Possibility of analogical application of Article 398 (2) of the Civil Act on the penalty: Focused on the Supreme Court Decision 2018Da248855, 248862 Delivered on July 21, 2022

Abstract

Recently, the Supreme Court ruled that the penalty agreement cannot be reduced because it is different from the liquidated damages. These results are the same position as conventional precedents, and it can be seen that the current precedent is valid and should be maintained as it is. In other words, as a reaffirmation of the validity of the current precedent, penalty cannot be reduced in principle, and penalty can be exceptionally reduced only if they have the nature of liquidated damages at the same time. There are similar aspects of the liquidated damages and the penalty regarding function, and as a result, there are continuous precedents that do not distinguish the concept of the liquidated damages and the penalty. Rather than distinguishing the nature of the damages for breach of contract between the parties, Article 398 of the Civil Code should be improved in a way that allows the party who fails to fulfill the contract or violates the contract to compensate the creditor for a reasonable amount. In other words, it would be desirable to integrate the two concepts into one rather than separate and regulate them in different ways. Accordingly, I agreed that the liquidated damages and the penalty under the 2013 revision of the Ministry of Justice are not separately distinguished, but are integrated into the upper concept of penalty. In Paragraph 3 of the amendment, if the penalty is unfairly excessive, it is reasonable for the court to reduce the penalty. In addition, it is reasonable to delete Paragraph 2 of the amendment, which assumes that damages for breach of contract is to be the liquidated damages. Through this, we intend to establish a fair transaction order by pursuing legal stability while respecting private autonomy between the parties regarding the damages for breach of contract.