You run a business. Find a business partner and sign a contract. You make multiple transactions with your business partner and build trust.
One day, your business partner asks for a huge order. You hesitate for a while, but start producing at your own expense soon. You prepare shipping after production is complete, however, your partner suddenly refuses to buy the products due to its financial problem. You lost contact with your partner and seek for remedies for compensation.
One of the most frequently asked questions during consulting is, “Can I Get My Lost Revenue Recovered ?”. Right. Most people seek for “full recovery” from debtor. They want to recover: Damages arising from failure to sell, store product, or in worst case dispose of products, Revenue from other buyers you could have expected if you had not done the trade with your partner” When it comes to “Lost Revenue Claim”, you should remember below before you decide the range of damage claim.
Damage can be classified in two types, ordinary damage and special damage. Ordinary damage refers to damages considered to occur in ordinary course of business in light of general trading conventions or empirical rules of society. Special damage, on the other hand, refers to damages from spacial circumstances.
Pursuant to Korean Civil Act Article 393, the range of compensation for damages is limited to ordinary damages. As for special damages, you can only claim it only when debtor had foreseen or could have foreseen such special circumstances from which special damages can occur.
Therefore, the strategy to recover “Lost Revenue” in damage case is as below:
(1) Try to include your “Lost Revenue” to ordinary damages. Try to explain and persuade the court that your damage of “Lost Revenue” is very common in your business field.
(2) As an alternative argument, emphasize that your business partner was aware of your loss of revenue. A written notice with exact numbers of your lost revenue would be a essential evidence for you.
Now, let’s get back to the first question, “Can you Get your Lost Revenue Recovered ?” The answer is, “Yes, in case the court accepts your Lost Revenue as ordinary damage, or when you have secured the evidence that your partner already knew or could have known your Lost Revenue.”
[Korean Civil Act]
Article 393 (Scope of Compensation for Damages) (1) The compensation for damages arising from the non-performance of an obligation shall be limited to ordinary damages.
(2) The obligor is responsible for reparation for damages that have arisen through special circumstances, only if he had foreseen or could have foreseen such circumstances.