[1] In a case where the contract is deemed to have been completed, and whether it is in accordance with the provisions of the Civil Act regarding the liability for warranty against defects in the completed object to be treated in accordance with the intent of the parties and the intent of the law (affirmative)

[2] The meaning of "delivery of objects" under Article 665 (1) of the Civil Code, where the parties to the contract have determined that "where the contractor has passed an inspection of the objects supplied by the contractor, the contractor shall be paid remuneration to the contractor," the legal nature of the "successful inspection" and the time when the period of the contractor's right to claim remuneration arrives

[3] In a case where Gap corporation contracted the manufacture and installation of the food equipment system to Eul corporation, Eul corporation made a subcontract to Byung corporation, and Eul corporation subcontracted to Byung corporation, and Eul corporation made a product, and the intermediate payment was made within 14 days after the completion of the last inspection and approval, and Byung paid the remainder at the end of the following month after completion of the last inspection, and Byung corporation started to manufacture the equipment and install it at Eul corporation's factory; Eul corporation notified Byung company that Eul company requested Eul company to supply complete equipment as stipulated in the quotation and requested Eul company to cooperate with Eul company to pay part payment and complete the remaining business, but Eul refused it, the case holding that Byung corporation completed the last process scheduled in the subcontract, and Eul company's claim for the cancellation of the remainder, regardless of whether the last inspection and approval was not a condition for payment, and thus Eul's claim for the cancellation of the last claim is not a condition for the completion of the last inspection, and thus Eul's claim for the cancellation of the remainder within 5 days after completion of the due date.

[1] If the main structural part of an object is constructed as agreed upon, and the performance generally required by social norms is completed, and the final process of the original scheduled area is completed, it shall be deemed that the completion of the work is completed. If the object is completed, it is an interpretation that the defect of an object shall be treated in accordance with the provisions of the Civil Act concerning the warranty liability is in accord with the intent of the parties and the purport of the law. In an individual case, the parties’ assertion that the final process of the object has been completed

[2] Article 665(1) of the Civil Act provides that remuneration shall be paid at the same time as the delivery of the completed object. The delivery of an object does not mean a simple transfer of possession, but also includes the case where the contractor explicitly or explicitly expresses that the object has been completed in accordance with the contract after the inspection of the object. Where the parties to the contract provide that “If the contractor passes an inspection of the object supplied by the contractor, the contractor shall pay remuneration to the contractor,” it is nothing more than confirming the contractor’s obligation to deliver the object in the simultaneous performance relationship with the contractor’s obligation to pay remuneration, and “the passing of the inspection” does not depend on the effect of the legal act, but rather on the indefinite-term period for the payment of remuneration. Therefore, the time limit for the right to claim remuneration shall arrive when the completion of the work stipulated by the contractor passes the inspection after the completion of the inspection or it is determined that

[3] Where Company A contracts for the manufacture and installation of the food equipment system to Company B, Company B makes a subcontract to Company C, according to estimates, etc., and the intermediate payment shall be made within 14 days after the completion of the last inspection and approval, and Company C starts to manufacture the equipment and install it at the factory of Company C, and Company C notifies Company C of the manufacture of the equipment and the supply of the remainder as stipulated in the quotation, and the conditions were requested by Company C to cooperate with Company B to complete the remaining work after payment of intermediate payment, but Company C refuses and notifies Company C of the remaining payment of the balance as stated in the above subcontract agreement, because the aforementioned equipment was constructed as agreed upon by social norms, and the intermediate payment was made within 14 days after the completion of the storage of the product, and C’s final payment of the remainder can be deemed to have been completed by C’s request for the inspection of the remainder as stipulated in the above subcontract agreement, and C’s final payment of the remainder can be deemed to have been completed by C’s request for the inspection of the remainder, regardless of whether C’s last payment was completed.

[1] Articles 105, 580, and 664 of the Civil Act / [2] Articles 147, 152, and 665(1) of the Civil Act / [3] Articles 105, 147, 152, 580, 664, and 665(1) of the Civil Act

[1] Supreme Court Decision 2004Da29217 Decided September 23, 2004 (Gong2006Ha, 1900) Decided October 13, 2006 / [2] Supreme Court Decision 2003Da24215 Decided August 19, 2003 (Gong2003Ha, 1870), Supreme Court Decision 2004Da21862 Decided October 13, 2006 (Gong2006Ha, 190)

A. E. S. (Bae, Kim & Lee LLC et al., Counsel for the defendant-appellant)

E. E.B. Co., Ltd. (the trade name before the change: Sbrid Co., Ltd.)

Sobre Co., Ltd. (Law Firm LBS Partners, Attorneys Seoh-seok et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2015Na2021866, 2021873 decided September 8, 2017

The appeal is dismissed. The costs of appeal are assessed against the Defendant-Counterclaim Intervenor.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Basic factual basis

According to the reasoning of the lower judgment, the following facts are acknowledged.

