1. Overview of the Case
In 2022, the plaintiff purchased factory land and two factory buildings from the defendant, paid the full purchase price, and completed the registration of title transfer.

The property was located on a factory site created by cutting into a forested hillside. Following the transaction, a retaining wall installed on the property and an adjacent site collapsed as a result of heavy rainfall.

Subsequent investigation revealed that the retaining wall had been improperly constructed using materials and construction waste that should not have been used in the construction process, resulting in significant deficiencies in its structural integrity and load-bearing capacity.

The plaintiff therefore filed suit seeking rescission of the sale contract and recovery of the purchase price, alleging that the contract had been entered into without knowledge of these serious defects.

At first instance, a default judgment was entered due to the defendant’s failure to respond. The defendant subsequently appealed, and One Law Partners, LLC assumed representation of the plaintiff beginning at the appellate stage.

2. Key Issue
· Whether the sale contract could be rescinded on the basis of fraudulent inducement by omission arising from the seller’s failure to disclose material defects

3. Legal Strategy
Attorneys Jong-Mun Park, Joong-Young Choi, and Han-Muk Choi of One Law Partners, LLC advanced the following arguments:

· Alternative and Multi-Layered Claims
The plaintiff asserted multiple alternative claims, including rescission based on warranty liability for defects, rescission for breach of contract, rescission based on changed circumstances, rescission for fraud, and rescission based on mistake.

This strategy was designed to preserve the claim even if one legal theory were rejected. Ultimately, the court accepted the rescission claim based on fraudulent inducement.

· Establishing the Duty to Disclose
The legal team relied on established case law recognizing that, where it is evident that a party would not have entered into a transaction had certain facts been disclosed, the principle of good faith imposes a duty to disclose those facts, and a breach of that duty may constitute fraudulent inducement by omission.

Based on this legal principle, the defendant’s silence itself was characterized as fraudulent conduct.

· Fraud Based on Failure to Disclose the Retaining Wall Defects
The plaintiff argued that the structural defects and safety risks associated with the retaining wall were material factors affecting the decision to enter into the transaction and that the defendant failed to disclose them.

The legal team emphasized that the risk of collapse existed prior to the sale, that the anticipated repair costs far exceeded those ordinarily expected in a real estate transaction, and that the purchase agreement contained no provision under which the plaintiff agreed to assume responsibility for such defects.

The plaintiff further argued that, had these defects been disclosed in advance, the plaintiff would either not have entered into the transaction at all or, at the very least, would not have agreed to the same terms. Accordingly, the defendant’s failure to disclose the defects constituted fraudulent inducement.

· Effective Use of Expert Findings
The court-appointed expert concluded that the retaining wall suffered from numerous structural deficiencies, including inadequate slope safety factors, reduced concrete strength, improper reinforcement placement, and failure to satisfy required safety standards.

These objective findings established that the property was affected by substantial defects that significantly undermined the safety and durability of the retaining wall.

4. Significance of the Case
The court granted the plaintiff’s alternative claim seeking rescission of the sale contract based on fraud.

In doing so, the court reaffirmed that a seller’s failure to disclose known structural defects and poor construction conditions at the time of contracting may constitute fraudulent inducement by omission.

The court further clarified that, even where defects may not rise to the level required for rescission under traditional warranty liability principles, rescission remains available where the seller knowingly conceals material defects from the purchaser.

Notably, while the court rejected the plaintiff’s claims based on warranty liability, breach of contract, and changed circumstances, it accepted the claim for rescission based on fraud, ultimately resulting in the recovery of the purchase price.

The decision is significant because it demonstrates that, in real estate disputes, the legal consequences of a seller’s breach of the duty to disclose can be just as important as the existence of the defect itself. It also illustrates that the doctrine of fraudulent inducement may provide an effective avenue for relief independent of the requirements applicable to rescission based on defects.

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Attorney Jong-Mun Park | jmpark@onelawpartners.com
Attorney Joong-Young Choi | jychoi@onelawpartners.com
Attorney Han-Muk Choi | hmchoi@onelawpartners.com
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Public Relations Team, One Law Partners, LLC | pr@onelawpartners.com