Contract law and Negotiations in South Korea

What should you know about South Korean business culture?

South Koreans are serious businessmen and tough negotiators. Koreans are familiar with English and if well educated, are functionally fluent in the language. However as English is not their native language, do not assume that their appearance of agreement is an indication of understanding. Koreans prefer that a familiar face make the introductions to a new business associate. They are extremely patriotic. Thus any awareness shown by foreigners of Korean culture, is rated highly.

South Koreans play with their cards close to their chest so be prepared for anything! They will always believe that they are negotiating from a position of strength (Customer is King) and try and get the maximum from the deal whilst giving away the minimum.

How important is Confucianism and Kibun in South Korean business culture?

If you wish to get familiar with the Korean culture, it’s important to know the tenets on which it’s built. Confucianism stands for virtues like honour, sincerity, duty, respect, filial piety, honour and of course, loyalty. Theoretically, Koreans believe they maintain these values even in the workplace.

Kibun, on the other hand, encapsulates another important trait of Korean culture. It means saving face, reputation, or someone’s feelings. Kibun implies refraining from open insults. But Westerners need to understand that Kibun is often a one way street. As a supplier to a Korean customer, you can lose face, repeatedly, as long as the customer saves his!

What are some South Korean negotiation tactics?

The bigger the group that you meet, the more important is your product. Remember that South Koreans will negotiate hard and wear you down, with the expectation that the weak or impatient foreigner will compromise on something to quickly close the deal. So, be prepared and follow these tactics:

Negotiation Process

  • Schedule your meeting a few weeks in advance. It should ideally be held between 10 and 12 am or 2 to 4 pm.
  • Be on time, inform if you’re late and be patient
  • Be prepared with a gift on the first meeting, but refrain from openly displaying it. Accept and present gifts with both hands.
  • Send in your company information prior to the meeting so that they have time to review it internally within their team
  • State your side of the deal slowly and clearly
  • Reiterate important points
  • Be diplomatic, don’t put yourself or anyone else down (kibun)
  • To other Asians, Koreans don’t say ‘no’ directly so pay attention to body language. Koreans believe too much in the Hollywood image of Westerners, and so will say ‘no’ to them.

What is a contract worth in South Korea?

A Korean contract marks the beginning of a business relationship that includes all the rules. A contract is not final and binding and can change as per situations. Koreans are not bothered by legal implications as they value the business relationship more. You are therefore expected to be forgiving in such matters. However, do not get hoodwinked into blindly following Korean legal activities as the ramifications always fall on the foreigner party. Make sure you understand all the clauses in the contract and make your side clear. Check it again before signing.

South Korean Arbitration and Litigation Processes

The legal system employed in South Korea is included in Constitution of the Republic of Korea and involves a thorough judicial process based on a civil law system.

Arbitration on the other hand, is a well established and recognized option to civil litigation processes, particularly for construction, property and international commercial disputes.

South Koreans are skilled and smart in the boardroom. They prefer working with people whom they know and trust easily. Hence, your relationship with a South Korean businessman can get smoother over time and with experience.

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