Case at a Glance
Our client, a financial institution, had extended a loan of several billion KRW to a corporate borrower and secured a continuing guarantee from the borrower's CEO at the time of the loan. When the borrower defaulted, our client brought a claim against the former CEO as guarantor for the outstanding principal and interest of approximately KRW 1.6 billion. The defendant raised three separate defences — termination of the guarantee, waiver by agreement, and breach of the duty of good faith — each presenting a distinct legal challenge. Law Firm Jinheon dismantled all three, and the court upheld the claim in full.
1. Why the Client Came to Law Firm Jinheon
Our client had entered into a loan agreement with a corporate borrower, at the time of which the borrower's CEO executed a continuing guarantee in favour of our client. The CEO subsequently resigned as director, and the company changed its representative. The borrower obtained several extensions of the repayment period but ultimately defaulted. Our client filed a claim against the former CEO as guarantor for the outstanding loan balance of approximately KRW 1.6 billion and engaged Law Firm Jinheon to handle the proceedings.
2. Law Firm Jinheon's Legal Strategy
The defendant raised three separate defences, each based on a distinct legal theory. Law Firm Jinheon addressed each in turn.
First, the termination defence. The defendant argued that, following their resignation as CEO, they had given notice of termination of the guarantee and therefore bore no further liability. Law Firm Jinheon applied the established principle of Korean guarantee law: in a continuing guarantee, termination has only prospective effect — it extinguishes the guarantor's liability for obligations arising after termination, but not for obligations that had already arisen before notice of termination was given. The loan in this case had been disbursed before the defendant's purported termination notice. The guarantee obligation on that pre-existing debt could not be extinguished by a later termination, and Law Firm Jinheon presented this argument to the court with supporting Supreme Court authority.
Second, the waiver defence. The defendant argued that, during discussions about changing the guarantor following their resignation, our client had entered into an agreement releasing the defendant from their guarantee obligations. Law Firm Jinheon invoked the principle that a waiver of rights or release of obligations — whether express or implied — must be assessed against a strict standard that takes the full content of the legal relationship into account. The communications that had taken place amounted to nothing more than procedural guidance on the documents required to change the guarantor; they fell well short of an agreement to release. Law Firm Jinheon also highlighted that it would be highly irregular for a financial institution to release a guarantor on a substantial loan without receiving adequate substitute security in return.
Third, the good faith defence. The defendant argued that our client's failure to give the defendant notice of subsequent loan extensions — after the defendant's request to change the guarantor — amounted to a representation that our client would not pursue the defendant, and that bringing the claim was therefore contrary to good faith. Law Firm Jinheon argued that the timing and method of exercising a right are, as a matter of principle, within the creditor's discretion; that failing to take additional steps after termination notice had been given could not be read as a representation of release, particularly given that the pre-termination obligation could not in any event be extinguished by the termination; and that pursuing a confirmed debt obligation does not reach the threshold at which good faith becomes a bar to recovery.
3. The Outcome — All Three Defences Rejected, Full Recovery Ordered
The court rejected all three of the defendant's defences and upheld our client's claim in its entirety. The defendant was ordered to pay the outstanding principal and interest of approximately KRW 1.618 billion, together with delay damages at the contractual rate and then at the statutory rate. All litigation costs were ordered against the defendant.
4. Why This Case Matters — And Why Choose Law Firm Jinheon
Guarantors facing enforcement frequently deploy multiple lines of defence simultaneously — not because each is necessarily strong, but because even one successful argument can reduce or defeat the claim. In this case, three separate defences were advanced, each grounded in a recognised legal theory: the prospective effect of guarantee termination, the implied waiver doctrine, and the principle of good faith. Any one of them, if accepted, could have reduced or eliminated the recovery.
Law Firm Jinheon addressed each of the three defences with the specific legal analysis it required — the scope of termination under continuing guarantee law, the strict standard for implied waivers, and the high threshold for good faith as a bar to a creditor's enforcement right. The result was a clean sweep: all three defences rejected, full amount recovered.
For financial institutions pursuing loan recovery against guarantors, the ability to anticipate, analyse, and systematically defeat each line of defence is what determines whether the full amount is recovered. That is what Law Firm Jinheon delivers.
