Increasing Consumer Damages from Excessive Penalty on Contract Cancellation for Chassis Installation
-Shows the Survey Results over Consumer Damages related to Chassis Installation

It seems that an increasing number of consumers are suffering damages from chassis installation because businesses impose excessive cancellation fees or reject consumers’ requests for contract cancellation on the ground of their “unfair” contract terms.

No. of Consumer Damages related to Chassis Installation by Type of Damage (2006)

   * There was a collective damage redress case involving 129 individual cases and this was counted as a single case.

The KCA announced this result after analyzing 225 damage redress requests related to chassis installation received during 2006 and contract papers of 31 businesses. The Agency emphasized the need for standardization of contract terms & conditions and improvement of related regulations in this field.

□ Excessive Penalties Imposed on Consumers’ Contract Cancellation  

In 2006, the KCA received 225 damage redress requests related to chassis installation, 39 of which were claimed as contract-related damages. Among these 39 cases, 23 cases were caused by excessive cancellation fees, accounting for the largest proportion of 59%. Businesses’ rejection of contract cancellation was the No.2 reason behind consumer complaints, making up 23.1% with 9 cases.

When consumers get rental housing, many of them make chassis-installation contracts with businesses which installed chassis samples in the model house. However, when later consumers want to cancel the contracts knowing that they paid higher prices than normal chassis prices, businesses refuse the cancellation on the ground that they have already placed an order for materials or started the installation. In other cases, businesses seem to charge excessive amount of cancellation fees on consumers.

□ Many Contract Terms are Disadvantageous to Consumers

According to the KCA’s analysis of 31 contract papers among damage redress requests received in 2006, 22 (71.0%) out of them contained unfair conditions that rule out or limit consumers’ right to contract cancellation. Also, 21 contracts (67.7%) had a provision that forces consumers to provide excessive amount of penalty or compensation in certain cases, and 7 (22.6%) contracts had a stipulation that a legal dispute should be resolved through a designated district court. Other unfair conditions were also found in 3 cases (9.7%).

Type of Unfair Contract Terms for Consumers

 * This is the result of analyzing 31 contract papers.

Examples of Unfair Contract Terms & Conditions

Type A) The contract takes into effect as soon as the “buyer” completes the payment of the contract fee of the balcony chassis. The buyer cannot ask the return of contract fee if the buyer’s cancellation request is not made within 7 days from the date of contract or if the “provider” has already started manufacturing the product.

Type B) In case the buyer requests contract cancellation after the provider places an order for materials (6 months prior to the completion of installation), the buyer shall pay 50% of total installation fee as cancellation fee. If the installation has already started, the consumer shall pay 100% of the total installation fee as penalty.
Type C) Competent Court: When a legal dispute takes place over this contract, the district court shall be where the provider (business)’s address belongs to.

Type D) Change in Contract Amount: If raw material cost increases more than 5%, the contract amount can be adjusted reflecting the inflation rate.

□ Many Consumers Suffer “Leakage” Problems after Chassis Installation
According to KCA’s analysis of 46 damage redress requests received in 2006, 31 complaints were related to the leakage of window chassis accounting for the highest proportion of 67.4%, followed by the deformation of chassis frames, and dew condensation.

Based on the survey result, the KCA is planning to ask the relevant organizations (the Korea Fair Trade Commission and the Ministry of Construction and Transportation) to establish standardized contracts and contract terms, and to reform the current regulations on chassis installation. Also, the Agency will request chassis makers to expand the application of the quality accreditation system to their sub-contractors or constructors.

To consumers, the KCA asked to thoroughly review and compare chassis prices and qualities of different constructors before signing a contract, and to clearly state every detail of contract conditions such as product type, glass thickness & color, type of material, installation date & time on the contract paper so that businesses will take the responsibility if anything goes wrong.

July 27th, 2007 [Consumer Dispute Settlement Department I]