A decision was made to ratify the ineffective documents, but… Court “Still invalid” Why?

Certificate received at the time of local housing association membership contract
As it turns out, it doesn't work... Lawsuit for refund of down payment
The court said, “If there was no certificate, the contract would not have been made…
The ruling in favor of the plaintiff is that the parties must also ratify for it to be valid.

The court ruled that even if the effectiveness of an important deed was secured through a ratification resolution, if the contracting parties did not participate in the process, it was invalid.

On January 15, the Busan District Court ruled in favor of the plaintiff in a lawsuit filed by two union members, including Mr. A, against the B Local Housing Association Establishment Promotion Committee for the return of contributions.

Mr. A and others signed a contract with Promotion Committee B for the purpose of selling a newly built apartment in 2022 and paid a down payment of 30 million won. During the contract process, they were issued a security guarantee certificate, which stated that if the project could not proceed due to the union's negligence, the full amount of the contribution would be refunded.

Afterwards, Mr. A and others learned that the guarantee certificate was invalid. In order to return the contribution, related rules must be established within the union or a general meeting resolution must be passed, but the promotion committee did not proceed with this procedure.

Accordingly, Mr. A and others filed a lawsuit for the return of the contribution, claiming that the contract was concluded without receiving any information from the Promotion Committee that the guarantee certificate was invalid.

However, Promotion Committee B countered that there was no obligation to return it. After the contract was signed, a ratification resolution was passed to ensure that the certificate had legal effect. At the same time, he emphasized that it is impossible to exercise the right to cancel the contract once it has become effective through ratification.

The court ruled in favor of the plaintiffs, including Mr. A. First, the court explained, “It appears that the plaintiffs made a mistake because they did not know that the security guarantee certificate was invalid at the time of signing the contract,” and that “without the certificate, they would not have entered into the contract.”

In addition, the court pointed out that there were problems with the ratification process. The warranty deed can be considered effective only if the plaintiffs, who are parties to the contract, also ratify it, but there is no basis for acknowledging that Mr. A and others ratified it. Accordingly, the court added, “Considering these circumstances, the contract is still invalid and cancellation of the contract is legal.”

Attorney Kim Nak-hyeong of Daeryun Law Firm, who represented Mr. A and others, said, “The refund agreement under the security guarantee certificate is not a sole act of the union, but corresponds to a contract with the plaintiffs,” and added, “Therefore, it cannot be considered effective just because a ratified resolution was passed at the regular general meeting of the union, which was one of the parties.”

Digital Content Team

[View full article]
A resolution was made to ratify the ineffective documents... Court “Still invalid” Why? (Shortcut)