The owner transferred the restaurant and reopened with the same menu... Law: “It is not a violation of duty to compete.”

Opened in the same administrative district a year after transferring the store... “I need to get my rights back”
The court said, “There is no clause prohibiting competition obligations in the contract… It is difficult to regard them as being in the same commercial area.”

The court ruled that if the business transfer agreement was written in the form of a real estate lease contract and there was no separate non-competition clause, it would be difficult to apply the obligation to prohibit competition under the Commercial Act.

On the 13th of last month, the Jeonju District Court ruled that plaintiff A lost in a lawsuit seeking compensation for damages between restaurant owners A and B.

Mr. A signed a contract to take over Mr. B's restaurant in 2020. At that time, Mr. A paid approximately 70 million won to Mr. B, including the existing lease deposit and key money.

However, the following year, a problem arose when Mr. B opened a restaurant somewhere else. As the store sold similar food to the one handed over to Mr. A, the menu composition of the two stores overlapped.

Mr. A claimed that Mr. B violated the obligation not to compete. This is because at the time of the contract, there was a promise not to open a restaurant with the same menu within the same administrative district.

He also emphasized that such violations led to a decline in store sales and even led to the closure of the business, and that the premium paid during the contract process should be returned.

In response, Mr. B countered that the non-competition obligation under the Commercial Act did not apply because the store was transferred through a ‘real estate lease agreement’ rather than a ‘goodwill sale agreement’. At the same time, he claimed that the names of the two stores are clearly different and that sales would not be affected by opening in a different commercial district than Mr. A.

The court ruled in Mr. B’s favor. The court said, “The transfer agreement was written in the form of a real estate lease agreement, and the contents did not include matters related to the obligation to not compete,” and added, “There is no evidence of a promise not to open a business in the same administrative district.”

He added, “The two stores have a considerable distance to travel 10km by car or bus, and their delivery areas do not overlap. There are restaurants selling similar menus in between, so it is difficult to say that they belong to the same commercial district.”

Attorney Lee Ha-neul of Daeryun Law Firm, who represented Mr. B in this case, explained, “If you look at the transfer agreement, matters such as the transfer of business know-how, succession of business partners and employment, and the obligation to prohibit competition, etc. were not mentioned,” and explained, “This contract should be seen as meaning a key money agreement in which the new lessee pays separately to the existing lessee, not a business transfer contract under Article 41 of the Commercial Act.”
 

Reporter Kim Jong-cheol (jckim99@sportsseoul.com)

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The owner transferred the restaurant and reopened with the same menu... Law: “It is not a violation of business obligations” (Shortcut)