Defense case in a lawsuit for the price of goods | Claim for the price of goods entirely dismissed through a defense of extinctive prescription

The client had maintained continuous transactions with the plaintiff company, a raw yarn manufacturer, for about 11 years, paying for goods in accordance with purchase orders, quotations, and tax invoices.

What became an issue was a particular transaction that took place more than 10 years ago.

At that time, the plaintiff company supplied nylon yarn, but due to its defective quality, a serious defect arose in the export products manufactured by the defendant.

As a result, the client suffered a loss of more than approximately 120 million won, and as deliveries were delayed, transactions with overseas buyers were also severed.

Accordingly, the defendant demanded damages and a refund of the price of goods from the plaintiff company, and the plaintiff company also acknowledged the fact of the defect in its delivery.

Thereafter, the two parties agreed to conclude the dispute through the following compensatory settlement.

Thereafter, transactions continued normally, and settlement was completed for each transaction.

However, several years after the transactions ended, the plaintiff abruptly filed a lawsuit for the price of goods against the defendant, asserting that “unpaid amounts remained at that time.”

The civil litigation attorney established, through tax invoices, emails, and transaction records, the substantial loss suffered by the defendant as a result of the yarn supplied by the plaintiff, as well as the resulting transaction delays and increased costs.

In particular, by submitting the circumstances showing that the plaintiff had acknowledged the fact of the defect and, through official documents and transaction records of the time, had proposed a compensatory settlement, the attorney made clear that the defendant had merely suffered a loss and had never assumed any obligation.

On the basis of the terms of the settlement under which the plaintiff company, instead of performing its obligation to pay damages and to provide a refund, agreed to compensate for the loss through a low-price supply arrangement, the civil litigation attorney demonstrated that all transactions had already been settled and concluded.

The attorney established through specific documents that the amount claimed by the plaintiff was not the price of goods, but rather an amount that had been agreed to be paid at the defendant's discretion if a profit remained from the low-price transactions.

The civil litigation attorney argued that the customer ledger and other materials submitted by the plaintiff were merely internally prepared records and could not constitute objective evidence.

In addition, the attorney logically rebutted that the defendant's remittance records and KakaoTalk conversations were also merely responses to requests for distribution of profits, and did not constitute an acknowledgment of debt.

Even if, as the plaintiff asserted, some unpaid amount had remained, the transaction in question had ended more than 10 years earlier, so the short-term extinctive prescription (3 years) for a claim for the price of goods had already been completed.

Accordingly, the civil litigation attorney clearly presented, as a matter of legal principle, that the small remittances the defendant made thereafter concerned an entirely different transaction and therefore did not constitute grounds for interrupting the prescription.

Under Article 163, Item 6 of the Civil Act, a claim for the price of goods sold by a producer or merchant is subject to a short-term extinctive prescription of three years.

The extinctive prescription runs from the time the right may be exercised (the delivery of the goods or the arrival of the payment due date) (Article 166, Paragraph 1 of the Civil Act), and if the claim is not asserted for three years, it is extinguished.

Accordingly, if a long period has elapsed after the end of the transaction, whether the extinctive prescription has been completed becomes the key issue that determines the outcome of the lawsuit.

Daeryun LLC includes civil law specialist attorneys registered with the Korean Bar Association, as well as attorneys with experience handling a wide range of cases.

Through a dedicated consultation attorney system, the firm identifies the significance of the matter and its key issues at an early stage and assigns a dedicated attorney suited to the type of case, providing multifaceted and systematic assistance.

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