[2] The case holding that the judgment below which did not reduce the compensation for delay at all is erroneous in the misapprehension of legal principles as to the reduction of the compensation for delay, in a case where Company A asserted that the payment of the compensation for delay should be considerably reduced since the delay in the supply of the goods due to the same site dust was caused by the delay in the supply of the parts due to the same site dust, after concluding the contract for the supply of the parts related to Company B with Company C, which was supplied by Company C, and manufactured and supplied the electric vehicle from Company B, which was a Japanese company C, and that the payment of the compensation for delay should be considerably reduced since the delay in the supply was caused by the delay in the supply of the parts due to the same site dust.

[3] Whether the provision of the former Act on Contracts to Which the State Is a Party prohibits or restricts the State, etc. from imposing special conditions, etc. effective only between the contracting parties on the basis of an agreement with the other party (negative)

[4] In a case where a special agreement was concluded between Company A and Company B for excluding the adjustment of the contract amount due to price fluctuation in the electric power vehicle supply contract entered into with Company B, but Company A asserted the invalidity of the said special agreement and sought the payment of the contract amount adjustment reflecting price inflation after the conclusion of the contract, the case holding that the judgment below accepting the claim for the increase of the contract amount due to price fluctuation on the ground that the said special agreement was null and void, in light of the other party’s legitimate interest and reasonable expectation

1. Plaintiff’s ground of appeal

A. Ground of appeal No.1

The lower court rejected the Plaintiff’s assertion that the Plaintiff’s liability for payment of liquidated damages ought to be exempted in full view of the circumstances indicated in its reasoning

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine regarding force majeure, calculation of the number of delayed days, and exemption of liquidated damages, or by failing

B. Ground of appeal No. 2

1) The lower court rejected the Plaintiff’s assertion that the liquidated damages scheduled to pay the damages should be reduced drastically due to the same site output occurred on March 11, 2011. ① The Plaintiff, as an electrical machinery supplier in the Republic of Korea, has a de facto monopoly in the market as an electrical machinery supplier in the Republic of Korea, and it is difficult to view the Plaintiff as an economically disadvantaged person, such as entering into a supply contract with the Defendant for a total contract amount of KRW 53.4 billion on 4 occasions in 2009. ② The rate of liquidated damages is not particularly high at the rate of 0.15%, and the liquidated damages amounting to KRW 9,670,04,646,2.7% of the contract amount of KRW 350 billion (around 2.759% of the contract amount, the lower court’s determination is apparent) and thus, cannot be deemed to have been excessive within the scope of the Plaintiff’s operating income due to the instant contract, and ③ the Plaintiff’s delay in the Plaintiff’s supply and the reasons for delay caused damages to the Defendant.

2) The agreement on compensation for delay falls under an estimate of the amount of compensation for delay, barring special circumstances, and thus, where it is deemed that the amount of compensation for delay calculated in accordance with the agreement is unfairly excessive in light of all the circumstances, such as the party’s status, purpose and content of the agreement, the motive behind which the agreement was scheduled, the rate of the compensation for delay to the contract amount, the reasons for delay, the amount of the compensation for delay, and the transaction practices at the time of the agreement, etc. In addition, even if the reasons for delay do not reach the extent that the obligor is exempted from the liability, the compensation for delay may be reduced by taking into account all the circumstances including the reasons (see Supreme Court Decision 2003Da6705, 6712, Apr. 28

The fact-finding or the ratio of the grounds for reduction is, in principle, belonging to the exclusive authority of the fact-finding court. However, if it is deemed that it is considerably unreasonable in light of the principle of equity, it is not allowed as it is illegal (see Supreme Court Decision 2016Da205779, Sept. 28, 2016, etc.).

3) In light of the records, the above circumstances cited by the court below in order to determine whether to reduce the amount of damages, but such circumstance alone is difficult to accept the court below’s decision that did not recognize the reduction of the amount of damages. The reasons are as follows.

