Korea-U.S. Railroad and one other (Attorney Strict-hoon, Counsel for the defendant-appellant)

Korea Rail Network Authority (Law Firm Han & Yang LLC, Attorneys Park Ge-hwan, Counsel for the plaintiff-appellant)

October 8, 2015

Seoul Central District Court Decision 2013Gahap16669 Decided May 1, 2015

All appeals by the plaintiffs are dismissed.

The costs of appeal are assessed against the plaintiffs.

The judgment of the first instance is revoked. The defendant shall pay to the plaintiffs 781,893,513 won and the amount calculated by the rate of 20% per annum from the day following the delivery of a copy of the complaint of this case to the day of complete payment.

1. Basic facts

(a) Conclusion of a long-term continuing contract;

1) On November 18, 2004, the Plaintiffs organized a joint supply and demand organization and entered into a contract with the Defendant on the following terms: “24,33,00,000 won” in the form of continuous contract (hereinafter “instant construction”) with respect to the construction works for covering iron rail trackss from the border line to the road at the intervals of continuous contract; “48 months from the commencement date of construction”; “150,000,000 won” in the construction cost of the primary contract; and “1,50,000,000 won” in the construction period of the primary contract (hereinafter “instant contract”; “the entire contract”; and “the part concerning the total construction works”; and “the unit of the relevant car” in this case.

2) Thereafter, the Plaintiffs and the Defendant concluded a modified contract by reflecting the design change, change of construction period, etc. that occurred during the construction process as indicated below:

본문내 포함된 표 (변경)계약일 주요(변경)내용 차수별 계약 총괄 계약 차수 계약금액(원) 계약기간 계약금액(원) 준공기한 2004. 11. 18. 1차 150,000,000 착공일부터 2004. 12. 31. 24,333,000,000 착공일부터 48개월 2005. 3. 7. 2차 805,400,000 2005. 3. 7.~2005. 12. 31. 상동 상동 2006. 4. 3. 3차 1,300,000,000 2006. 4. 3.~2006. 12. 20. 상동 2008. 12. 8. 2006. 12. 18. 상동 상동 23,923,000,000 2008. 12. 1. 2007. 2. 27. 4차 6,193,000,000 2007. 2. 28.~2007. 12. 20. 상동 상동 2007. 12. 18. 5,521,000,000 상동 25,088,000,000 상동 2008. 3. 28. 5차 6,000,000,000 2008. 3. 31.~2008. 12. 1. 상동 상동 2008. 11. 24. 상동 상동 상동 2009. 12. 31. 2008. 11. 27. 상동 2008. 3. 31.~2008. 12. 20. 상동 상동 2008. 12. 10. 7,000,000,000 상동 25,091,000,000 상동 2008. 12. 31. 6차 3,377,000,000 2009. 1. 5.~2009. 12. 20. 상동 상동 2009. 1. 14. 6,377,000,000 상동 상동 상동 2009. 12. 15. 6,439,212,000 상동 26,530,000,000 2011. 12. 30. 2011. 3. 8. 상동 상동 상동 2012. 12. 31.

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(b) Change into a continuing expenditure contract;

1) On February 22, 2012, the Plaintiffs and the Defendant concluded a contract under which the former long-term continuing contract was changed to a continuing expenditure contract (hereinafter “instant continuing expenditure contract”) while maintaining the total construction amount and the deadline for completion ( December 31, 2012).

2) Thereafter, the Plaintiffs and the Defendant concluded a modified contract regarding the instant continuing expenditure contract as indicated in the following table.

(2) On December 31, 2012, 204 1,300,300,000,000,000,000,000,00 for the total annual construction cost of a construction project (original) per year as of the date of the main contract (amended) as of the date of the contract in the main sentence (amended) contract (amended), and the total annual construction cost of a construction project (original) for the year when the completion period is completed (original) is 26,530,00,00,000 on February 28, 2012; 1,30,000,000, 200, 200,00,000, 200, 200, 200, 200, 2000, 212, 214, 2008, 314, 308, 2008, 2008, 205, 2716,27

C. The plaintiffs' demand for indirect construction cost

1) On December 11, 2009, the Plaintiffs sent to the Defendant an official document with the following contents:

3. On December 31, 2009, the construction period of the Track Line 3. The construction work period of the Track Line 3. The Track Line 3. The construction work period of the Track Line 3. The Track Line 3. The construction work period of the Track Line 3. The Hack Line 3. The construction work period of the Track Line 3. The Hack Line 3. The construction work period of the Track Line 3. The Hack Line 4. The construction of the Hack Line 3. The Hack Line 2.1.2.2.4. At the present, the building of the Hack Line 1.2. the Hack Line 2.5.0,500,000, the construction period of the Hack Line 2.5.

