This article is a contribution by Attorney Jaesik Moon of Choi & Lee Law Firm. If you would like to share quality content for startups in the form of a contribution, please contact the Venture Square editor team at editor@venturesquare.net.
Perhaps one of the documents that lawyers write and review the most is an agreement. An agreement is a document that contains the terms and conditions of payment, confidentiality, etc. between the parties in a dispute or criminal damage, and the final resolution of the dispute. For example, it is written when a suspect or defendant in a criminal case agrees to pay a certain amount of money to the victim and withdraw the complaint, and when there are various disputes such as intellectual property rights infringement, non-payment, and adultery (illegal acts). In the recent issue of extortion against Son Heung-min, the confidentiality agreement written by Son Heung-min can also be considered a type of agreement (of course, if it was written through extortion, it is invalid). Today, we will look at three important points to keep in mind when writing an agreement that you may encounter at least once.
The agreement will be written in many different ways depending on the content of the dispute, the terms agreed upon, the penalty for breach of the agreement, etc., but it will mostly include the following three elements: 1. scope and content of the dispute, 2. penalty for breach of agreement, and 3. non-subpoena agreement. I will explain the points to note for these three elements in detail.
1. Specific scope and content of the dispute
Usually, the summary or introduction part of the agreement describes the scope and content of the dispute that led to the agreement. If you are not an expert, you may overlook this part, but it is a very important part. This is because the content specifies the scope of the agreement and becomes the subject of the sub-agreement explained below. For example, if you are the offender, if the dispute in question is not fully described in the agreement, it is possible that issues that are not included in the content will be raised again later, and it will be difficult to defend with the agreement.
Therefore, specifying the scope and content of the dispute is a fundamental and important point in drafting an agreement. From the perspective of the aggressor in the dispute, it is advantageous to specify the scope and content of the dispute comprehensively, while from the perspective of the victim, it is advantageous to specify the scope and content of the dispute narrowly.
2. Setting penalties (deductibles, penalty fees)
In order to bind the agreement, a penalty provision is essential in the agreement. Usually, a monetary means called a penalty or a penalty is used most of the time. The difference between a penalty and a penalty is only one letter, but their legal meanings are very different.
Liquidated damages are presumed to be the amount of damages according to Article 398 of the Civil Act. In other words, it is to predetermine the amount of damages that will occur in the event of a breach of contract or agreement. Liquidated damages are used as a means to enforce performance as a 'penalty' for the breach of obligation itself, regardless of damages.
At first glance, they seem similar. However, there is a difference in whether the court can reduce the amount of liquidated damages or penalty in cases where a lawsuit is filed due to the issue of payment of liquidated damages. In the case of liquidated damages, the court may reduce the amount appropriately at its discretion if the liquidated damages are estimated to be the amount of compensation according to Article 398, Paragraph 4 of the Civil Act. On the other hand, the court cannot reduce the amount of liquidated damages, which is the position of our Supreme Court precedent. Of course, if both the liquidated damages and penalty are excessively heavy to the point of being beyond common sense, they can be deemed invalid on the grounds that they are against public order and morals, but cases where they are deemed invalid in this way are actually very rare, and the courts refrain from making such judgments (Supreme Court 2022. 7. 21. Decision 2018da248855, 2018da248862 En banc Decision).
Therefore, when adding a penalty clause for breach of agreement, it would be advantageous for the party with the obligation to perform the agreement to set it as a penalty, and for the party concerned about the other party's breach of agreement to set it as a penalty.
3. Sub-Agreement
The agreement to refrain from filing a lawsuit is the most important part of the agreement. It literally means an agreement to refrain from filing a lawsuit. The purpose of writing an agreement is to finally resolve the disputed matter through the agreement and prevent problems from being raised in the future. If there is no agreement to refrain from filing a lawsuit, there is no reason to write an agreement.
It is usually written as a phrase similar to “No civil or criminal claims, lawsuits, or other objections will be raised.” It may seem like a simple phrase. However, if one party later files a lawsuit on a matter that has been agreed upon as not to file a lawsuit, the court will dismiss the lawsuit, deeming it unlawful on the grounds that there is no “interest in protecting rights.” In other words, without looking into the specifics, it is saying that since there is an agreement to not file a lawsuit, there is no need to protect rights through a trial.
As such, subcontract agreements are essential to an agreement, so they must be included when drafting the agreement.
The agreement is the final settlement of the dispute and may impose heavy penalties depending on its contents, so you should carefully review it before stamping it. Even though it is smaller than other contracts, we carefully consider and review the agreement several times to ensure that each word will not be interpreted differently and that there will be no potential problems in the future. We strongly recommend that you be aware of the importance of the agreement, keep in mind the precautions I have mentioned, and seek professional help if necessary.
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