First of all, according to the facts acknowledged by the lower court, the Plaintiff entered into a contract with the Plaintiff on March 5, 2010 on the supply of parts, such as the surrounding exchange device and peripheral voltage necessary for the manufacturing of the instant electric vehicle from May 201 to April 2012, 201, and ② the same site price occurred on March 11, 201, the Japanese power authorities notified the Japanese power agency of the total of 40.8 hours on March 10, 201, and the actual period was 4.9.8 hours from the date of planning, which was 4 days from the date of planning, and the direct damage of facilities was not located in addition to the quality of the business before planning. ③ The Plaintiff delayed the supply of parts due to the damage to the tachi Electric Cable Co., Ltd., a subcontractor of the city.

Furthermore, the record reveals that ① on February 17, 2010, the Defendant consented to the supply of major parts of the instant electric vehicle from the city to the city, ② the same site is the fourth scale around the world since the commencement of modern earthquake observation as 9.0, and as the maximum scale of Japanese observation ideas, the collapse or damage of buildings exceeding approximately 20,000 persons and missing, approximately 1,000 persons, and nuclear power plants also suffered from radioactive damage, including dam collapse, serious damage to roads and rails, and severe structural damage, including radioactive damage caused by radioactive damage, ③ the Plaintiff’s delayed supply of the instant electric vehicle from the date of the same site to the Defendant and the Defendant’s delayed supply of the instant site to the extent that it is inevitable to cause 6th of the instant electric vehicle due to instability, including local planning and rearrangement, etc., and ④ the Plaintiff’s delayed supply of the instant electric vehicle and the Plaintiff’s delayed supply of the instant construction site to the Plaintiff on 20th of the instant urban and rural development project.

4) According to these circumstances, even if the same site and the US, which is an unexpected natural disaster, did not directly harm the production facilities of urbanba, it is acknowledged in light of the empirical rule that the overall industrial activities in Japan were committed. Therefore, even if it is difficult to see it as force majeure, it is difficult to conclude that such circumstance did not completely affect the manufacturing process of the parts of the electric vehicle of this case as acknowledged by the court below, and it is reasonable to conclude that the manufacturer of the instant rolling stock, such as urbanba, was demanded to preferentially put the ability to recover from the Japanese infrastructure rather than the timely supply of the goods overseas to the owner of the goods overseas. Furthermore, as seen below, if the Plaintiff appears to have been unable to receive the adjustment of the contract price from the Defendant due to the exclusion of the contract price adjustment system excluding the contract price adjustment system due to price fluctuation, it is unreasonable to reduce compensation for delay from the amount of damages to the amount of 9,670,044,646 won.

5) Nevertheless, the lower court did not completely reduce the penalty for delay and did not deducted the entire amount from the price of goods payable to the Plaintiff. In so determining, the lower court erred by misapprehending the legal doctrine on reduction of the amount of damages, thereby adversely affecting the conclusion of the judgment. The allegation contained in

2. As to the Defendant’s ground of appeal

A. Article 19 of the former Act on Contracts to Which the State is a Party (amended by Act No. 11547, Dec. 18, 2012; hereinafter “State Contract Act”) provides, “The head of each central government agency or the public official in charge of contracts shall adjust the contract amount as prescribed by Presidential Decree in cases where it is necessary to adjust the contract amount due to price fluctuations, design modification, or any other modification to the terms and conditions of the contract after concluding the contract for construction, manufacture, service, or any other contract that imposes a burden on the National Treasury.” The provisions of the former State Contracts Act or the Enforcement Decree thereof regarding the validity of a contract concluded with any other content are

Considering the nature of a contract to which the former State Contracts Act or the Act on the Management of Public Institutions applies, and the details, legislative intent, etc. of the provision on the adjustment of the contract amount due to price fluctuation under the State Contracts Act and the provisions on the provision on the adjustment of the contract amount due to price fluctuation under the State Contracts Act and the legislative purport, the said provision merely provides for matters to be observed by the contracting officer, etc. so that the State or public enterprise (hereinafter “State, etc.”) can process the contractual relationship with private persons fairly, rationally, and efficiently, and cannot be deemed as prohibiting or restricting the State, etc. from adding special conditions, etc. effective only between the parties to the contract based on

