[1] The standard for determining whether a subcontractor requests the direct payment of a subcontract price under Article 14(1) of the former Fair Transactions in Subcontracting Act as a requirement for the occurrence of a direct payment claim

[2] The case holding that in case where Gap corporation, contractor Eul corporation, and subcontractor Byung corporation, the representative of subcontractor Eul corporation, entered into a business agreement to resume the work suspended due to Eul corporation's application for the work, and Gap corporation directly paid the subcontract price, etc., Gap corporation, subcontractor Gap corporation, Eul corporation, and Eul corporation entered into a direct payment agreement, and Jung corporation filed a claim for the payment of the subcontract price with Eul corporation, the subcontractor Gap corporation, Eul corporation, and Eul corporation, which did not enter into a direct payment agreement, and Eul corporation requested the payment of the increased price under the direct payment agreement, but the court rejected Gap corporation's claim for the payment of the increased price under the premise that Gap corporation is liable to pay the first subcontract price under the direct payment agreement, and the court filed a lawsuit against Eul corporation, which was merged Eul corporation, it is difficult to view it as a claim for the subcontract price under the business agreement and payment agreement, and it constitutes a direct payment request under Article 14(1)3 of the former Fair Transactions in Subcontracting Act

[1] The system of direct payment under the former Fair Transactions in Subcontracting Act (amended by Act No. 12709, May 28, 2014; hereinafter “subcontract”) is to protect a subcontractor (i.e., a subcontractor) and a general creditor by bearing the obligation of direct payment of a subcontract price upon a direct payment agreement or upon a request of a direct payment. In such cases, the contractor bears the obligation of direct payment to the subcontractor within the scope of the obligation of the subcontract price (Article 9(3) of the Enforcement Decree of the Fair Transactions in Subcontracting Act (hereinafter “Enforcement Decree of the Subcontract Act”). At the same time, the subcontractor’s obligation of direct payment to the subcontractor and the obligation of the subcontractor to the subcontractor to the subcontractor is extinguished (Article 14(2) of the Subcontract Act).

According to Article 14(1)2 of the Subcontract Act, in cases falling under Article 14(1)2 of the same Act (hereinafter “the case where the ordering person, the prime contractor, and the subcontractor agree to pay the subcontract price directly to the subcontractor”), there occurs a claim for direct payment within the scope prescribed by paragraphs (1) and (4) of the same Article and Article 9(3) of the Enforcement Decree of the Subcontract Act even if the subcontractor does not request a direct payment. However, in cases falling under subparagraphs 1, 3, and 4 of the same Article, the above claim for direct payment occurs only when the subcontractor requests the direct payment.

Whether a subcontractor requests the direct payment of a subcontract price referred to in Article 14 (1) of the Subcontract Act shall be determined by comprehensively taking into account the details and methods of the subcontractor's request for a subcontractor, the purpose of the subcontractor to achieve, the reasons and details of the subcontractor's direct payment, the increase in the subcontract price, the purpose and time of the direct payment system, the interests of the subcontractor, the contractor, the contractor, and the subcontractor, the legal effect following the request for the direct payment, and

[2] In a case where Gap corporation Gap corporation, Eul corporation, and Byung corporation, the contractor Eul corporation, and Byung corporation, the representative of Eul corporation, concluded a business agreement to resume the work suspended due to Eul's application for the work, and Gap corporation directly paid the subcontract price to the subcontractor, etc. Accordingly, Gap corporation, Eul corporation, and Eul corporation prepared a direct payment agreement. Gap corporation filed a lawsuit against Eul et al. for the direct payment of subcontract price and requested Gap corporation to pay the increased price under the direct payment agreement, but the court rejected Gap corporation's assertion on the payment of subcontract price under the premise that Gap corporation is liable to pay only the first subcontract price under the direct payment agreement, and it is difficult to consider Gap corporation's claim against Eul corporation, the contents and contents of the business agreement and the direct payment agreement, the circumstance and contents of the change agreement, the process and contents of the request for the direct payment, the details and scope of the request made by the parties to the contract before the direct payment, and the circumstances and extent of the request made by the court for the direct payment of the subcontract price under the former 201.

