A Study on the Grounds for Avoidance of a Contract under the PICC and the Cases thereof

Although the Principles of International Commercial Contracts (PICC) are not a convention having a binding force, the PICC effectively have the legal benefit of being used as directions in writing an international commercial contract, as a legal standard for settling disputes arising from international commercial contracts, as general principles of law or as a gap-filler in interpreting domestic or international laws on international commercial contracts. * Lecturer, Hankuk University of Foreign Studies, S.J.D. This article focuses on examining the legal bases for grounds for avoidance of a contract under the PICC by focusing on the interpretation of the legal standard of the provisions of Chapter 3 (Validity), Section 2 (Grounds for Avoidance) of the PICC and the cases determined thereunder. By doing this, this article may provide a clear understanding of the requirements for avoidance of a contract and enhanced ability to apply such provisions to a contract. The PICC are said to be very restrictive since they set high requirements for avoidance of a contract for mistake. And as found in some cases, tribunals apply the requirements of gross disparity and notice of avoidance strictly and it is relatively difficult to meet the requirements in the contracts between business persons. Nevertheless, case law helps to improve foreseeability concerning the application of the PICC by clarifying the meaning of the provisions of the PICC. With respect to the grounds for avoidance of a contract, case law refines certain requirements of the relevant provisions of the PICC including the standard of review on the materiality of mistake, the existence of a mistake, fraud, threat, gross disparity, a duty to inform, a (fraudulent) non-disclosure, gross negligence, and a reasonable time in a given situation. Since the PICC, particularly in the case of an arbitration, have been applied not only by the parties’ agreement to do so, but also as general principles of law or a supplementary source for the applicable domestic law, it is important to improve the understanding of the provisions of the PICC. In addition, since the content of a particular provision of the PICC is materialized by case law where tribunals apply the provision to real-life situations, special consideration should also be given to the development of case law.