I. Current situation of termination of cooperation contracts

Termination of cooperation contracts commonly occurs when one or more parties no longer wish to maintain the agreement, when the objectives of the cooperation have been achieved, or due to legal factors (such as decisions issued by competent authorities). Such situations may arise in various sectors, including business, investment, or civil activities.

II. Legal regulations on termination of cooperation contracts

1. What constitutes termination of a cooperation contract

Pursuant to Article 512 of the Civil Code 2015, a cooperation contract is deemed terminated when it no longer has legal effect, which means that the rights and obligations of the parties are also terminated.

2. Cases of termination of cooperation contracts

The Civil Code 2015 specifies five specific cases, as follows:

  • By agreement of the parties: The parties have the right to agree to cease cooperation when it is no longer appropriate.
  • Expiration of the contract term: Upon the expiry of the cooperation period as stipulated in the contract.
  • Achievement of the cooperation purpose: When the cooperation objectives have been fulfilled without continuing the contract.
  • Decision of a competent state authority: In cases involving violations of law or public interests.
  • Other cases as prescribed by law: For example, according to specialized laws such as the Law on Enterprise or the Law on Investment.

3. Legal consequences of termination of the cooperation contract

  • Debts arising from the contract must be settled using common property.
  • If the common property is insufficient, members must use their separate property to settle the debts (Article 509 of the Civil Code 2015).
  • Any remaining property after debt settlement shall be distributed in accordance with the capital contribution ratio or as otherwise agreed.

III. Questions regarding termination of cooperation contracts

1. Is it permissible to impose contractual sanctions upon termination of the cooperation contract?

Pursuant to Article 418 of the Civil Code 2015, the parties may agree on contractual sanctions. However, such sanctions must be expressly stipulated in the contract.

In addition, in certain cases where the contract is terminated due to force majeure or due to both parties’ faults, contractual sanctions may not be applied. Therefore, before requesting the imposition of sanctions, it is necessary to carefully review the contractual provisions and relevant legal regulations.

2. May compensation obligations continue to be claimed after termination of the cooperation contract?

Pursuant to Article 360 of the Civil Code 2015, if a breach of obligation causes damage, the injured party may claim compensation even after the contract has been terminated.

Compensation liability includes actual damages and benefits that the injured party should have been entitled to enjoy. To claim compensation, the injured party must prove that the damage resulted from the other party’s breach, including evidence of financial losses, incurred expenses, or lost business opportunities.

However, if the contract contains provisions on limitation of liability or exemption from liability in certain circumstances, the claim for compensation may be restricted. Accordingly, it is necessary to carefully review the contract to ensure the protection of lawful rights and interests when claiming compensation after contract termination.

3. Notes when terminating the cooperation contract

When terminating the cooperation contract, in order to avoid disputes and ensure transparency, it is necessary to note the following matters:

Compliance with proper legal procedures

  • The parties must comply with Article 512 of the Civil Code 2015 and the terms agreed upon in the contract. The termination should be set up in writing and confirmed by all members to avoid subsequent legal risks.

Settlement of debts and handling of common property

  • It is necessary to inventory common property and settle all debts arising from the contract. If the common property is insufficient, members must take liability with their separate property in proportion to their capital contributions, as stipulated in Article 509 of the Civil Code 2015.

Review of outstanding rights and obligations

  • It is requested to ensure that obligations such as compensation for damages or contractual sanctions (if agreed) continue to be fulfilled even after the contract has been terminated.

Negotiation and consensus among members

  • Termination of the contract should be based on the consensus of all cooperating members. In the event of disputes, negotiation and mediation should be prioritized before initiating proceedings before a court or competent authority.

IV. Legal consulting services relating to termination of cooperation contracts

The above constitutes all detailed information provided by NPLaw to support our clients regarding the termination of cooperation contracts. Should you have any further inquiries relating to the above matters or other legal issues, please contact NPLaw for direct consultation and guidance from our professional team.