However, Article 4 of the Enforcement Decree of the Act on Contracts to which the State is a Party (hereinafter “Enforcement Decree of the State Contract Act”) provides that “A contracting officer shall not enter into a contract, which unfairly limits the contractual interests of the other party under the State Contracts Act and the Decree on Contracts to which the State is a Party, or set any special terms or conditions that unfairly restrict the contractual interests of the other party.” Thus, any special agreement unreasonably limits the contractual interests of the other party and thus, is null and void. In this context, it is insufficient to say that the special agreement is somewhat disadvantageous to the other party in order to make the other party null and void as it goes against Article 4 of the Enforcement Decree of the State Contracts Act. It is insufficient to find that the State, etc. unfairly puts any disadvantage to the other party by providing for special agreement contrary to equity against the legitimate interests and reasonable expectations of the other party. Whether a special agreement unreasonably limits the contractual interests of the other party is a special agreement that may arise from the said special agreement, shall be determined by comprehensively taking into account all the circumstances such as the content and degree of disadvantage, possibility of disadvantage, impact on the whole contract, the conclusion process between the parties (see en banc Decision.

B. The lower court determined that even if there was the instant exclusion agreement that did not adjust the contract amount even in the case of price fluctuation as it constitutes a mandatory provision under Article 19 of the former State Contracts Act, the Plaintiff may claim for the adjustment of the contract amount according to price fluctuation, and that the instant exclusion agreement is null and void since the instant exclusion agreement was a special agreement or condition unreasonably restricting the contractual interests of the counterparty in violation of Article 4

C. However, in light of the above legal principles, the lower judgment is difficult to accept for the following reasons.

1) The Plaintiff is a domestic supplier of high-speed rail vehicles and actually has a market monopoly, and it cannot be concluded that the Defendant is in a position to abuse its trade position against the Plaintiff.

2) The Plaintiff’s claim purported to increase the price increase of approximately KRW 6.8% in total for three years, and the possibility of price increase was anticipated by the Plaintiff. Therefore, it is difficult to view the instant special agreement contrary to the other party’s legitimate interest and reasonable expectations.

3) The contract price adjustment system according to price fluctuation may bring about the effect of reducing the contract price when price drop. As such, the Plaintiff lost the expectation for the increase of the contract price under the instant special agreement, while going beyond the risk of the contract price to be reduced. In fact, according to the Defendant’s report on price adjustment (Evidence 27) submitted as evidence with respect to the purchase contract of volume 50 “KEX (KTX)” which was entered into between the Plaintiff and the Defendant, the adjustment rate of the contract price due to the price fluctuation in the total amount of 4ths was calculated in a negative number (-) and the contract price was reduced. In addition, the index adjustment rate was calculated as a negative number in relation to the purchase contract of volume 25 of the diesel engine 25 and the 138-ray bit B-dong 138 vehicles, which was entered into between the Plaintiff and the Defendant on June 24, 2011.

D. Nevertheless, the lower court, solely on the grounds indicated in its reasoning, deemed the instant exclusion clause null and void, received the Plaintiff’s claim for the increase of the contract amount due to price fluctuation. In so determining, the lower court erred by misapprehending the legal doctrine on the provisions regarding the adjustment of the contract amount according to price fluctuation, thereby affecting the conclusion

3. Scope of reversal

As to the part of the judgment of the court below against the plaintiff, there are grounds for reversal as to the part against the defendant among the judgment below. The defendant appealed to the part against the defendant in whole, and since it is necessary to examine together with the part on the contract amount adjustment due to price fluctuation as seen earlier, the part on the advance interest deduction, and damages for delay included in advance

4. Conclusion

The lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)