[1] Article 14(1), (2), and (4) of the former Fair Transactions in Subcontracting Act (Amended by Act No. 12709, May 28, 2014); Article 9(3) of the Enforcement Decree of the Fair Transactions in Subcontracting Act / [2] Article 14(1), (2), and (4) of the former Fair Transactions in Subcontracting Act (Amended by Act No. 12709, May 28, 2014); Article 9(3) of the Enforcement Decree of the Fair Transactions in Subcontracting Act

[1] Supreme Court Decision 2010Da24176 Decided May 10, 2012

New building construction (Law Firm LLC, Attorneys Shin Sung-si et al., Counsel for the defendant-appellant)

Co., Ltd. (Bae & Yang LLC, Attorneys Ansan-sik et al., Counsel for the defendant-appellant)

Daegu High Court Decision 2012Na6456 decided May 21, 2014

The judgment below is reversed, and the case is remanded to the Daegu High Court.

The grounds of appeal are examined.

1. The system of direct payment under the former Fair Transactions in Subcontracting Act (amended by Act No. 12709, May 28, 2014; hereinafter “subcontract”) protects subcontractors (i.e., a subcontractor) and their general creditors by bearing the obligation of direct payment of subcontract consideration upon a direct payment agreement or upon a request of a direct payment. In such cases, the contractor bears the obligation of direct payment to the subcontractor within the scope of the obligation of subcontract consideration (Article 9(3) of the Enforcement Decree of the Fair Transactions in Subcontracting Act (hereinafter “Enforcement Decree of the Subcontract Act”) and at the same time, the subcontractor’s obligation of direct payment to the subcontractor and the obligation of the subcontractor to the subcontractor to the subcontractor is extinguished (Article 14(2) of the Subcontract Act).

According to Article 14(1)2 of the Subcontract Act, in cases falling under Article 14(1)2 of the same Act (hereinafter “the case where the ordering person, prime contractor, and subcontractor agree to pay the subcontract price directly to the subcontractor”), a request for direct payment has been made within the scope prescribed by paragraphs (1) and (4) of the same Article and Article 9(3) of the Enforcement Decree of the Subcontract Act, even if the subcontractor does not request a direct payment. However, in cases falling under subparagraphs 1, 3, and 4 of the same Article, only when the subcontractor requests the direct payment is requested (see Supreme Court Decision 2010Da24176, May 10, 201, etc.).

Whether a subcontractor requests the direct payment of a subcontract price referred to in Article 14 (1) of the Subcontract Act shall be determined by comprehensively taking into account the details and methods of the subcontractor's request for a subcontractor, the purpose of the subcontractor to achieve, the reasons and details of the subcontractor's direct payment, the increase of a subcontract price, the time and time of the increase of a subcontract price, the purport of the direct payment system, the interests of a contractor, contractor, subcontractor, and subcontractor, the legal effect following the request

2. The key issue of the instant case is whether the contractor’s obligation to pay the subcontract price for the C&M Co., Ltd. (hereinafter “C&M”), upon the Plaintiff’s request for the direct payment of the subcontract price to the F&M Co., Ltd. (hereinafter “C&M”).

The lower court determined that, on the ground that the Plaintiff, a subcontractor, filed a lawsuit claiming the payment of the subcontract price (hereinafter referred to as “pre-instigation”) against P&M, the contractor, and the duplicate of the complaint was served on P&M on August 11, 2010, and the Plaintiff requested a direct payment pursuant to the Subcontract Act pursuant to Article 14(1)3 of the Subcontract Act, the lower court: (a) held that P&M bears the obligation to directly pay the subcontract price (including the amount of the first subcontract price and the increase agreed upon by C&W; and (b) the Defendant extinguished the obligation to pay the subcontract price for P&M that was merged with the Plaintiff.

3. However, we cannot accept the judgment of the court below as it is.

A. According to the reasoning of the lower judgment and the record, the following facts can be revealed in relation to the prior suit filed by the Plaintiff against the M&.

