If you would like to avoid court expenses and headaches related to your business in Korea, please do yourself a favor and have a contract drafted by an experienced professional prior to conducting any business with a company in Korea.
We handle litigation and
arbitration matters for many clients that have either used an attorney
without adequate experience in Korea or that have foregone the use of an
attorney in favor of form contracts they find on the internet. The
matter is, often, complicated because of these, too often, poorly
drafted agreements and lack of some basic clauses that would add
protections for a non-breaching party.
Any client that
pleads that the fee to draft the agreement is too high or that they
will just download a form agreement from the internet is immediately
sent the following.
The primary reason to have a carefully tailored Korean-specific agreement drafted is the following:
1. Parties Understand Who They are Going to Bed with and What will Happen under the Covers.
We, often, see a party to a dispute jump into bed with a Korean company
before knowing what is under the covers and what will happen when they
are both under the covers. A carefully drafted and explained agreement
will allow the parties to know what are the obligations of the parties
and, also, know the remedy for not meeting these obligations. Prior to
even discussing any relationship with a party, please don't forget our
post entitled: Listen to My Mother: JVs in Asia.
example, lets say that you contract with a Korean company to provide
you with 100 widgets every 90 days. Without a clause setting out the
damages for delay, often the Korean company will sign the agreement and,
then, note that they thought this 90 days was, simply, a guideline.
The penalty clause makes the Korean party understand the seriousness of
Also, do not forget due diligence comes before
the deal - NOT after the deal is completed. Sometimes it is better to
forgo an opportunity in order to avoid unnecessary risk, expense and
headaches . Korea Due Diligence: Not So Different than China.
2. Non-Breaching Parties Have Remedies through a Korean Court or Arbitrator
Korean courts will enforce written agreements, but are skeptical to
enforce oral promises or relationships based on course of dealings. A
carefully drafted agreement will, normally, consider the major arguments
that, typically, occur in Korea and, thus, the issues that may arise in
the future will likely be addressed in the agreement. This, allows,
the potentially breaching party to reconsider breaching because of the
likely damage from the breach, while, also, providing a remedy for
breach. Thus, in all but the most rare of cases, will an agreement, in
Korea, be simply one of these three pagers pulled off the internet.
The Korean courts are ranked Second by the World Bank for the enforcement of contracts. The ranking maybe be found at: World Bank: Doing Business Ranking of Economies.
3. Liquidated Damages & Related Remedy Clauses Are Your Friends
damages clauses should be utilized in most agreements. Without an
agreement with liquidated damages clauses it is, often, difficult for
the non-breaching party to establish damages that equal the actual
damages. For a post on liquidated damages take a look at: Liquidated Damages Necessary in Most Korean NDAs and Non-Compete Agreements.
4. Korean Companies Fear Lawyers
companies that know that you have an attorney are less likely to play
footsies under the covers. When having a contract drafted make sure the
attorney is capable of, also, negotiating the agreement.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com