Debtor's Repayment
Meaning of Repayment
- "Repayment" means an act to discharge debt obligation, repayment in terms of an Agreement for Consumer Cash Loan means that the debtor's making payment of the borrowed money back to the creditor.
Tender of Repayment
- Repayment shall be made by way of actual tender in strict accordance with the tenor of debt obligation. (Article 460 of the Civil Act)
· "Tender in strict accordance with the tenor of the debt obligation" means a tender of the borrowed money prepared for the purpose of making repayment by the debtor to the creditor.
· However, if the creditor refuses to accept any advance repayment or if any act of the creditor is required for making repayment, it shall be sufficient for the debtor to give the creditor a peremptory notice that the debtor is ready and willing to make repayment. (Article 460 of the Civil Act)
- A tender of repayment shall discharge the debtor from debt obligation for non-performance of such obligation as from the time of such tender. (Article 461 of the Civil Act)
Place of Repayment
- If the place of repayment has not been agreed by the parties, repayment shall be made at the place of current address of the creditor. However, repayment in relation to commercial transaction, the place of repayment shall be the business address of the creditor. (Article 467(2) of the Civil Act)
Bearing Expenses of Repayment
- Unless otherwise specifically agreed by the parties, the expenses of repayment shall be borne by the debtor. However, if the expense of repayment is increased by changing the address of the creditor or by his or her any other act, the amount of such increase shall be borne by the creditor. (Article 473 of the Civil Act)
· For example, expenses of repayment include bank fees for remittance and any travel expenses incurred by the debtor who had to travel from Busan to Seoul for making repayment.
Person Who Makes Repayment & Person Who Receives Repayment
Repayment Made by a Third Party
- Any third party may perform repayment of debt. However, if such repayment is not allowed by the agreement between the parties, a third party shall not make repayment. (Article 469(1) of the Civil Act)
- Any third party who has no interest in the debt obligation may not make repayment against the debtor's intention. (Article 469(2) of the Civil Act)
· A Joint Guarantor or a Mortgagee may make repayment against the debtor's intention since they have interest in the debt obligation.
Repayment to a Third Party
- A repayment made to a quasi-possessor of the claim shall be effective only if he or she was made so in good faith and without negligence. (Article 470 of the Civil Act)
※ A "quasi-possessor of the claim" means the person who appears to actually have such claim.
· For example, a person having a forged receipt (Supreme Court Decision, October 10, 1963, 63 Da 384), or a person who is specified as a child in the Family Register but actually is not entitled as a successor.
※ The quasi-possessor of the claim was made so "in good faith and without negligence" means that he or she had no knowledge of his or her right to receive repayment and that he or she was not negligent in receiving such repayment.
- A repayment made to the bearer of a receipt shall be effective even where he or she was not authorized to accept the repayment. However, this shall not be applicable if the person making repayment had or should have had knowledge of such authority. (Article 471 of the Civil Act)
※ A "Receipt" means a document which proves that repayment has been made.
- Except in the case of repayment made to a quasi-possessor of the claim and the case of repayment made to the bearer of a receipt, any repayment made to a person who had not been authorized to receive the repayment shall be effective only to the extent that the creditor has been enriched thereby. (Article 472 of the Civil Act)
· Even if repayment was made to the person who had not been authorized to receive the repayment, such repayment shall not be effective in principle.
· Nevertheless, if the person who had not been authorized to receive the repayment transfers the repayment to the creditor, such transfer shall be effective and the debt obligation shall be extinguished to the extent that the creditor has been enriched therefrom.
Repayment Before Due Date
Repayment Before Due Date
- Unless otherwise specifically agreed by the parties, the debtor may make repayment before the due date. However, if the creditor suffers loss arising out of early repayment, the debtor shall indemnify such loss. (Article 468 of the Civil Act)
- In the case where the debtor makes repayment before the due date, loss suffered by the creditor shall be the interest which would have incurred as from the date of such repayment to the due date under the Agreement for Consumer Cash Loan.
Partial Satisfaction by Partial Payment of Debt
Purpose of Partial Satisfaction
- The "Partial Satisfaction" issue arises when the debtor owes to the same creditor several obligations whose subject is of the same kind (Article 476 of the Civil Act), or when the debtor is obliged to pay expenses and/or interest other than the principal debt with regard to one or more debts. (Articles 478 and 479 of the Civil Act) In the above circumstances, a question of whether which debt obligation was discharged may arise.
- Partial Satisfaction shall be done according to the parties' agreement. However, if such agreement cannot be reached by the parties, the person who has authority shall decide which obligation was discharged, and if there has been no such decision, it shall be done in accordance with the order set out by the law.
Order to satisfy expenses, interest, and the principal debt
- The creditor and the debtor may agree in advance to the order to satisfy expenses, interest, and the principal debt if partial satisfaction of debt would be made.
· If there is an agreement between the parties, the order of satisfaction shall be done in accordance with such agreement. (Supreme Court Decision, March 24, 1987,
84 Daka 1324) Such agreement may be expressly specified in the promissory note or may be reached orally.
- In the case where the debtor pays expenses incurred and interest accrued to one or more debt obligations, and unless otherwise agreed by the parties, the order of satisfaction shall be: expenses, interest, and the principal debt. (Article 479(1) of the Civil Act)
- The detailed order of satisfying expenses, interest, and the principal debt shall be the following statutory order. (Articles 477 and 479(2) of the Civil Act)
· If some of the debt obligations are due and others are not due, it shall be satisfied for the repayment of debt obligation which is due.
· If all the debt obligations are due or all are not due, it shall be satisfied for the repayment of debt obligation, the discharge of which is more beneficial to the debtor.
※ "Benefit of Debtor" means the benefit enjoyed by the debtor if he or she chooses to make repayment against one of several debts. It will be more beneficial for the borrower if he or she makes repayment against interest-bearing debt rather than no-interest loan. Also, high-interest-rate loan rather than low-interest-rate loan, and own debt rather than Joint Debt.
· If the Benefits of Debtor are all equal, it shall be satisfied for the repayment of debt obligation which first became due or will become due.
· In the case of the order mentioned in the above, it shall be satisfied for the repayment of debt obligation in proportion to the amount of each obligation.