Dissolution of the Pre-sale Contract of Living Lodging Facilities : Focusing on Pre-sale Advertising and Induced Mistake

There are various types of residences, and the registration requirements according to the type of residence are stipulated by law in Korea. Among these residences, there are lodging facilities, and one of these lodging facilities is a living lodging facility. The living lodging facilities have the same structure as general residential buildings, but they must be registered as non-residential accommodation facilities such as hotels. The sale price of living lodging facilities is often lower than that of general residential buildings. This is because the requirements for living lodging facilities and those for general residential buildings are different according to legal provisions. If a living lodging facility can be used as a general residential building, the price of the living lodging facility will increase significantly. Because of this, it is common for sellers of buildings in units (hereinafter referred to as ‘seller’) to advertise that the living lodging facilities can be used as general residential buildings. The case law in Korea establishes the following principles regarding advertising: advertisements for sale are invitation to offer for the contract, and the contract is not concluded solely because of such simple exaggerated advertisements. However, if such advertising is false or unfairly exaggerated beyond simple exaggeration, the advertising may be illegal. It was argued in this paper that these principles should be modified in housing sales contracts: it is common to sell a building before construction begins. Therefore, only the person selling the building has any information about it. He also knows whether the advertisement for the building is accurate. If the buyer is mistaken due to such advertisement, the seller shall be responsible for such mistake. The paper emphasized that in such situations, advertising needs to be part of the contract and that buyers should be given the option to cancel the contract.