Contract Law and Insolvency Law: Continuity or Discontinuity? - On a Recently Proposed Amendment to Korean Insolvency Law -

Abstract

When a debtor’s insolvency proceedings open, the bankrupt debtor’s non-performance of their contractual obligation either continues or occurs anew under the insolvency procedures due to the mandatory standstill imposed by the procedures. The author’s main argument in this paper is that, regardless of whether the contract in question is executory, (1) a creditor can claim damages caused by such non-performance as an insolvency claim or a subordinate insolvency claim, but (2) the creditor should not be authorized to terminate the contract based on such non-performance after the commencement of the insolvency proceedings. The creditor’s exercise of a new termination right under the insolvency procedures should, in principle, be restricted to ensure the unified and orderly liquidation of contractual relationships. The author introduces the Korean Ministry of Justice’s recent, preliminarily proposed amendment to Korean insolvency law concerning these issues, makes some critical comments on the adopted proposal, and suggests an alternative.