A. The Defendant (Counterclaim Plaintiff; hereinafter “Defendant”)’s Intervenor (hereinafter “Supplementary Intervenor”) provided each of the equipment systems (Glas Slring Slring Symm; hereinafter “instant equipment”) through the Defendant (Counterclaim Defendant; hereinafter “Plaintiff”), and the Defendant issued a written intent to purchase to the Plaintiff on April 2013.

Then, the Plaintiff, the Defendant, and the Intervenor met several times regarding the design and installation of the instant equipment, and on May 29, 2013, the Plaintiff submitted a written estimate specifying the items, quantity, unit price, etc. constituting the instant equipment to the Defendant. On May 30, 2013, the Defendant paid KRW 1,056,00,000 to the Plaintiff as advance payment for the manufacture and installation of the instant equipment.

B. As to the manufacturing and installation of the instant equipment, the auxiliary intervenor contracted to the Defendant on June 20, 2013 with the price of KRW 3.5 billion (excluding value-added tax), and on June 24, 2013, the Defendant subcontracted the instant contract to the Plaintiff on June 24, 2013 (hereinafter “instant contract”). The main contents of the instant contract are as follows.

(1) Products are produced according to estimates, etc.. The intermediate payment shall be made within 14 days after the completion of the storage of the product with 50% of the contract amount, and the balance shall be paid at the end of the following month after the completion and approval of the last inspection at 20% of the contract amount. The payment date shall be set on July 30, 2013.

(2) The Plaintiff shall immediately commence the installation work after delivering the product to a place designated by the Defendant, and conduct a trial run in the presence of the Defendant, and request the Defendant to conduct the final inspection. The Defendant shall conduct a final inspection on the product in accordance with the quotation and other agreed evaluation criteria, and notify the Defendant in writing as to

(3) The Plaintiff guarantees that the product works normally and normally in conformity with the estimate or other agreed standards. The Plaintiff is responsible for free repair of all defects arising in relation to the manufacture and installation of the product for one year from the date the Defendant passed the final inspection. If any defects arising during the warranty period without the Defendant’s fault and repair is impossible, the Plaintiff shall manufacture and replace the same product without compensation until the deadline requested by the Defendant.

(4) The Plaintiff and the Defendant may cancel or terminate a contract where the purpose of the contract is not achieved or is likely to be achieved because the contract is not performed, the product’s specifications and performance fall short of the standards agreed upon, such as a written estimate, etc. (hereinafter “reasons of subparagraph 2”), or the refusal of the performance of the contract is directly or indirectly indicated (hereinafter “reasons of subparagraph 5”).

C. From June 21, 2013 to August 5, 2013, the Defendant and the Intervenor inspected the instant equipment manufactured at the Plaintiff’s factory several times, and consulted with the Plaintiff on detailed matters of request. The Plaintiff began to install the instant equipment at the factory of the auxiliary intervenor on August 12, 2013 following the installation schedule agreement.

However, on September 13, 2013, the Defendant did not comply with the Plaintiff’s request for the payment of intermediate payments, and the Plaintiff notified the Defendant that the installation work of the instant equipment was suspended on the grounds of the non-payment of intermediate payments. Accordingly, the Defendant notified the Plaintiff that the instant equipment was manufactured and the instant equipment was demanded to be supplied with complete equipment as prescribed in the estimate. Upon receipt of such notification, the Plaintiff suspended the installation work of the instant equipment, and requested the Defendant to cooperate so that the intermediate payment may be paid and the remaining work may be completed by sending the e-mail exchanged with the minutes prepared.

Even after the Plaintiff requested several times to cooperate in the installation of the instant equipment, the Defendant rejected the Plaintiff’s request and notified the Plaintiff on November 20, 2013 that the instant contract was cancelled on the grounds of subparagraphs 2 and 5.

2. The assertion that the instant contract was lawfully rescinded (ground of appeal Nos. 2, 3, and 4)

A. The lower court rejected the Defendant’s assertion that the instant contract was lawfully rescinded for the following reasons.

(1) The instant equipment has any defect arising from the manufacturing and quantity different from that stated in a written estimate and from a defect that is produced to enjoy (hereinafter “instant defect”). The Defendant asserts that the showers were installed differently from a written estimate, but in light of various circumstances, the Plaintiff cannot be deemed to have installed a different installation from a written estimate without the Defendant’s approval.

Although there was crack discovered on February 10, 2014 on the part adjacent to the PVC display of the instant equipment, it cannot be deemed that the Defendant had such cracation at the time of the rescission of the instant contract, and it is difficult to deem that it was caused by the design and manufacture error by the Plaintiff, as it was not installed at the factory of the Intervenor’s factory.

(2) Even though the Defendant was able to easily verify the instant defect during the pre-examination process with the instant equipment storage, the Defendant did not raise any objection. In addition, it is difficult to deem that the Plaintiff failed to perform the instant contract based on the inconsistency between the written estimate and the written estimate, including the addition of 25 items not indicated in the written estimate, and the change into the parts of the specifications different from the written estimate through several consultations with the Defendant. The instant defect does not affect the performance or safety of the instant equipment.

