[Seoul Civil Attorney Winning Case] Unilateral Cancellation of a Payment-in-Kind Agreement Prevented With Attorney Assistance

The client and defendant in this case held the position of representative at a construction company.

Several years earlier, the construction company built a new officetel, and during that process, it concluded a payment-in-kind agreement with the plaintiff, the representative of a sink construction company.

The contract provided that, instead of paying the plaintiff tens of millions of won in sink construction payment in cash, the defendant would pay it with one officetel unit.

Because the price of one officetel unit was far higher than the construction payment, the plaintiff had to pay a large additional amount beyond the construction payment.

The plaintiff also had to assume the defendant’s existing apartment loan debt. Even so, both sides agreed to all of these terms and then concluded the contract.

Not long afterward, however, the plaintiff suddenly took a different position. The plaintiff stated that, because the amount available for a loan had decreased following a change in government policy, it had become difficult to assume the defendant’s loan debt.

The plaintiff also asserted cancellation of the agreement, claiming that the right to claim registration of the ownership transfer of the real estate in this case had been provisionally attached due to the defendant’s fault.

Based on these circumstances, the plaintiff filed a lawsuit arguing that the payment-in-kind agreement itself had been canceled by mutual agreement and that the defendant must therefore pay the construction payment to the plaintiff as originally agreed.

What Does Payment in Kind Mean?

In simple terms, it means repaying a debt with an item instead of money. However, for payment in kind to be established, the creditor’s consent is required.

Civil Act Article 466 (Payment in Kind)

When a debtor, with the consent of the creditor, makes another performance in lieu of performing the original obligation, it has the same effect as payment.

The plaintiff argued that, because the amount available for a loan had decreased due to the changed government policy, it was difficult to assume the defendant’s loan debt.

The Seoul civil attorney, however, directly refuted this. The difference between the loan amount that had previously been available and the changed available loan amount was not very large.

It was therefore the Seoul civil attorney’s view that, had the plaintiff only had the will to do so, assumption of the loan debt would have been more than possible.

One of the plaintiff’s arguments was that the right to claim registration of the ownership transfer of the real estate had been provisionally attached due to the defendant’s fault.

The Seoul civil attorney, however, emphasized that this argument was also untrue.

The attorney emphasized that, rather, three months had passed because the plaintiff had not assumed the loan debt, and the provisional attachment of the right to claim registration of the ownership transfer was established only after that.

Because the plaintiff did not perform the payment-in-kind agreement, the defendant also suffered additional harm.

The defendant had to pay interest each month on a loan amounting to hundreds of millions of won, and the Seoul civil attorney actively defended the client based on these facts.

When repayment of a debt based on money is difficult, so-called ‘payment in kind,’ in which the debt is settled with another item that holds property value, has been increasing.

Because payment in kind is also a form of contract, legal assistance is needed when the agreement is concluded.

If you are placed at risk of having a payment-in-kind agreement canceled without your knowledge, you may visit Daeryun Law Firm, which has Seoul civil attorneys.