Case at a Glance
Our client, a financial institution, had extended a loan of several billion KRW to a corporate borrower and secured a continuing guarantee from the borrower's CEO at the time of the loan. When the borrower defaulted, our client brought a claim against the former CEO as guarantor for the outstanding principal and interest of approximately KRW 1.6 billion. The defendant raised three separate defences — termination of the guarantee, waiver by agreement, and breach of the duty of good faith — each presenting a distinct legal challenge. Law Firm Jinheon dismantled all three, and the court upheld the claim in full.
1. Why the Client Came to Law Firm Jinheon
Our client had entered into a loan agreement with a corporate borrower, at the time of which the borrower's CEO executed a continuing guarantee in favour of our client. The CEO subsequently resigned as director, and the company changed its representative. The borrower obtained several extensions of the repayment period but ultimately defaulted. Our client filed a claim against the former CEO as guarantor for the outstanding loan balance of approximately KRW 1.6 billion and engaged Law Firm Jinheon to handle the proceedings.
2. Law Firm Jinheon's Legal Strategy
The defendant raised three separate defences, each based on a distinct legal theory. Law Firm Jinheon addressed each in turn.
First, the termination defence. The defendant argued that, following their resignation as CEO, they had given notice of termination of the guarantee and therefore bore no further liability. Law Firm Jinheon applied the established principle of Korean guarantee law: in a continuing guarantee, termination has only prospective effect — it extinguishes the guarantor's liability for obligations arising after termination, but not for obligations that had already arisen before notice of termination was given. The loan in this case had been disbursed before the defendant's purported termination notice. The guarantee obligation on that pre-existing debt could not be extinguished by a later termination, and Law Firm Jinheon presented this argument to the court with supporting Supreme Court authority.
Second, the waiver defence. The defendant argued that, during discussions about changing the guarantor following their resignation, our client had entered into an agreement releasing the defendant from their guarantee obligations. Law Firm Jinheon invoked the principle that a waiver of rights or release of obligations — whether express or implied — must be assessed against a strict standard that takes the full content of the legal relationship into account. The communications that had taken place amounted to nothing more than procedural guidance on the documents required to change the guarantor; they fell well short of an agreement to release. Law Firm Jinheon also highlighted that it would be highly irregular for a financial institution to release a guarantor on a substantial loan without receiving adequate substitute security in return.
Third, the good faith defence. The defendant argued that our client's failure to give the defendant notice of subsequent loan extensions — after the defendant's request to change the guarantor — amounted to a representation that our client would not pursue the defendant, and that bringing the claim was therefore contrary to good faith. Law Firm Jinheon argued that the timing and method of exercising a right are, as a matter of principle, within the creditor's discretion; that failing to take additional steps after termination notice had been given could not be read as a representation of release, particularly given that the pre-termination obligation could not in any event be extinguished by the termination; and that pursuing a confirmed debt obligation does not reach the threshold at which good faith becomes a bar to recovery.
3. The Outcome — All Three Defences Rejected, Full Recovery Ordered
The court rejected all three of the defendant's defences and upheld our client's claim in its entirety. The defendant was ordered to pay the outstanding principal and interest of approximately KRW 1.618 billion, together with delay damages at the contractual rate and then at the statutory rate. All litigation costs were ordered against the defendant.
4. Why This Case Matters — And Why Choose Law Firm Jinheon
Guarantors facing enforcement frequently deploy multiple lines of defence simultaneously — not because each is necessarily strong, but because even one successful argument can reduce or defeat the claim. In this case, three separate defences were advanced, each grounded in a recognised legal theory: the prospective effect of guarantee termination, the implied waiver doctrine, and the principle of good faith. Any one of them, if accepted, could have reduced or eliminated the recovery.
Law Firm Jinheon addressed each of the three defences with the specific legal analysis it required — the scope of termination under continuing guarantee law, the strict standard for implied waivers, and the high threshold for good faith as a bar to a creditor's enforcement right. The result was a clean sweep: all three defences rejected, full amount recovered.
For financial institutions pursuing loan recovery against guarantors, the ability to anticipate, analyse, and systematically defeat each line of defence is what determines whether the full amount is recovered. That is what Law Firm Jinheon delivers.