2) On February 22, 2011, the Plaintiffs sent to the Defendant an official document with the following contents:

In the table 2. H. H. H. H., contained in the main text, the term of construction of molding railing railing construction was December 30, 201. However, according to the circumstances where the delay in the preceding process was inevitably unable to implement the remaining construction, the term of construction completion and the date and time suspension of construction shall be deemed necessary for about 12 months (from March 1, 2011 to February 28, 201), and the main time shall be approved after reviewing scenarios. 3. E. H., minimizing costs incurred during the temporary suspension of construction, the rental fee for the office at the search site (including 21,00,000, cost of security expense) shall be reflected in the design change, and the other general management expenses, profits, etc. shall not be separately claimed.

3) On December 27, 2012, the Plaintiffs sent a public notice to the Defendant stating that “The Defendant shall claim for the cost of air extension (contract amount adjustment) based on Article 22 of the General Conditions of the Construction Contract in relation to the instant construction project.”

(d) Payment of construction cost;

The Plaintiffs completed the instant construction work on or around the end of December 2012, and received KRW 1,265,438,700 as the total completion amount of the instant construction work on January 3, 2013 (the construction cost under each number of vehicles was already paid prior to the completion amount).

【Ground for recognition】 The fact that there has been no dispute, Gap's entries in Gap's evidence Nos. 1, 5, 6, 14, 16, 17, 44 through 46, Eul's evidence Nos. 2 through 5 (including branch numbers; hereinafter the same shall apply), the purport of all pleadings

2. The parties' assertion

A. The plaintiffs

1) As to the claim for indirect construction cost due to extension of the construction period

A) The instant construction project had been extended from December 1, 2008 to December 31, 2012 due to the Defendant’s fault, such as the delay of the preceding process, and the deadline for completion was extended from December 1, 2008 to December 31, 2012. The Plaintiffs filed an application for the adjustment of the contract amount before the date of receipt of the completion

B) Therefore, the Defendant is obligated to pay the Plaintiffs the amount of KRW 781,893,513 equivalent to the indirect construction cost from December 2, 2008, which was extended from December 2, 2008, to December 31, 2012, which was the date following the original completion deadline, and the damages for delay.

C) Even if an application for the adjustment of the contract amount cannot be filed before receiving the completion cost of the contract by the number of vehicles, the indirect construction cost for the extended period after the completion of the 6th number contract should be paid.

2) As to the claim for an agreed amount

Even if the above obligation to pay the above indirect construction cost is not recognized due to the extension of the construction period, at least the amount of indirect construction cost of KRW 42.5 million incurred from January 1, 2010 to February 28, 2012, the Defendant agreed to pay it to the Plaintiffs, and thus, the obligation to pay it.

B. Defendant

1) As to the claim for indirect construction cost due to extension of the construction period

A) The specific rights and obligations in a long-term continuing contract are determined according to each type of contract, and each type of contract is meaningful as an independent contract, and the total construction period and total construction amount are merely an additional entry into each type of contract. Furthermore, given the intrinsic nature of a long-term continuing contract, the parties to a contract can naturally anticipate the extension of the total construction period. Accordingly, the Plaintiffs cannot claim for indirect construction costs against the Defendant for the extension of the total construction period, not by the extension of the construction period of each type of contract.

B) To receive indirect construction cost due to the extension of the construction period, the Plaintiffs should have filed an application for the adjustment of the contract amount before receiving the payment for the completion of the contract by the relevant number of vehicles. The Plaintiffs did not take such procedures.

C) Since the increased total construction cost by each of the instant units contracts or continuing expenditure contracts and their modified contracts already included indirect construction cost due to the extension of construction period, there is no reason to additionally pay indirect construction cost to the Plaintiffs.

D) The Plaintiffs concluded a modified contract with the Defendant several times, and increased the construction cost, and the increased construction cost includes both indirect construction cost items, and agreed to faithfully fulfill the obligations under the modified contract at the time of concluding the modified contract. As such, the Plaintiffs agreed to implement the instant construction project according to the increased construction cost under the modified contract. In other words, the Plaintiffs completed the settlement of the indirect construction cost due to the extension of the construction period through the modified contract, and waived the right to claim the additional indirect construction cost.

