Advisory Case on the Review of the Scope of Damages Arising from a Service Outage

1. The Client's Situation

While the client was being supplied with an online service that provided a function for storing handwriting data, a temporary service interruption occurred due to a cause attributable to the service provider, resulting in a problem in which handwriting data was not saved. The contract contained a damages clause providing for the return of the full supply value, but a legal review was needed as to whether full compensation also applied even to a temporary interruption, and as to the possible scope of a refund or additional compensation.

Your Legal Team first reviewed the concepts of ordinary damages and special damages under the Civil Act, along with the relevant precedents, and explained that, because it is difficult to assess the value of the data, it would not be easy to have direct damages recognized. We determined that the liquidated damages under the contract (the full supply amount) presupposed a situation of contract termination and were therefore excessive for a short-term interruption. After reviewing industry practice and the relevant statutes, we presented the conclusion that a partial refund of the usage fee proportional to the period of service interruption was reasonable, and, taking into account the elements of damage to credit and image, recommended a plan to negotiate with a cap of KRW 1 million as the usage fee for the handwriting data.

Based on the legal review, the client was able to avoid the excessive demand for full compensation and to proceed with negotiations within a reasonable monetary range. Through this, it prevented unnecessary disputes and was able to receive substantive compensation for its loss while maintaining its relationship with the client company.