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Mistake in Motive and Rescission Under Korean Civil Law: Supreme Court 97Da26210 on a Building Sale Crossing the Setback Line, Article 109 and a No-Suit Agreement
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A 6-page Korean civil law case analysis of Supreme Court judgment 97Da26210 (September 30, 1997). After a sale it turned out that the building crossed the legal setback line by 1.45 m, but the seller assured the buyer that a lawsuit would fix it, so the buyer paid the balance. The paper explains the requirements of Article 109 of the Korean Civil Act (mistake about an essential part of the juristic act, no gross negligence), why a mistake in motive caused by the other party can justify rescission, the role of a no-suit agreement, and compares Supreme Court judgment 2004Da43824.
This is also sound in light of the fact that, in the end, whether rescission for mistake is recognized is a question of who should properly bear the risk of mistake. Among domestic views, some say that, in regulating mistake, the decision should basically be made from the perspective of whether it is just to protect the declarant or just to protect the other party's reliance, and that this should be resolved from the perspective of which party it is just to make bear the risk of making a declaration of intent by mistake, or the resulting loss; others say that the theory of mistake should allow the disadvantage arising from mistake, that is, the risk, to be appropriately allocated between the declarant and the other party, and it is said that some consensus seems to have formed that the perspective of risk allocation between the declarant and the other party is an important factor in regulating mistake. The standard for risk allocation can be said to be sound when it takes into account not only the declarant's circumstances but also the other party's. What deserves attention above all is the doctrine of "mistake induced by the other party" formed by case law. Our courts have been achieving concrete justice regarding mistake by forming new doctrines to a degree not found in other areas; under this doctrine, one can see cases where, if the mistake was induced or contributed to by the other party, the assessment of requirements traditionally demanded for rescission for mistake is omitted or those requirements are judged to be satisfied. Scholars generally support this, some saying that this attitude of the case law is fully acceptable since the other party who induced the mistake does not deserve protection, and others saying that there is no doubt that, where the declarant's false notion was induced not by the declarant but by the other party, the resulting disadvantage should also be borne not by the declarant but by the other party who created or realized the risk of that mistake, and thus that the Supreme Court's approach of placing the disadvantage on the other party where the declarant's mistake was induced by the other party is justified. Although it cannot be concluded that the formation of this doctrine has completely rejected the existing view of rescission for mistake, one can at least see that, in recognizing rescission for mistake, the requirements of the existing system have been modified so that the other party's circumstances are actively considered. If one takes the position that whether to allow rescission for mistake must be decided by considering only the declarant's circumstances, how should the formation of such case law be accepted? It could only be seen as the formation of a deformed and destructive customary law; but if the perspective is changed to one that actively considers the other party's position in deciding whether to allow rescission, the above case-law theory becomes natural. Perhaps changing the perspective and amending the statutory text is the only means of accepting the current case-law theory.
Case law on mistakes of motive has developed in the direction that, where the motive was expressed as part of the content of the declaration of intent and the other party knew of it, or where the mistake was induced by the other party's improper methods or provision of information, it is treated as a mistake in an important part and rescission is allowed regardless of whether it was expressed. There is also case law holding that even where the mistake arose from the declarant's gross negligence, rescission cannot be barred if the other party knew of the mistake and took advantage of it, so for case-type questions on the general provisions of the Civil Act it is essential to practice breaking down the requirements and applying them one by one. The facts in this material are a suitable example for that practice.
✦ At a glance
Article 109 allows rescission for a mistake about an essential part of the deal unless the mistaken party was grossly negligent.
A mistake in motive normally does not count, but Korean courts allow rescission when the motive was shown to the other side or when the other side caused the mistake.
Note: the paper itself is written in Korean and discusses Korean law. This page is general study information, not legal advice.
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