South Korea: Product Liability

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This country-specific Q&A provides an overview to product liability laws and regulations that may occur in South Korea.

This Q&A is part of the global guide to product liability. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/product-liability/

  1. Please summarise the main legal bases for product liability

    The main legal bases for product liability are the Product Liability Act, and tort and contract liability under the Civil Act.

    • Liability without fault under the Product Liability Act;
    • Torts (Civil Act, Article 750); and
    • Contract liability – seller’s liability for warranty against defect (Civil Act, Articles 580 and 581) and breach of contract (Civil Act, Article 390).
  2. What are the main elements which a claimant must prove to succeed in a strict liability type claim for damage caused by a defective product?

    (1) Liability without fault

    Under the principle of liability without fault, it is not necessary to prove the intention or negligence of the responsible person.

    (2) Defects in products

    A defect in a product means that it ‘lacks the safety normally expected’. A product means manufactured or processed personal property, which excludes real property, raw agricultural products and services. The mere fact that the performance or quality of a product is below standard (without any safety-related damage) cannot serve as a basis for finding defect under the Product Liability Act. The Product Liability Act categorizes defects in a product as (i) manufacturing defect, (ii) design defect, or (iii) labelling defect, and additionally provides the general rule that the Act applies in the case of lack of safety commonly expected of a product. Therefore, even if a product is not defective under the above three defect categories, if it lacks safety commonly expected of such product, then such product may nevertheless be deemed defective and be subject to the Act.

    (3) Damage to life, body or property

    The damage recognized by the Product Liability Act consists of damage to the life, body or other property of a person caused by a defect of a product. The Product Liability Act explicitly stipulates that “damages inflicted only to the relevant product” is excluded from compensation under the Product Liability Act. And a Supreme Court precedent explains that “damage inflicted only to a product”, which is excluded from the damage recognized by the Product Liability Act, is considered to include not only the property damage caused to the product itself but also any business loss caused by the defect in the product.

    (4) Causal relationship

    Courts have been recognizing that it is practically impossible for the person claiming liability (the injured person) to prove the manufacturer's manufacturing and design defects and to prove the causal relationship between the defect and the damage, especially in cases where the product is produced by high technology. And in this regard, court precedents have alleviated the burden of proof for causation by presuming product liability if the injured person can prove (i) that the damage occurred in the exclusive domain of the manufacturer and (ii) that the damage does not normally occur without a person’s fault.

    Reflecting this trend in court precedents, the Product Liability Act, was amended in 2017 to establish the elements for presuming product liability. According to this amendment, if the injured person proves the following facts, it is presumed that the product had a defect at the time the product was supplied and that damage to the person was caused because of the defect:

    (i) that the damage was caused to the injured person while the product was being used normally;

    (ii) that the damage referred to in (i) was attributable to a cause practically controllable by the manufacturer; and

    (iii) that the damage referred to in (i) would not ordinarily be caused if it were not for the relevant defect of the product.

    This amendment is interpreted as a more relaxed burden of proof, stipulating that the law only requires proof that the damage occurred in a practically controllable situation, rather than requiring that the damage occurred in the exclusive domain of the manufacturer. However, because courts also did not require complete exclusiveness in the prior court precedents, the progress of the case law applying the amendment should be watched to see if the amendment actually results in a difference in the burden of proof of the injured person.

  3. With whom does liability sit? If there is more than one entity liable, is liability joint and several?

    (1) Primary liability: Manufacturer and Importer

    (i) Manufacturers

    The manufacturer of the finished product as well as manufacturers of raw materials or parts of the finished product

    (ii) Importer

    (iii) Manufacturer by label

    Refers to a supplier who, although not the actual manufacturer or importer, indicates to the consumer that it is the manufacturer or importer using the name, trademark, trade name or other identifiable symbol of the supplier on the label attached to the product. This includes (i) not only the case where the supplier intends to label itself as a manufacturer or importer, (ii) but also the case where, regardless of the intent of the supplier, the label is misleading the consumer to believe that the supplier is the manufacturer or importer.

