Passing over the restaurant and opening a similar restaurant nearby...1st trial court rules ‘closure and compensation for damages’

Namyangju Support “Transfer of store property after contract, business permission… applicable to business transfer under commercial law”

The court ruled that even if a transfer contract was not signed when taking over a commercial building, if the same business was continued as before, it could be considered a business transfer under the Commercial Act.

According to the legal community on the 2nd, Mr. A took over a restaurant in 2020 from Mr. B and his wife, whom he had known. At that time, they received 55 million won in exchange for handing over all air conditioners, refrigerators, remaining food ingredients, and alcohol to Mr. A.

However, two years later, when Mr. B and his wife opened a restaurant in the same industry near Mr. A's restaurant, Mr. A and Mr. B began to have a conflict, and eventually Mr. A filed a lawsuit claiming that the couple did not keep the non-competition agreement they had signed at the time of transfer.

In response, Mr. B and his wife argued that because they entered into a key money contract in return for the facility, it did not constitute a 'transfer of business under commercial law'. Mr. A's claim that the non-competition agreement was not followed was refuted by saying, "It was never concluded."

On March 28, the 1st Civil Affairs Division of the Namyangju Branch of the Uijeongbu District Court, which heard the case, ruled in favor of some of the plaintiffs in a lawsuit banning business activities between restaurant owners Mr. A and Mr. B. The defendant was ordered to close the store, prohibited from doing business in the nearby area for 10 years after the transfer, and ordered to pay 5 million won in damages.

In the ruling, the court ruled in favor of Mr. A, saying, "It is difficult to say that a non-competition agreement was concluded because there was no agreement between the plaintiff and the defendant during the contract process on non-competition." However, "It is acknowledged that the defendants transferred the store property to the plaintiff after the contract and allowed the plaintiff to continue business activities, which is equivalent to a transfer of business under the Commercial Act."

In addition, the court ruled, "The defendants' opening of the store two years later constitutes an act of violation of the obligation to prohibit competition established by Article 41, Paragraph 1 of the Commercial Act," and "The defendants have an obligation not to engage in similar business activities near the plaintiff's restaurant."

In relation to this, lawyer Jeong Yun-chae of Daeryun Law Firm, who represented Mr. A, explained, "In the process of handing over the store, Mr. B and his wife said, 'We will no longer run the store,' and even showed Mr. A a detailed list of customers, emphasizing that it was a business that could be operated stably." He added, "Continuous damage occurred due to violation of the duty not to compete, and mental damage could be recognized."
 

Intern reporter Kim Mi-ji (unknown@kyeonggi.com)

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The owner of the restaurant transferred it over and reopened nearby... Court order to ‘close store and compensate for damages’ (link)