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When an interior renovation has to be called off, most clients assume that forfeiting the deposit ends the matter. In practice that window is shorter than people expect. Depending on when you cancel, you may also owe payment for the work already done and damages on top of it.

[Contents]

1. How long “just forfeit the deposit” actually works

2. What counts as commencing performance

3. Once work has started: Article 673

4. How the completed portion is settled

5. If the contractor claims a lien

6. If you decide to cancel, in this order

1. How long “just forfeit the deposit” actually works

Article 565 of the Korean Civil Act provides that, absent a different agreement, a deposit allows either party to rescind until one of them has commenced performance: the payer by forfeiting the deposit, the recipient by returning twice the amount.

Although the article sits in the chapter on sales, Article 567 extends the chapter to other onerous contracts, so it applies to interior work contracts as well.

The deadline is what matters. "Forfeit the deposit and walk away" holds only while neither side has begun performing. Once the contractor has started, this route closes and a different ground is needed.

If the contract contains its own penalty clause for cancellation, that clause governs. Reading the termination and penalty provisions is therefore the first step.

2. What counts as commencing performance

The most contested question is whether the contractor has commenced performance. Signing alone is generally not enough, but outwardly recognisable preparatory acts usually are.

• Completing the site survey and fixing the drawings and schedule

• Ordering materials, particularly custom-made items

• Filing for permits or notifications with the authorities

• Beginning site preparation such as demolition

If none of this has happened, the client can exit relatively cheaply by forfeiting the deposit. Speed of decision is itself a cost item.

3. Once work has started: Article 673

Once performance has begun, the client relies on Article 673: before the work is completed, the client may rescind the contract upon compensating for damages. No fault on the contractor’s side is required, but damages are the price of that freedom.

Those damages cover not only costs already incurred but also the profit the contractor would have earned had the work been completed. A change of mind is therefore not limited to the deposit.

The figure is not open-ended. Expenses saved by the cancellation, and gains made by redeploying labour and materials elsewhere, are deducted. Contesting those deductions is where most of the negotiation happens.

4. How the completed portion is settled

Rescission does not erase work already performed. Courts treat the contract as remaining effective for the completed portion and as losing effect only prospectively for the unbuilt part, so the client must settle the value of work done.

That value is not simply half the price because half the budget was spent. The assessment looks at:

• how far the work actually progressed

• whether the completed portion is usable as it stands

• whether it contains defects, and the cost of repair

Repair costs can be set off against the amount owed, but defects must be proved. Photographs, video, material records and message logs taken at the moment work stops are decisive.

5. If the contractor claims a lien

Contractors often respond to cancellation by asserting a lien over the site. Article 320, however, grants a lien only for a claim arising in relation to the thing itself, which requires a genuine connection between the claim and the property.

Unlike new construction, ordinary interior work is frequently held not to generate a claim relating to the building itself, and the lien fails. The outcome turns on the nature and scope of the work.

Where no lien exists, continued occupation lacks any legal basis, and the client may demand possession and claim damages for the period of occupation. The word "lien" should not by itself drive concessions.

6. If you decide to cancel, in this order

If cancellation is unavoidable, following this sequence before giving notice limits the loss.

1. Read the contract for termination and penalty clauses.

2. Check whether performance has begun – purchase orders, survey dates, permit filings – to see whether Article 565 is still available.

3. Record the site before giving notice; this fixes the baseline for valuation and defects.

4. Give written notice stating the ground and your intention to settle. Oral notice invites a dispute over the date itself.

5. Negotiate the settlement of the completed work and damages together, adjusting the contractor’s figure for deductions.

Cheongchul Law Firm handles interior and renovation disputes for both clients and contractors, covering timing of rescission, valuation of completed work, set-off for defects and lien challenges.

For a consultation, please call 02-6959-9936 or use our consultation request page.

This post is general legal information, not legal advice on any particular matter. Please consult an attorney regarding your specific case.