Korean Freight Carrier Liability for Damaged Shipments under Korean Law

The Supreme Court of Korea held a specialized delivery company liable for damage to a rare piece of art that was damaged when an employee of the Shipping Company opened the shipping container. The duties under the contract ceased upon delivery of the item, however, the employee of the Shipping Company, beyond the scope of the contract opened the package. The case sheds light on the need for carefully drafted clauses related to the passing of the risk of loss and the duties and responsibilities of employees of companies.

Liability in Korea of Freight Carriers
for Damage to Cargo

Facts

1. Art Dealer runs an art gallery in Seoul, Korea. Art Dealer was hired to arrange the purchase of a rare piece of art from a New York Art Consultant for around KRW 1,000,000,000.
2. New York Art Consultant arranged the deal with an artist located in Austria for shipment of the artwork from Austria to Incheon Airport in Korea.
3. The Art Dealer executed a contract with a Shipping Company to bring the work from Incheon Airport to the Art Dealer’s Gallery in Seoul Korea. The duties under the contract for the Shipping Company was completed upon delivery. The Shipping Company had no obligations, under contract, to unpackage the artwork.
4. The Art Dealer after delivery of the artwork to the gallery of the Art Dealer, requested the employee of the Shipping Company to open the shipping container containing the art.
5. Upon opening the shipping container, the employee of the Shipping Company damaged the artwork by cutting into the canvas, thus, decreasing the value of the art by around 60 to 70%.
6. The owner of the artwork sued the Shipping Company for the decreased value of the artwork and restoration costs.
7. The Supreme Court of Korea ruled that the Shipping Company is liable for the actions of the employee of the Shipping Company even though the contract notes that the duties under the contract with the Art Dealer are complete upon delivery of the Artwork to the gallery of the Art Dealer and the employee of the Shipping Company was not directed by the Shipping Company to open the package.

Supreme Court on Liability of Delivery Company on Damage to Rare Art

The Supreme Court of Korea (2024da245505) held the Shipping Company liable for damage noting, in short, that: “Article 756 of the Civil Act stipulates the requirements for establishing employer liability that ‘A person who has employed another person to engage in a certain business is liable for damages inflicted by the employee to a third party in connection with the execution of the business.’ Here, ‘in connection with the execution of business’ means that when the employee’s wrongful act is objectively seen as being the employer’s business activity, business execution act, or related thereto, it is deemed as an act in connection with the execution of business, regardless of the actor’s subjective circumstances.”

Therefore, “If an employee commits an act of harm to another person, even if the act is not the employee’s business duty itself, if it is temporally and geographically close to the employer’s business duty and is performed in the process of performing all or part of the employee’s business, or if the motive for the act of harm is related to the execution of the business, it is deemed to be related to the employer’s business execution, and employer liability is established (refer to Supreme Court Decision 2021Da219529 dated September 16, 2021, etc.).”

The Korean Supreme Court pointed out that “although the accident in question occurred during the process of unpacking, which was outside the scope of the defendant’s obligations stipulated in the transportation contract, the accident occurred immediately after the transportation work was completed at the location where the transportation work was performed, and considering that the defendant is a specialized transportation company for special cargo and that the defendant’s employees were sometimes directly responsible for unpacking depending on the contents of the transportation contract, it is reasonable to view the accident that occurred during the process of the defendant’s employees unpacking as being related to the defendant’s act of executing their duties as the employer.”

The case exemplifies the duties and responsibilities of freight forwarding, delivery, and shipping companies and agents under Korean Law. The risk of loss could have passed to the Art Dealer or Customer if the Shipping Company had a more nuanced and carefully drafted agreement.

Sean Hayes is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw, and IPG Legal is consistently ranked Top Dispute Resolution Law Firm for our litigation services.

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