The following post considers some of the basics of contract drafting in South Korea. The following post is meant to be, only, a basic explanation of the basics of a good Korean contract based on a few observations. This post is not meant to be an exhaustive explanation of this issue, books have been written on contract drafting and we will not be drafting a book with this post.
The main purpose of drafting a contract is to avoid a dispute. This article and a great Korean-experienced lawyer with an understanding of business in Korea and your industry should assist you in avoiding a legal dispute in Korea.
Basics Considerations Before Signing a Contract in Korea
- Contract Clarity. We see all too often, Korean contracts that lend themselves to unnecessary ambiguity. In some cases, ambiguity may be a benefit to our clients doing business in Korea, but in other cases, ambiguity may lead a Korean court to balance its way out of the enforcement of a contractual obligation by the Korean counter party. Thus, keep contracts clear and consistent.
- Defining the Parties. Many Korean companies have capitalized and cash-flush subsidiaries abroad. In many cases, it is easier to enforce a contract in a non-Korean court against a Korean company. Please note, even if the choice of law and jurisdiction is a jurisdiction other than Korea, if the company named in a dispute is a Korean company, the enforcement of the foreign judgment shall require enforcement via a Korean court, since the company’s assets, likely, shall be solely in Korea. Make the signing party a party that you have the highest likelihood of enforcing a judgment against – this may not, necessarily, be the Korean HQ.
- Definitions Increase Clarity. To increase contract clarity and, often, consistency, in Korean contracts, while allowing the production of clean, clear and concise Korean contracts – definitions are, often, a key and integral aspect of the document. Never overlook any term of art, ambiguous expression or “obvious” expression or you may have an interpretation battle in a Korean court. Save money and avoid courts.
- Korean Language. Make sure your counter party fully understands the contract. Korean courts may invalidate a contract if, among other things, the counter party is considered a less than savvy party that did not fully understand the contract. Thus, in most cases we suggest that a contract is drafted in English and Korean. Normally, we advise that the English language governs the contract.
- Contract Dispute Resolution Clauses (Choice of Law/Jurisdiction). In all but the most exceptional of cases, we believe arbitration clauses are advisable – these clauses should be carefully tailored to the specific agreement. Don’t just use a boiler clause and don’t willy nilly choose a jurisdiction. The choice of law is, also, a complex issue and requires the balancing of many issues, including where the contract shall be performed, where it may be breached and if Korean law shall govern, at least, part of the relationship.
- Don’t Steal the Work of Others. All lawyers have utilized templates for, at least, some clauses. However, great lawyers know the purpose of these “template” clauses and understand the need to revise many template clauses to fit the specific need. If you do not have significant experience drafting contracts in Korea, do not try to just tweak a contract to save a little money. Trust me, litigation shall cost you much more than a professional drafting a contract for you.
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