the victim can get the damages award.   

One should always consult an experienced attorney who understands your needs, and is honest in assessing your situation.