Pre-Construction Home Contract Rescinded, KRW 480 Million Recovered in Full
Case Overview
- Client Information
- Individual / Plaintiff
- Case Details
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The client entered into a purchase agreement for a detached home that was to be newly constructed in Korea. Under the agreement, the client paid a total of KRW 480 million as the deposit and the first two interim payments.
At the time of signing, the developer represented that the property would be ready for occupancy within approximately one year to one year and three months. However, even after approximately five years and six months, the foundation work had not been completed.
The developer later demanded additional construction costs that were not included in the original agreement and indicated that construction could not continue unless those additional amounts were paid.
The client sought advice from DECENT Law Firm regarding whether they were required to continue waiting for the delayed project and whether the contract could be rescinded so that the amounts already paid could be recovered.
Decent's Strategy
🔹Maturity of the Developer’s Completion Obligation
Even where a contract does not specify an exact completion date, a developer cannot delay construction indefinitely.
DECENT argued that the completion obligation had become due because the period reasonably expected for construction had clearly passed, taking into account the actual progress of the project, the ordinary construction period, and the occupancy timeline originally represented to the client.
🔹Refusal to Perform the Original Agreement
The developer demanded additional payments that were not provided for in the agreement and made continued construction conditional upon payment of those amounts.
DECENT assessed that this conduct could constitute a clear refusal to perform the developer’s obligations under the original contract.
DECENT then proceeded with the following steps:
▪️ Review of Contractual Performance
Reviewed the purchase agreement and payment records to establish that the client had fully performed the payment obligations due at that stage.
▪️ Collection of Supporting Evidence
Secured advertising and promotional materials showing the completion and occupancy timeline presented by the developer.
▪️ Formal Demand and Notice of Rescission
Sent a formal legal notice requiring the developer to resume construction and provide a specific completion schedule within a stated period. The notice also made clear that the agreement would be rescinded if no adequate action was taken.
▪️ Filing of the Lawsuit
When the developer failed to respond or take corrective action, DECENT filed a lawsuit seeking the return of the KRW 480 million already paid, together with applicable interest.
Results & Significance
The court ordered the developer to return the full KRW 480 million paid by the client, together with interest. The developer was also ordered to bear the litigation costs, and the judgment was declared provisionally enforceable.
This case demonstrates that a buyer may be able to rescind a pre-construction property agreement when construction has been delayed far beyond the period reasonably expected and the developer seeks additional payments outside the original contract.
For foreign nationals purchasing property in Korea, it is particularly important to preserve the signed agreement, payment records, advertisements, construction updates, and communications with the developer. These materials may become essential evidence in a contract rescission and refund claim.
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