Assistance by a Corporate Litigation Attorney | Improper Claims for Costs and Payment, Plaintiff's Claim Dismissed “Winning the Case”

The client was the representative of a company in the manufacturing business and had been conducting transactions by outsourcing part of the production process to an outsourcing contractor.

The outsourcing contractor used equipment to carry out the process after the conclusion of the contract, but that equipment was general-purpose equipment rather than dedicated equipment designed to match the client's process.

As a result, recurring defects arose during the production process, and the client suffered substantial losses, including delivery delays and product returns.

The client requested the outsourcing contractor to improve the process, but the problem was not resolved, and ultimately the client reached a situation in which the outsourcing contract had to be discontinued.

Thereafter, the outsourcing contractor filed a lawsuit claiming, under the name of development costs, the equipment purchase costs, labor costs, and testing costs, as well as the payment it alleged it had not received for performing its work.

Accordingly, the client determined that a strategic response to the lawsuit was necessary and came to request the assistance of a corporate litigation attorney.

The opposing party demanded that the client bear the costs accordingly, asserting that a development service contract had been concluded with the client.

However, after reviewing the contract provisions and the ordering structure, the corporate litigation attorney confirmed that there was no provision specifying that the client would bear the additional costs or the equipment costs.

In addition, on the ground that the outsourcing contractor's purchase of the equipment had been carried out without the client's request or prior approval, the attorney emphasized that the claim for those costs lacked a contractual basis.

The opposing party asserted that a separate development service relationship existed with the client and that the client should bear the costs accordingly.

After reviewing the content of the contract actually concluded, the corporate litigation attorney responded by focusing on the point that there was no provision premised on the performance of a development service or the bearing of related costs.

In addition, the attorney explained to the court that the sample production and testing carried out by the opposing party were not the performance of a service under a formal contract, but merely amounted to a preliminary review and proposal stage.

The opposing party asserted the validity of the claimed amount on the basis of an appraisal report and internal calculation materials.

After reviewing the submitted materials against the actual content of the contract, the corporate litigation attorney pointed out that there was an inconsistency between the calculation basis and the contract structure.

In particular, the attorney emphasized that development-stage costs and costs of an investment nature had been claimed together without being distinguished, and contested the credibility of the opposing party's assertions as a whole.

Failure to perform a contractual obligation means a case in which a party does not perform an obligation assumed under the contract, or performs it in a manner that does not conform to the content of the contract.

Pursuant to Article 390 of the Civil Act, where the obligor fails to perform in accordance with the content of the obligation, the obligee may claim damages for the loss resulting therefrom.

This is a provision setting forth the basic principle of contractual responsibility, namely that after a contract is concluded, the parties must faithfully perform the obligations they have agreed upon.

However, where the obligor has become unable to perform without intent or negligence, liability for damages is not recognized.

Therefore, in corporate litigation, the scope of the obligations under the contract and whether the parties bear responsibility must be reviewed comprehensively.

Pursuant to Article 393 of the Civil Act, damages for the failure to perform an obligation are recognized up to the limit of the loss that may generally arise in the course of performing a contract, that is, ordinary loss.

In contrast, in the case of loss arising from special circumstances, liability for compensation is recognized only where the obligor knew of or could have sufficiently foreseen those circumstances.

Therefore, liability for damages is not recognized merely on the ground that a loss has occurred; rather, the scope of liability is determined by comprehensively reviewing the content of the contract, the transaction structure, and the foreseeability of the loss.