    (2) Supplementary liability: Supplier

    Where the manufacturer of a product cannot be identified, a person who supplies the product by means of sale, lease, or other form of transaction for profit is liable. Therefore, if an injured person who has not been informed of the manufacturer within a reasonable period of time at the request of a legal representative, claims compensation for damages against a supplier, that supplier is liable for product liability, irrespective of whether or not it is responsible for the failure to notify the injured person of the identity of the manufacturer. In order to avoid such liability, it is important for suppliers to keep information about the manufacturer and its own supplier.

    (3) Joint liability

    Where two people or more are liable for the same damage, they will be jointly liable for the damages (Product Liability Act, Article 5). Therefore, each responsible entity will bear the liability for the entire damages, regardless of each party’s respective liability ratio. Such jointly liable parties only have right to claim indemnification from the other party or parties, as applicable.

  4. Are any defences available? If so, please summarise them.

    Where a person who is responsible for product liability proves any of the following facts, he/she will be exempted from any liability for damages. However, even if an exemption under (2) through (4) below is applicable, the manufacturer/supplier cannot claim the defence if he/she knew, or should have known, of the defect after supplying the product but nevertheless failed to take appropriate measures to prevent the occurrence of damages caused by the defect .

    (1) That the manufacturer did not supply the product

    The manufacturer may be exempted from liability under the Product Liability Act if it proves that the product has been distributed unintentionally. Whether or not the manufacturer is at fault does not affect the grounds for the exemption. However, if the manufacturer is at fault for such unintentional distribution, and damage has occurred as a result of such unintentional distribution, then the manufacturer may be liable for damages under general liability laws (see 7. below).

    (2) That the existence of the defect could not be identified by the state of scientific or technical knowledge at the time when the manufacturer supplied the product

    (3) That the defect is attributable to the manufacturer’s compliance with the applicable standard prescribed by law effective at the time when he/she supplied the product

    (4) In the case of the manufacturer of raw materials or components, that the defect is attributable to the design or manufacturing instructions provided by the manufacturer of the product made of the relevant raw materials or components.

  5. What is the limitation period for bringing a claim?

    A person cannot bring a claim in the case of any of the following.

    (1) Limitation period

    The right of claim for damages under the Product Liability Act is extinguished if the injured person does not claim his/her rights within three years from the date on which the injured person becomes aware of (i) the damage and (ii) the identity of the person responsible for the product liability.

    (2) Exclusion period

    Claims under the Product Liability Act must be brought within 10 years from the date the manufacturer supplied the defective product. However, with respect to damage to health caused by substance accumulation in the body over time, or any other damage where symptoms appear after the lapse of a certain latent period, the above 10-year period will commence on the date on which the damage actually occurs.

  6. To what extent can liability be excluded (if at all)?

    In principle, any exclusion or limitation of liability under the Product Liability Act is null and void. However, in the event that a person who receives a product for use in his or her business has agreed to a special provision to exclude or limit liability for damages under the Product Liability Act with respect to damages incurred to his or her business property, the supplier who provided the subject product to the person may be excluded or limited from liability by contract under the Product Liability Act.

    In addition, if there is an increase in damages due to the claimant's negligence, the defendant can claim contributory negligence.

  7. What are the main elements which a claimant must prove to succeed in a non-contractual (eg tort) claim for damage caused by a defective product?

    Article 750 of the Civil Act stipulates general liability in a non-contractual claim for damages. Such liability does not presume a contractual relationship between the claimant and the defendant, so a claimant may claim liability against any person who may be viewed to have contributed to the defect of the product that caused the damage. In order to succeed in a non-contractual claim for damages caused by a defective product, the claimant must prove (i) the intent or negligence of the the defendant; (ii) the illegality of the defendant’s conduct; (iii) the occurrence of the damage; and (iv) the casual relationship between the defendant’s conduct and the damage.

  8. What types of damage/loss can be compensated and what is the measure of damages? Are punitive damages available?

    Damages that can be compensated include (i) expectation damages and (ii) special damages only to the extent that they were known or could have been known by the party who engaged in the illegal conduct. Further, a person who has caused the death of another person can be liable for economic and consolatory damages to the lineal ascendants, lineal descendants and the spouse.