Comprehensively taking account of these circumstances, the instant defect is merely the Plaintiff’s nonperformance of the incidental obligation, and it cannot be deemed that the purpose of the instant contract is not or is likely to be achieved due to the instant defect. The grounds for revocation under subparagraph 2 cannot be a legitimate ground for revocation.

(3) In order to repair the instant defect, excessive cost is required to re-manufacture the instant equipment, while the instant defect does not have an important defect that affects performance or safety. Therefore, the Defendant is not entitled to claim the repair of the instant defect, and the Plaintiff did not comply with the claim for the repair, and does not constitute grounds for revocation. 5 does not constitute legitimate grounds for revocation.

B. Examining the reasoning of the lower judgment in light of the evidence duly admitted, the lower court did not err in its judgment by failing to exhaust all necessary deliberations, contrary to what is alleged in the grounds of appeal, by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on the distinction between principal and incidental

3. The assertion as to the propriety of the claim for the remainder of the principal lawsuit (ground of appeal No. 1)

A. In a contract, if the main structural part of an object was constructed as agreed upon, and completed the performance generally required by social norms, and the final process of the original scheduled, it shall be deemed that the completion of the work is completed. If the object is completed, the defect of an object shall be treated in accordance with the provisions of the Civil Act on the warranty liability is an interpretation consistent with the intent and the purport of the law. It is reasonable to objectively determine the object in light of the specific content of the contract and the principle of trust and good faith (see Supreme Court Decisions 2004Da29217, Sept. 23, 2004; 2004Da21862, Oct. 13, 2006, etc.).

Article 65(1) of the Civil Act provides that remuneration shall be paid in a contract for work at the same time as the delivery of the completed object. The delivery of an object does not mean the transfer of a simple possession, but also includes the time explicitly or implicitly viewing that the object was completed in accordance with the contract after the contractor inspected the object. Where the parties to the contract provide that “If the contractor passes an inspection of the object supplied by the contractor, the contractor shall pay the contractor the remuneration.” This is merely a fact that the contractor confirms the contractor’s duty of delivery of the object in the simultaneous performance relationship with the contractor’s duty of payment of remuneration, and “the passing of the inspection” does not depend on the validity of the juristic act, but rather on the due date of the payment of remuneration. Therefore, when the contractor passes the inspection after the completion of the work specified in the contract for work or it becomes final and conclusive that the contractor is unable to pass the inspection (see, e.g., Supreme Court Decisions 203Da24215, Aug. 19, 2003; 2004Da21862).

B. According to the above facts and legal principles, the following conclusion can be derived.

(1) Comprehensively taking into account the examination of the Defendant and the Intervenor in the process of manufacturing the instant equipment, the progress of the agreement between the parties, the progress from the Plaintiff’s commencement of the construction of the instant equipment to the Defendant’s notification of the cancellation of the instant contract after the Plaintiff’s commencement of the construction of the factory in accordance with the agreement on the installation of the instant equipment, the performance and safety defects of the instant equipment, etc., the instant equipment was constructed as the performance generally required by social norms as agreed upon by the main structural part, and began to install the instant equipment, but the Plaintiff was not able to complete the installation by the Defendant’s non-cooperation, and thus the Plaintiff completed the last process as scheduled in the instant contract. Accordingly, the instant defect should be treated in accordance with the Civil Act on the Liability for Warranty, and the Plaintiff

(2) Under the instant contract, “after the completion and approval of the final inspection” was stipulated to pay the remainder, and the completion and approval of the final inspection is not a condition for the payment of the remainder, but a fixed period. As such, even if the Plaintiff completed the last process scheduled under the instant contract, the Defendant’s refusal of the final inspection and notification of the cancellation of the instant contract was confirmed to be impossible to “final inspection completion and approval” and thus, the period during which the claim for the remainder of the contract was due. Therefore, the Plaintiff may claim the remainder, regardless of whether the Defendant was omitted to the creditor body or whether the requirements under Article 538(1) of the Civil Act are met.

C. The lower court determined that the Plaintiff could be exempted from the obligation to undergo the final inspection as stipulated in the instant contract and claim the payment of the remainder, since the Plaintiff failed to obtain the Defendant’s final approval on the instant equipment due to the Defendant’s rejection of receipt of the Plaintiff’s installation work.

Although the reasoning of the lower judgment is inappropriate, the lower court’s conclusion, which received the Plaintiff’s remainder claim on the premise of lawful performance provision or work completion, is justifiable in light of the legal doctrine as seen earlier. In so doing, the lower court did not err by misapprehending the legal doctrine on the interpretation of Article 538(1) of the Civil Act, thereby adversely affecting the conclusion

4. Conclusion

The supplementary intervenor's appeal is dismissed as it is without merit, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Dong-won (Presiding Justice)