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Case 7: Restrictions on the ordering party's exercise of the right to arbitrarily terminate a contract
—A South Korean company sued a film and television media company over a contract dispute

Updated: December 23, 2022

This case is a typical international contract dispute. The contractor had delivered the work of foreign-related film and television special effects production as promised, but the ordering party unilaterally terminated the contract, which is contrary to the principle of good faith.

In December 2015, a South Korean company contracted with a Chinese film and television media company to produce CG special effects for the TV series The Legend of Chusen. After the signing, the Chinese company paid part of the CG special effects production fees to the South Korean company, and the South Korean company delivered the CG special effects. The TV series was broadcast on July 31, 2016. The South Korean company sued the media company, requesting it to continue to implement the contract and pay six million yuan as the balance of the special effects production fees. The Chinese company lodged a counterclaim, requesting termination of the contract and requesting the South Korean company to return the special effects production fee of 1.9416 million yuan already paid, as well as to pay the liquidated damages of 3.6 million yuan. The court held that the termination of the contract at any time is not arbitrary and absolute, and the right to terminate should be limited by the performance of the contract. Article 787 of The Civil Code of the People's Republic of China stipulates that "the ordering party may terminate the contract at any time before the contractor completes the work", which clarifies that the right to terminate the contract at any time should be exercised before the contractor completes the work. In this case, the contractor had completed the work and delivered the work results. The ordering party had made a payment of six million yuan for the special effects as agreed, and the TV series was broadcast on July 31, 2016, so the parties should abide by the principle of good faith and fully fulfill their obligations in accordance with the contract.


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