    The amended Product Liability Act enacted on April 19, 2018, includes a punitive damages provision. The Act provides that (i) if the manufacturer is aware of the defect in the product but fails to take necessary measures to correct the defect and (ii) serious damage occurs to the consumer’s life or body as a result thereof, the manufacturer can be liable for punitive damages of up to three times the amount of damages incurred by the injured person (i.e., treble damages). The exact amount of damages to be awarded to the claimant is determined by considering a number of factors such as the degree of intention/fault, degree of damage, economic benefit, the degree of criminal punishment or administrative disposition, and the duration and volume of the supply.

  9. How are multiple tortfeasors dealt with? Is liability joint and several? Can contribution proceedings be brought?

    If it is objectively recognized that the torts of multiple tortfeasors are a common cause of the damage, joint liability may be established. Based on court precedents, “joint” liability has been understood to refer to “joint and several” liability because the scope of liability for damages caused by multiple tortfeasors is determined by evaluating the actions of all tortfeasors in relation to the injured person as a whole, and the tortfeasors cannot put forward a defense in regard to only their respective contribution to the damage, and each tortfeasor is liable for the entire damage.

  10. Are any defences available? If so, please summarise them.

    There are no separate defense (i.e. exemption) provisions in the Civil Act for tort liability.

  11. What is the limitation period for bringing a claim?

    Under Article 766 of the Civil Act, a claim for tort damages resulting from an unlawful act must be brought either (i) within three years commencing from the date on which the injured party becomes aware of both the damage and the identity of the person who caused the damage, or (ii) within ten years from when the unlawful act was committed, which ever period expires earlier.

  12. To what extent can liability be excluded (if at all)?

    In the case of a tort incidental to a transaction between two or more parties, an agreement limiting or excluding liability among the parties to the transaction may be applicable to tort liability in limited scope (for example, tort damages caused by by negligence may be limited, but tort damages caused by intent or gross negligence cannot be limited)

    Even if there is no prior agreement, it is possible to claim contributory negligence if the damage has increased due to the negligence of the claimant in subsequent dispute procedures.

  13. Does the law imply any terms into B2B or B2C contracts which could impose liability in a situation where a product has caused damage? If so, please summarise.

    (1) Implied warranty

    If there is an effective sale and purchase agreement between the parties, warranty liability may be found regardless of whether the seller is at fault if (i) there was already a defect in the product at the time of purchase, and (ii) the purchaser entered into the transaction in good faith and there was no fault on part of the purchaser in regard to the defect at the time of the purchase (Civil Act, Articles 580 and 581).

    (2) Liability for breach of contract

    If (i) a party fails to perform its contractual obligations and (ii) the failure to perform is attributable to the fault of that party, liability for breach of contract can be established (Civil Act, Article 390). Delivering a defective product can be viewed as incomplete performance of the seller’s contractual obligations. Court precedents clearly state that warranty liability and liability for breach of contract are two separate concepts that are different from each other in terms of their elements and effects, and in the case of special (extended) damages, damages can only be claimed as liability for breach of contract.

  14. What types of damage/loss can be compensated and what is the measure of damages?

    In principle, there is no statutory provision stating that there is a difference in the scope of damages for breach of contract and warranty liability, but many view that damage compensation based on breach of contract includes (i) expectation damages and (ii) special damages only to the extent that they were known or could have been known by the party responsible for the defective product, and the damage compensation based on warranty liability is limited to exchange value of the product and that no extended damages are recognized as warranty liability operates under the principle of strict liability.

    In practice, it is common to bring a claim for both types of damages (i.e., damages for breach of warranty and damages for breach of contract). If a defect of the product is recognized, default on part of the seller/manufacturer is usually recognized as well, so the above discussion on the scope of damages is not particularly meaningful.

  15. To what extent can liability be excluded (if at all)?

    The contracting parties may agree, in advance, to limit or exclude contract liability by stipulating as such in the actual contract. However, exclusion/limitation of liability provisions may not be enforceable if the seller was aware of the product defect but nevertheless failed to disclose such defect at the time of contract execution.

