When and how can a contract be terminated or rescinded?

Based on 113 consultation cases · Updated October 4, 2026 · Translated from the Korean original.

A contract cannot be rescinded whenever one party wants; there must be a contractual provision or a statutory ground for rescission. As a rule, to rescind for delay in performance, you must set a reasonable period and demand performance. Rescission may also give rise to issues of restitution and damages.

Buyer and seller → Buyer → Seller → A party wants to rescind a contract → Is there a contract term or statutory ground? → no → No rescission right is shown by these rules → yes → Is the ground delay in performance? → Rescission may be available under another valid ground → After a reasonable deadline and demand, did the other party still fail to perform? → yes — Civil Act, Article 544 → Check earnest money and whether performance has begun → Before performance begins, paid earnest money may allow rescission by forfeiture or double return, unless otherwise agreed (Civil Act, Article 565) → Check any automatic-cancellation term → A missed payment deadline alone may not end the contract if the seller did not tender reciprocal performance → Check what follows rescission → Each party generally returns what they received, with interest on returned money; damages may also be claimed (Civil Act…

Key points

Unless otherwise agreed, earnest money may be treated as a cancellation deposit. Before either party begins performing the contract, the party who paid it may rescind the contract by forfeiting the earnest money, and the party who received it may rescind by returning twice that amount (Civil Act, Article 565).
If a party merely promised to pay earnest money but did not actually pay it, the right to rescind by forfeiting earnest money does not generally arise (Case 12).
As a rule, to rescind a contract for delay in performance, you must set a reasonable period and demand performance, and the other party must fail to perform within that period (Civil Act, Article 544).
Even if the contract provides for automatic rescission if the balance is not paid, the contract may not be automatically rescinded merely because the deadline has passed if the seller did not tender performance of the reciprocal obligation and place the buyer in default (Case 11).
When a contract is rescinded, each party must generally return what they received, and interest must be added to any money being returned from the date it was received (Civil Act, Article 548). A claim for damages for breach of contract may also be made separately from rescission (Civil Act, Article 551).
The mere fact that the property being sold is subject to a provisional seizure will generally not allow the contract to be rescinded. However, rescission may be possible if circumstances show that the obligation to register the transfer of ownership cannot be performed (Case 15).
To rescind a contract due to a change of circumstances, the objective circumstances underlying the contract must have changed in an unforeseeable way, and requirements such as maintaining the contract being manifestly contrary to the principle of good faith must be met (Case 13).

Frequently asked questions

Q. I have not paid the earnest money yet. Can I rescind the contract by forfeiting only the earnest money?

If you only promised to pay earnest money but did not actually pay it, as a rule you do not acquire the right to rescind the contract by forfeiting earnest money under the Civil Act. However, whether you may be required to pay the earnest money, or may rescind the earnest-money agreement or the main contract because of nonpayment, depends on the specific circumstances.

Case 12

Q. The seller says they want to back out of the contract and will pay only 10% of the sale price, not twice the earnest money. Can the contract be rescinded?

If the contract provides that the seller must pay twice the amount of the earnest money in the event of a breach, the seller cannot rescind the contract in accordance with that provision simply by offering to return only 10% of the sale price. However, the right to rescind by forfeiting earnest money may itself be restricted if either party has already begun performing the contract.

Case 4

Q. Can I rescind the contract immediately if the other party does not pay the balance?

Generally, you must set a reasonable period and demand payment of the balance, and may rescind the contract if payment is still not made within that period. However, no demand may be necessary in cases such as when the other party has already indicated that they do not intend to perform.

Case 5

Q. When is a provision stating that the contract will be automatically rescinded if the balance is not paid by the due date effective?

Even if the contract contains such a special provision, where the seller’s obligation to transfer ownership and the buyer’s obligation to pay the balance are reciprocal obligations to be performed simultaneously, it is important to determine whether the seller tendered performance and thereby placed the buyer in default. Unless there are special circumstances, the mere fact that the due date has passed does not automatically rescind the contract.

Case 11

Q. Can I rescind the contract if the property being sold is subject to a provisional seizure?

A provisional seizure does not, by itself, make it impossible to register a transfer of ownership, so that circumstance alone will generally not allow the contract to be rescinded. However, rescission may be possible if the seller is unable to lift the provisional seizure or otherwise is found unable to perform the obligation to register the transfer.

Case 15

Q. If a contract is rescinded, do I get interest on the money I paid back?

As a rule, when money is returned as restitution following rescission of a contract, interest must be added from the date the money was received. This interest falls within the scope of restitution and is distinct from damages for delay in performing the obligation to return the money.

Case 8, Case 23

Q. Can I rescind a contract due to a change of circumstances simply because its purpose can no longer be achieved?

The fact that the purpose of the contract can no longer be achieved may not, by itself, be sufficient. It is necessary to consider whether the objective circumstances underlying the contract changed in an unforeseeable way, whether the party seeking rescission is free from responsibility, and whether maintaining the contract would be manifestly contrary to the principle of good faith.

Case 13

Q. Can I rescind a gift contract to get back real estate I gave away?

A gift made without a written document may be rescindable, but if registration of the transfer of ownership of the real estate has already been completed, that part of the gift has already been performed and cannot be reversed for that reason alone. Whether the donor’s financial circumstances have changed substantially or another statutory ground for rescission applies must be considered separately.

Case 7

Relevant laws

National Land Planning and Utilization Act, Article 117(1), Article 118(1) and (6) (국토의 계획 및 이용에 관한 법률 제117조 제1항, 제118조 제1항·제6항)
Civil Act, Articles 109, 153, 393, 398(2), 400–403, 536, 538, 543(1), 544–546, 548(1) and (2), 551, 555–558, 565, and 572–574 (민법 제109조, 제153조, 제393조, 제398조 제2항, 제400조부터 제403조까지, 제536조, 제538조, 제543조 제1항, 제544조부터 제546조까지, 제548조 제1항·제2항, 제551조, 제555조부터 제558조까지, 제565조, 제572조부터 제574조까지)
Act on the Regulation of Terms and Conditions (약관의 규제에 관한 법률)
Former Rules on Housing Supply, Article 27(3) and (4) (구 주택공급에 관한 규칙 제27조 제3항·제4항)
Act on Special Cases Concerning the Expedition, etc. of Legal Proceedings, Article 3(1) (소송촉진 등에 관한 특례법 제3조 제1항)

Watch out for

Even if the contract includes an automatic-rescission or penalty provision, the effect of rescission may depend on whether the parties’ obligations are reciprocal and whether the other party tendered performance.
When demanding performance, if you demand an amount substantially greater than the actual debt and clearly state that you will refuse payment unless that amount is paid, rescission based on that demand may be ineffective.
The effect of rescission or restitution may vary depending on whether performance had already begun before the contract was rescinded and whether a third party acquired rights after rescission.
Contracts requiring permission for land transactions, gifts, presale contracts, and other agreements may be subject to different rescission requirements depending on their nature and terms. They should not be assessed solely by applying the general rules.

Source cases

This guide was compiled by AI from the following Korea Legal Aid Corporation consultation cases (in Korean).

This guide is general legal information about Korean law, not legal advice for your situation. For a specific case, consult a lawyer or the Korea Legal Aid Corporation (call 132 in Korea).