The Ministry of Justice is pursuing a comprehensive revision of the Civil Code, which has remained nearly unchanged for 67 years since its enactment in 1958. The proposed amendments include changing the legal interest rate from a fixed rate of '5% per annum' to a variable rate that reflects the economic situation.
On the 7th, the Ministry of Justice announced that it has prepared a revision plan for around 200 clauses related to contract law in the Civil Code, which is closely linked to people's lives, and will officially announce it until March 19. Following this announcement, the Ministry of Justice plans to submit the revised Civil Code to the National Assembly in the first half of this year after review by the Legislation Ministry, the Vice Minister, and the State Council.
Since June 2023, the Ministry of Justice has been preparing the revision plan for the Civil Code by forming a committee of external experts. While the family law section of the Civil Code has been revised several times, the provisions related to property rights and obligations have remained almost unchanged for over 60 years since its enactment, leading to criticism that it does not reflect changes in the times.
The proposed revision includes changing the legal interest rate to a variable rate instead of a fixed rate. The legal interest rate applies when the parties have not specified a separate rate. It is also used as a basis for calculating delayed damages. The current Civil Code stipulates the legal interest rate at 5% per annum, which has not changed for over 60 years.
The Ministry of Justice has prepared a revision plan to change the legal interest rate to a variable rate. It has been proposed that the legal interest rate be determined by presidential decree, taking into account the base rate set by the Bank of Korea, prevailing market rates, inflation rates, and other economic circumstances.
The proposed civil code revision also includes provisions allowing cancellation of declarations made under gaslighting. Currently, only declarations made under fraud or duress can be canceled. Additionally, it has been added that contract modifications are possible in the event of significant changes in circumstances after the contract. The current law only specifies the ability to rescind or terminate contracts.
The Ministry of Justice has also introduced a provision that states that when an agent abuses their authority for their own benefit or the benefit of a third party, the actions will be deemed ineffective. Furthermore, if there are defects in goods or rights, the proposed amendments include allowing the exercise of the right to a claim for a reduction in payment and the right to demand fulfillment (claiming the requirement must be met), regardless of the seller's fault.