E) The claim for the construction cost equivalent to the indirect construction cost claimed by the Plaintiffs is subject to the three-year short-term extinctive prescription pursuant to Article 163 subparag. 3 of the Civil Act. Since the Plaintiffs filed the instant lawsuit on February 28, 2013, the claim for the construction cost equivalent to the indirect construction cost corresponding to the previous construction period was extinguished by the extinctive prescription, which was three years prior to the date of filing the lawsuit.

F) Even if there is a duty to pay the cost of construction equivalent to the indirect construction cost due to the extension of the construction period, the indirect construction cost claimed by the Plaintiffs is insufficient, and there is no objectivity. In addition, indirect construction cost due to the absence of the respective respective respective respective contracts, or the increase in quantity, etc., should be deducted.

2) As to the claim for an agreed amount

There is no agreement to pay the plaintiffs' indirect construction cost of KRW 42.5 million.

3. Determination

A. Whether an obligation to pay indirect construction cost exists due to extension of the construction period

1) Details of general terms of construction contract

Article 22(1) of the General Conditions of the Contract for Construction, which applies to the instant contract, provides that “Where it is necessary to adjust the contract amount due to a change in the terms of the contract, such as a change in the period of construction, transportation distance, etc., in addition to cases under Article 19 and Section 11 of the Contract for Construction, the person in charge of the contract shall adjust the contract amount to the extent that it does not exceed the actual cost according to the changed terms (Evidence 2 of the Contract).”

2) Determination

A) In light of the overall purport of the statements and arguments stated in Gap evidence Nos. 5, 6, 17, and 44 through 46, it appears that the deadline for completion of the instant construction works was extended from December 1, 2008 to December 31, 2012 due to the circumstances on the part of the defendant, such as the delay in the prior process, etc. Therefore, it seems that there is a need to adjust the contract amount in the event that the costs of construction works equivalent to the indirect construction cost increase to the plaintiffs.

B) However, in full view of the facts acknowledged earlier and the following circumstances acknowledged by the evidence, it is difficult to view that the Defendant is liable to pay the Plaintiffs’ indirect construction cost equivalent to the Plaintiffs’ assertion in addition to the construction cost already paid to the Plaintiffs. Therefore, without further review, the Plaintiffs’ claim for this part of the claim is without merit.

(1) Even if the indirect construction cost of the Plaintiffs’ assertion was not reflected or reflected in the total construction cost under the revised contract as seen earlier, it is reasonable to deem that the Plaintiffs agreed to implement the instant construction work according to the changed total construction cost.

As seen earlier, the instant contract was concluded on November 18, 2004, with the extension of the construction period or with the extension of the construction period. Moreover, the instant contract was concluded on February 22, 2012 under the circumstances where the period of completion is set at December 31, 2012 as well as the continuing expenditure contract was set at December 31, 2012, and the contract was concluded on December 18, 2012. In particular, the instant contract was concluded under the circumstances where the instant construction work was completed and completed and the construction cost was increased to KRW 340 million,00,000 (the total construction cost of the instant construction work was increased to KRW 360,000,000,000 as at the time of the conclusion of the instant contract).

If the indirect construction cost due to the extension of the construction period was not reflected in the total construction cost of the modified contract or claimed separately, it would have been assumed that measures, such as filing a lawsuit, were taken to specify the revised construction cost or filing a lawsuit (the Plaintiff well aware that the contract price adjustment that reflects the indirect construction cost due to the extension of the construction period was needed). In addition, the Plaintiffs did not take any measures related thereto not later than December 27, 2012. In the event that the Plaintiffs demanded the reflection of the indirect construction cost on February 22, 2011, even if they did not accept the demand for the indirect construction cost of December 11, 2009, if the demand for the indirect construction cost of December 22, 2011 was not accepted, it would have been assumed that the indirect construction cost of December 11, 2009 was also required when the demand for the extension of the construction period was made (the Plaintiff did not seem to have been reflected in the Plaintiffs’ demand for the extension of the construction period in light of the details of the modified construction cost).

The Plaintiffs demanded the reflection of indirect construction cost immediately before the extension of the total construction period, and entered into a modified contract to extend the construction period or to increase the construction cost thereafter. (i) On December 15, 2009, immediately before the expiration date of the overall construction contract was extended to December 30, 201, the Plaintiffs demanded the reflection of indirect construction cost due to the extension of the construction period on December 15, 2009, and the total construction cost was increased as above while extending the completion date of the overall construction contract as above; and (ii) on March 8, 2011, the completion date of the overall construction contract was either demanded to reflect indirect construction cost due to the extension of the construction period as of December 31, 201, which was immediately before the extension of the total construction period, or the extension of the construction period was not in accordance with the amendment of the construction cost under the overall construction contract to the total construction cost as of December 22, 2011. The Plaintiffs’ request for the adjustment of the construction price was not the expiration date of the construction cost.

