Minimizing Risk in the Termination of an International Transaction Contract

The client had concluded a long-term goods-supply contract with an overseas partner company, but as the end customer repeatedly raised quality issues, the entire supply chain faced disruption. Determining that the relationship of trust had been destroyed beyond repair due to the partner company's insincere response, the client considered terminating the contract and requested advice from our firm to assess the possibility of legal disputes and to establish a response strategy.

The core issues of this case were:

• whether grounds for termination existed and could be proven; - whether the contractual procedures had been observed; - the validity of a signature without an affixed seal; and - whether the destruction of the relationship of trust would be recognized in a continuous contract.

Your Legal Team first confirmed that the validity of a contract is established regardless of whether a corporate seal or stamp is affixed.

Next, the team prepared an evidence-securing strategy so that it could objectively prove the circumstances in which, despite repeated quality problems and improvement demands, the partner company did not respond in good faith.

In addition, based on the termination clause in the contract and the "doctrine of destruction of the relationship of trust" recognized in precedent, the team organized the logic that immediate termination of the contract was possible even without a procedural demand (peremptory notice).

Finally, to prevent future disputes, the team recommended expressing the intent to terminate through written notice, in particular by content-certified mail.

Based on the advice, the client secured sufficient evidence and, through proper procedures, communicated its intent to terminate the contract, thereby minimizing unnecessary disputes with the partner company and reorganizing its supply chain in a stable manner. This case confirms that, in a continuous transaction such as an overseas supply contract, where repeated quality problems occur and the relationship of trust is damaged beyond repair, termination of the contract can be justifiably recognized. It presents a practical standard by which companies in international transactions can reduce legal risk and respond swiftly.