South Korea’s Civil Code Revision: Key Changes and Implications

South Korea’s Civil Code Revision: Key Changes and Implications

The South Korean government has introduced a major revision to the Civil Code, marking a significant legal modernization. 

This reform aims to enhance clarity, align with global standards, and improve legal accessibility for both citizens and foreign residents.

By addressing legal ambiguities and incorporating judicial precedents into statutory law, this revision is expected to enhance predictability in legal disputes.

Key Reforms in the Civil Code Revision

One of the most notable changes is the improvement of the breach of obligation system. 

Previously, the Civil Code only had provisions on non-performance and delay but lacked explicit rules on partial performance. 

The revised law clarifies this by defining breach as “when performance has not been completed” rather than “when performance becomes impossible.”

Additionally, the scope of remedies such as restitution and periodic compensation has been expanded to offer more legal protection.

Introduction of Variable Statutory Interest Rate

Under the current Civil Code, the statutory interest rate is fixed at 5% per annum, which fails to reflect economic fluctuations. 

The revised law introduces a variable statutory interest rate system that adjusts based on the Bank of Korea’s benchmark rate and other economic indicators. 

This change ensures that statutory interest remains fair and relevant to prevailing market conditions.

Recognition of Undue Psychological Influence

Previously, only errors, fraud, and duress were grounds for invalidating a declaration of intent. 

The revision introduces a new provision allowing individuals to cancel contracts if they have been coerced through undue psychological influence, such as “gaslighting.”

This change reflects modern understandings of psychological coercion and ensures greater protection for vulnerable individuals in contractual relationships.

Modification or Termination of Contracts Due to Changed Circumstances

Although case law has recognized the possibility of contract termination in cases of significant changes in circumstances, 

there has been no explicit provision allowing contract modification. 

The new revision enables parties to request contract modifications if the fundamental basis of the contract has changed. 

If modification is not feasible, contract termination remains an option, thus providing more flexibility in commercial and civil transactions.

Codification of Established Legal Principles

The new Civil Code includes explicit provisions on the abuse of agency authority, specifying that an agent’s actions will not bind the principal if the third party was aware of the abuse. 

It also introduces a claim for unjust enrichment, allowing creditors to demand benefits obtained by the debtor in cases where performance has become impossible. 

These changes improve legal predictability and efficiency in resolving disputes.

Revised Liability for Defects

The previous framework for liability concerning defective goods and services was highly complex. 

The revision simplifies the classification of defects into two categories: “defects in rights” and “defects in objects,” reducing the previous eight categories. 

Legal remedies have also been updated, including an expanded right to request price reductions and a newly introduced right to request supplementary performance. 

Additionally, the limitation period for claims has been extended from six months to one year from the date of defect discovery.

Improved Legal Accessibility Through Simplified Language

In an effort to enhance accessibility, the revision simplifies difficult legal terminology and eliminates outdated expressions. 

By using clearer language, the Civil Code becomes easier for both legal professionals and the general public to understand and apply. 

This change is particularly beneficial for foreign residents and businesses operating in South Korea, as it reduces the complexity of legal compliance.

Purpose of the Civil Code Revision

The primary goal of this revision is to modernize South Korea’s Civil Code and enhance its accessibility. 

Since the Civil Code’s enactment in 1958, it has struggled to keep pace with social, economic, and cultural changes. 

By incorporating judicial precedents and academic interpretations into statutory law, the revision increases legal predictability and usability.

Aligning with Global Legal Standards

Major countries such as Germany, France, Japan, and China have updated their civil codes to reflect modern legal and economic developments. 

South Korea’s revision follows this global trend, ensuring that its legal framework remains competitive and aligned with international best practices. 

This update will help improve legal transactions for foreign investors and residents who engage in business or civil activities in South Korea.

Enhancing Legal Dispute Resolution

The revision introduces clearer provisions for common legal issues such as breach of obligation, contract law, and liability for defects. 

These changes facilitate more efficient and rational dispute resolution, benefiting both legal professionals and the general public. 

By reducing legal uncertainties, the revised Civil Code helps prevent unnecessary litigation and promotes fairer outcomes.

Government’s Future Plans

The Ministry of Justice plans to submit the revised Civil Code to the National Assembly in the first half of 2025. 

This reform is the first step in a broader initiative to continuously modernize South Korea’s legal system. 

The ultimate goal is to establish a legal framework that is transparent, predictable, and easily accessible to all citizens and foreign residents.

Expected Impact of the Civil Code Revision

This landmark revision is expected to bring several key benefits:

✅ Faster and more predictable resolution of legal disputes  

✅ Flexible legal application in response to economic changes  

✅ Improved accessibility for both South Korean citizens and foreign residents  

✅ A well-structured legal system beneficial to both legal practitioners and the general public  

Conclusion

If passed, this revision will be the most significant overhaul of South Korea’s Civil Code in 67 years. 

By enhancing legal clarity, accessibility, and efficiency, it will greatly benefit individuals and businesses operating in South Korea. 

Foreign residents and investors will also find it easier to navigate the legal landscape, ensuring greater protection and predictability in their transactions.