2. The costs of appeal shall be borne by the Defendant.

Purport of claim and appeal

[Claim]

2. Judgment on the defendant's assertion

A. Article 14(2) and (1)2 of the former Fair Transactions in Subcontracting Act (amended by Act No. 10475, Mar. 29, 201; hereinafter “former Subcontract Act”) provides that “The obligation of the subcontractor to pay the subcontract price equivalent to the portion of the manufacture, repair, construction, or service performed by the subcontractor directly to the subcontractor by the ordering person, the prime contractor, and the subcontractor shall be deemed extinguished within the scope of the obligation to pay the subcontract price to the subcontractor upon agreement between the ordering person, the prime contractor, and the subcontractor.” If the conditions for the said three-party direct payment are met, the obligation to directly pay the subcontractor the subcontract price equivalent to the portion of the manufacture, repair, construction, or service performed by the subcontractor is extinguished, and such obligation to pay the prime contractor is extinguished within the scope of the obligation to pay the subcontractor to the ordering person (see, e.g., Supreme Court Decision 2012Da85267, Dec. 24, 2014).

On the other hand, even if there is an agreement on direct payment between the above three parties, it should be viewed as an agreement on general assignment of claims, not a direct payment agreement as stipulated in the former Subcontract Act, and this is an issue of interpreting specific intent between the parties. After the suspension of construction work due to the failure of the contractor, the contractor shall pay it directly to the subcontractor with respect to the claim for the construction cost of the part executed by the subcontractor between the subcontractor and the contractor and the third party, and the contractor raises any objection thereto.