The Plaintiffs asserted that, at the time of the conclusion of the modified contract, it was impossible to accurately calculate the indirect construction cost incurred by extension of the construction period, and that the total construction cost increased under the modified contract is merely the amount reflecting the design change or price fluctuation. However, it is difficult to accept the assertion that the Plaintiffs failed to reflect it in the modified contract on December 18, 2012, because it was impossible to compute accurate indirect construction cost for the extended construction period in that the construction cost is determined based on the calculation of the construction cost of a direct or indirect construction cost under the condition that the construction period was set, and that it was difficult to understand that the modified contract was not reflected in the modified contract because the accurate indirect construction cost for the extended construction period was determined based on the calculation of the construction cost under the condition that the construction period was set, and that it was concluded before the completion of the construction work due to the extension of the construction period was completed at the time when the indirect construction cost was already at issue between the parties.

The plaintiffs asserts to the effect that the contract amount shall be adjusted as long as the application for the adjustment of the contract amount was made before the final completion price was paid. However, as seen earlier, it is reasonable to deem that the indirect construction cost for extension of the construction period was already reflected in the total construction cost or agreed to implement the instant construction project as the total construction cost, as well as that there was no opportunity to adjust the contract amount in relation to extension of the construction period (e.g., where the contract for the modification of the contract for the extension of the construction period was not concluded) in other circumstances, such as the case where the contract for the extension of the construction period was not concluded (e.g., the case where the contract for the modification of the contract for the extension of the construction period was not concluded after the determination of the construction period). However, the plaintiffs' case may not be deemed to constitute the case where the adjustment

(b) Claim for the agreed amount

The reasons for this part are as stated in the text of Article 420 of the Civil Procedure Act, since it is the same as the part of the 11th judgment of the court of first instance concerning the claim for the agreed amount.

4. Conclusion

All of the plaintiffs' claims shall be dismissed as it is without merit. Since the judgment of the court of first instance is justified with this conclusion, all of the plaintiffs' appeals are dismissed. It is so decided as per Disposition.

Judges Sung Dok (Presiding Judge) Park Jong-il

1) The former Act on Contracts to Which the State is a Party (amended by Act No. 11377, Mar. 21, 2012) provides that “a long-term continuing contract may be concluded in the case of a contract which needs to continue to exist for several years in its nature or requires several years to be implemented (Article 21).” The Enforcement Decree of the same Act provides that “a long-term continuing construction project, the performance of which becomes final and conclusive by design, etc.” (Article 8(2)).

Note 2) The contract is “the starting date” and appears to be “the starting date of the second contract.”

Note 3) The date of commencement of the General Agreement specified as December 9, 2004, and the completion date was also specified as above.

Note 4) The period for the previous completion of the General Agreement is not December 8, 2008, but also December 1, 2008.

Note 5) The date of commencement of the General Agreement shall be specified on December 1, 2004.

Note 6) Although the date of commencement of the General Contract is described as December 9, 2004 by the date of commencement of the General Contract, the completion date is described as December 1, 2008.

Note 7) The date of commencement of the General Agreement shall be specified as December 9, 2004.

8) The National Finance Act provides that with respect to continuing expenditure, “construction works, etc. which require several years for completion may be disbursed over several years within the scope of the total amount of such expenditure and annual installments determined and approved in advance by the National Assembly” (Article 23(1)). The Act on Contracts to Which the State is a Party provides that “for continuing expenditure projects under Article 23 of the National Finance Act, a contract for continuing expenditure shall be concluded by clearly stating the total amount and annual installments (Article 21(1)).”

9) The chief director of the Defendant Corporation, delegated by the chief director, in charge of the contracting affairs (Article 2 subparag. 1 of the General Conditions of the Contract for Construction).

Note 10) Provisions concerning the adjustment of the contract amount due to a modification of a design.

Note 11) provide for the adjustment of the contract amount due to price fluctuations.

12) A lawsuit is filed to seek the payment of construction cost equivalent to the indirect construction cost prior to the completion of construction in a long-term continuing construction project.

13) In the instant case, in the absence of an opportunity to adjust the contract amount under the condition that the construction is extended due to the completion of the construction work after the conclusion of the modified contract on December 18, 2012, the application for the adjustment of the contract amount can be made before receiving the completion price.