The government will push for a full revision of the Civil Act enacted in 1958. The aim is to reflect the realities that have changed over 67 years. The statutory interest rate will not be fixed and will change with economic conditions, and expressions of intent made under unfair interference such as "gaslighting" can be canceled.
The Ministry of Justice said on the 16th that the first task to modernize the Civil Act, the basic law for people's daily lives and economic activity, the amendment to the "contract law" provisions, was passed by the Cabinet. The Civil Act amendment will be submitted to the National Assembly, and after deliberation and resolution by the standing committee and the plenary session, followed by Cabinet approval and publication in the official gazette, it will be promulgated.
The Civil Act was enacted in 1958 and took effect on Jan. 1, 1960. It replaced the "Joseon Civil Ordinance," which applied until then and adopted the Japanese Civil Code by reference. Since then, the areas of family law and inheritance law have been revised several times, but there have been no major changes in the areas of general provisions, real rights, and obligations that govern property relations. The Ministry of Justice launched a committee in 2023 and began a comprehensive revision, and this amendment to the contract law provisions is meaningful in that it marks the beginning of the full revision of the Civil Act.
The government's amendment to the Civil Act includes allowing the statutory interest rate, which is fixed at an annual 5% for civil matters and 6% for commercial matters, to be changed by presidential decree in consideration of economic conditions such as the Bank of Korea's base rate, market rates, and inflation.
The amendment introduces the concept of gaslighting. In relationships such as between religious leaders and followers or caregivers and patients, if a person in a psychologically vulnerable state makes a declaration of intent while strongly dependent on the other party, it can be canceled. The Ministry of Justice said it introduced the legal doctrine of "undue influence," which is adopted in many countries including the United States, the United Kingdom, and the Netherlands.
It also codified case law that has recognized termination or rescission of contracts due to changed circumstances. At the same time, it introduced a right to request contract modification to reflect global standards. If modification is impossible or it is unreasonable to expect the parties to modify the contract, the contract can be terminated or rescinded.
The amendment also generally recognizes restoration to the original state as a method of damages in addition to monetary compensation. It also refined the provisions on damages for nonperformance of pecuniary obligations and on liquidated damages. Responding to criticism that the provisions on collateral liability are complex and unclear, it unified the types of defects in sales into two categories: "defects in rights" and "defects in the thing."
As the Civil Act was rendered in Korean, difficult Sino-Korean terms, awkward expressions, and grammatically incorrect sentences were revised. In Article 104, "gungbak (窮迫)" was revised to "distressed and desperate circumstances," and "rashness or inexperience" was revised to "lack of judgment or experience."
Minister Jung Sung-ho of the Ministry of Justice said, "The amendment will enhance public convenience and the credibility of the Civil Act," adding, "We will do our best to ensure the amendment passes the National Assembly, and we will continue to push ahead with revisions to modernize the Civil Act."