(1) On August 2010, the Plaintiff filed a prior suit with the Daegu District Court Decision 2010Da79777, the Daegu District Court (Seoul District Court 2010) and the Daegu Bank as a co-defendant to claim the payment of the subcontract consideration. The Plaintiff stated in the complaint that the Plaintiff is obligated to pay the subcontract consideration, including the increase in the subcontract consideration, by a project agreement entered into on March 2009 as the cause of the claim and the subsequent direct payment agreement. However, Article 14(1)1 of the Subcontract Act (i.e., “if the principal contractor is unable to pay the subcontract consideration due to the suspension of payment, bankruptcy, other similar causes, or cancellation of permission, authorization, license, registration, etc. of the principal contractor, and the subcontractor has requested a direct payment of the subcontract consideration at least twice” (ii) Article 13(1) or 3 (iii) of the Subcontract Act (i.e., “where the principal contractor fails to pay the subcontract consideration to the relevant subcontractor on more than two occasions and the subcontractor has requested a direct payment).

(2) The foregoing business agreement was concluded between P&M (contractor), C&W bank (contractor), Daegu Bank (bank), and P&C company (contractor and supplier representative) to resume the work suspended due to the application for the work of P&C. The content of the agreement is that a new loan of the Daegu Bank should be used as the primary financial resources to pay the subcontract price, etc. directly to sewage suppliers.

(3) The written direct payment agreement prepared by the Plaintiff and C&C and SM under the foregoing business agreement was stated only KRW 1,712,00,000,000, which was the first subcontract price. However, in a lawsuit, the Plaintiff claimed that the increased amount of KRW 494,928,000, which was the changed contract with C&C was paid together on the ground of the terms of the business agreement or the separate payment undertaking, etc. The Plaintiff asserted that the increased amount was irrelevant to the direct payment agreement. On May 18, 2012, the above court rendered a judgment accepting a part of the Plaintiff’s claim against C&M, and rejected all the Plaintiff’s assertion regarding the increase amount of KRW 91,712,00,000,000, which was the balance under the direct payment agreement, based on the premise that C&M is liable to pay only KRW 1,712,000,000,000 under the direct payment agreement.

(4) In the foregoing case, the Plaintiff’s claim was based on the direct payment agreement stipulated under Article 14(1)2 of the Subcontract Act, and the scope of the obligation was disputed by the Plaintiff. According to the terms and conditions of the instant project agreement, the court determined that the Plaintiff was liable to pay the full amount of the payment under the agreement, irrespective of the scope of the amount of the obligation against the C&C bank, and did not make any decision on the scope of the obligation against the C&C bank. The judgment became final and conclusive as it was without objection by the Plaintiff, etc.

(5) Meanwhile, on June 201, when the said lawsuit was pending, the Plaintiff filed the instant lawsuit with the same court seeking payment of the increased amount against the Defendant, stating that “SM only recognized the first construction cost and did not recognize the increased amount.”

B. As seen above, the name C&M agreed to pay a certain amount of the subcontract price directly to the Plaintiff regardless of the scope of the obligation to pay the contract price for C&W. In the previous suit, the Plaintiff claimed payment of the increased amount along with the subcontract price originally agreed upon as the primary basis. The Plaintiff’s right to claim direct payment pursuant to Article 14(1)3 of the Subcontract Act was not deliberated and determined in the previous suit. However, if the Plaintiff requested the direct payment of the increased amount pursuant to the Subcontract Act by the delivery of the copy of the complaint, the Plaintiff’s exercise of right to the increased amount or collection of the price is virtually difficult. Based on these circumstances, it is difficult to see that the Plaintiff’s right to claim direct payment of the subcontract price under the Subcontract Act was practically difficult. Based on such circumstances, the content and content of the language written in the previous suit, the process and scope of the amendment agreement on the increased amount, the details and scope of the contract asserted by the parties in the previous suit, the circumstances leading up to the instant lawsuit, the Plaintiff’s genuine intent to claim direct payment of the subcontract agreement and its genuine contents under the Act.

The lower court determined that the Defendant’s obligation to pay increased price to the Plaintiff was extinguished on the ground that the Plaintiff requested a direct payment under Article 14(1)3 of the Subcontract Act by serving a copy of the complaint in the previous suit, with regard to the fact that the Plaintiff did not review the progress of the previous suit as a whole and did not receive more than twice the subcontract price from the C&W bank at the time. In so doing, the lower court erred by misapprehending the legal doctrine on a direct payment request under Article 14 of the Subcontract Act, thereby adversely affecting the conclusion of the judgment.

4. The Plaintiff’s appeal is with merit, and the case is remanded to the court below 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 Park Poe-young (Presiding Justice)