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A Critique of the Supreme Court Decision on Pre-contract Deposits: Supreme Court Decision 2022Da247187, delivered on September 29, 2022

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This article presents a critical analysis of the Supreme Court’s approach towards pre-contract deposits. The focus is on the Supreme Court’s latest decision, Decision 2022Da247187, issued on September 29, 2022, which addresses the legal nature of pre-contract deposits in Korea. In this decision, the Supreme Court asserted that a pre-contract deposit constitutes earnest money only when the parties, upon entering into the contract, had mutually agreed that rescinding the contract would result in the party delivering the deposit forfeiting the money, the receiving party reimbursing double the deposit amount. This approach, however, presents challenges. First, it contradicts existing case law, which presumes deposits to be earnest money unless stated otherwise. Although deposit contracts are deemed to be substantial contracts, even a partial payment of a deposit is sufficient for the deposit contract to be valid. Crucially, this can serve as a basis for recognizing pre-contract deposits as deposits, and thus earnest money. Unfortunately, 2022Da247187 reaches the opposite conclusion. Second, established case law recognizes that a pre-contract can serve as a formal contract even without requiring explicit agreement to enter into a formal sale or lease. Regrettably, the Supreme Court’s latest decision in 2022Da247187 did not take this important principle into consideration. As a result, 2022Da247187 is inconsistent with many aspects of well-established case law.

Abstract

This article presents a critical analysis of the Supreme Court’s approach towards pre-contract deposits. The focus is on the Supreme Court’s latest decision, Decision 2022Da247187, issued on September 29, 2022, which addresses the legal nature of pre-contract deposits in Korea. In this decision, the Supreme Court asserted that a pre-contract deposit constitutes earnest money only when the parties, upon entering into the contract, had mutually agreed that rescinding the contract would result in the party delivering the deposit forfeiting the money, the receiving party reimbursing double the deposit amount. This approach, however, presents challenges. First, it contradicts existing case law, which presumes deposits to be earnest money unless stated otherwise. Although deposit contracts are deemed to be substantial contracts, even a partial payment of a deposit is sufficient for the deposit contract to be valid. Crucially, this can serve as a basis for recognizing pre-contract deposits as deposits, and thus earnest money. Unfortunately, 2022Da247187 reaches the opposite conclusion. Second, established case law recognizes that a pre-contract can serve as a formal contract even without requiring explicit agreement to enter into a formal sale or lease. Regrettably, the Supreme Court’s latest decision in 2022Da247187 did not take this important principle into consideration. As a result, 2022Da247187 is inconsistent with many aspects of well-established case law.

참고문헌 (16)

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