    If the contract does not specify a warranty period for defective products, please note that under the Civil Act the purchaser must exercise its right to bring a warranty claim against the seller within six months from the date on which the purchaser became aware of the fact that he/she suffered damages as a result of the defective product. In cases of a sale between merchants, the Commercial Act stipulates that the buyer shall, upon receipt of the subject matter, inspect it without delay, and immediately give a notice thereof to the seller if any defect is found therein; otherwise, buyer has no right claim warranty liability ( i.e.to rescind the contract, to demand price cuts or to claim damages thereby).The same shall apply in cases where, within six months, the buyer discovers in the subject matter of the sale a defect which was not immediately discoverable. However buyers' such duties to inspect subject matters and to notify defects rule shall not apply to a seller acting in bad faith.

    Separately, claims for warranty liability and liability for breach of contract are generally subject to a statute of limitation of 10 years, however for the claim arising out of a commercial activity the period of statute of limitation is shorten to 5 years.

  16. Are there any recent key court judgements which have had a significant impact on the approach to product liability?

    The gravity of the accidents caused by humidifier disinfectants led to the amendment of Product Liability Act and enactment thereof on April 19, 2018. Under the revised law, there is a view that the burden of proof for the injured persons is alleviated. At the moment, however, we have not yet had any court cases showing whether the burden has actually been alleviated under the amendment.

    It is also noteworthy that the amended Product Liability Act newly introduced a punitive damage system. Punitive damages apply only if (i) the manufacturer was aware of the defects in the product and failed to take necessary measures to correct the defect; and (ii) as a result, serious damage to life or property resulted therefrom.

    An eye should be kept on court precedents to determine courts’ view on the degree of intention of the manufacturer and the degree of measures taken, as well as the criteria for serious damage.

  17. What are the initial litigation related steps you should take if you are facing a product liability claim or threatened claim?

    The amended Product Liability Act enacted on April 19, 2018, includes a punitive damages provision. In light of the change in the product liability Act, an entity that is facing a product liability claim or threatened claim should immediately take necessary measures to correct the defect and mitigate serious damage.

  18. Are the courts adept at handling complex product liability claims? Are cases heard by a judge or jury?

    The most disputed issues in product liability cases are the demonstration of causal relationship between the defect and damage and proving defect in technologically intensive products. Korean courts are experienced in handling various product liability cases across mutliple industry sectors. Cases are heard by a judge, since Korean courts have not adopted the jury system for civil litigation.

  19. Is it possible to bring a product liability related group action? If so, please summarise the types of procedure(s) available

    Class action is not currently available under the Product Liability Act. However, as the argument for adopting a class action system for product liability cases is growing stronger, the possibility of future introduction of class action system for product liability cases cannot be ruled out.

  20. How are cases typically funded? Can lawyers charge success fees? Is third party funding permissible?

    In most lawsuits, the claimants bear the cost of their lawsuits. Lawyers can charge success fees. As such, lawyers tend to take on civil suits by charging a small retainer fee and a large success (i.e., contingency) fee. If a case has multiple claimants, some lawyers recruit as many claimants as they can and these claimants then fund their case by sharing the legal costs amongst themselves. Third party funding is not used in Korea because class action lawsuits are not yet available for product liability litigation in Korea.

  21. How common are product liability claims and what factors influence their frequency?

    In the event of an accident caused by a defect in a product, it is common for parties to engage in civil litigation. Product liability claims are not actively pursued in Korea due to the lack of class action system and the resulting high burden placed on individuals filing civil lawsuits.

  22. What are the likely future developments in product liability law and practice? To what extent is the suitability of the law being challenged by advances in technology?

    In recent years, there were several cases that received national attention which highlighted the difficulty of proving a causal relationship between a defect in a product and the damages suffered by an injured consumer. As many claimants were denied compensation as a result of such difficulty, there was a push for amending the relevant laws to alleviate this burden of proof. As a result, the Product Liability Act was amended and there has been more public discussion regarding additional amendments to the Product Liability Act including the introduction of class action in product liability litigation cases. It will be interesting to see if any further legislative developments take place to this effect.