Newsletter | August 2014, Issue 3
	LITIGATION
	Korean Supreme Court decision on new car replacement claims
	In a case of first impression, the Korean Supreme Court recently ruled on how and when consumers can exchange a defective car for a new replacement, setting a high threshold for such claims in Korea. The plaintiff in this case had sued to claim a new replacement car due to a malfunctioning dashboard, rejecting repairs (which would have presumably fixed the alleged defect at no cost since the car was still under the manufacturer's warranty).  The legal claim itself was based on a buyer's right to a new replacement for a defective product under the Korean commercial laws.  The plaintiff also sued both the dealer and importer on the theory that the importer had assumed the seller's liability against defects by providing buyers with a manufacturer's warranty. The lower Seoul High Court held in the plaintiff's favor, finding that car dealers were indeed subject to the legal obligation to provide a replacement vehicle, absent any special circumstances (e.g. if the claim was based on a quite minor defect, although some may argue that this applied to the present suit also.).  The court also found the importer liable based on the manufacturer’s warranty theory advanced by the plaintiff. The Supreme Court reversed this decision, finding that the instant replacement claim was not supported by the facts ― (i) severity of the defect, (ii) ease of repair, (iii) curability of the defect, and (iv) the seller’s burden in providing a replacement car.  The Court also ruled that a buyer was not entitled to a new replacement product if this would significantly burden the seller compared to other remedies, particularly if the defect could be fully cured by straightforward repairs. The Court also rejected the importer’s liability, finding that the manufacturer’s warranty was not drafted or offered with the intent to hold the importer liable for the seller’s obligations, and that the alleged defect did not fall within the scope of the warranty in any case (i.e. "a serious defect relating to the operation and safety of an automobile"). Our firm represented the defendants in this case, focusing our fact finding on (i) why this case did not involve "a serious defect relating to the operation and safety of an automobile," (ii) the curable nature of the defect, and (iii) the relatively minor repair time and costs compared to the seller's burden in providing a new replacement. We believe that this decision will serve as important precedent for product replacement claims in Korea, for cars certainly but also for other goods in general, in addition to setting a boundary for importer liability arising from manufacturer warranties.  We also believe that our experience in persuading the Supreme Court through a detailed technical analysis of the alleged defect will provide a useful roadmap in defending against similar future claims.
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