Whether a contractor who has taken over the obligation for the payment of the subcontract price to a subcontractor by the contractor may oppose the subcontractor by a defense of simultaneous performance based on the claim for defect repair against the subcontractor or the damage claim in lieu of the defect (affirmative)

If there is any defect in the object completed in a contract for work, the contractor may claim against the contractor for the repair of the defect, and he may claim damages in lieu of or together with the repair of the defect. Since these claims are in the simultaneous performance relationship with the contractor's obligation for the payment of the subcontract price, the contractor who takes over the obligation for the subcontractor to the subcontractor in the simultaneous performance relationship with the subcontractor under the subcontract may set up against the subcontractor a defense of simultaneous performance, such as a claim for the repair of defects or a claim for damages in lieu of the defect.

Articles 536, 665, and 667 of the Civil Act

Supreme Court Decision 91Da33056 Decided December 10, 1991 (Gong1992, 490) Supreme Court Decision 96Da7250, 7267 Decided July 12, 1996 (Gong1996Ha, 2480) Supreme Court Decision 2001Da21632, 21649 Decided June 15, 2001 (Gong2001Ha, 1606)

Busan Enterprise Co., Ltd. and four others (Attorney Song-tae, Counsel for the plaintiff-appellant)

The Housing Association for Forestation, Sub-Gradation and Reconstruction;

Seoul High Court Decision 2006Na29435 decided March 14, 2007

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

We examine the grounds of appeal.

1. The court below acknowledged the facts as stated in its reasoning based on the evidence of its holding. The defendant, as a contractor of the instant construction work, agreed to pay each subcontract price to be paid by the defendant directly by the defendant in the first instance court Construction Co., Ltd. (hereinafter "Banwon Construction"), barring any special circumstance, determined that the plaintiffs are liable to pay each subcontract price, and rejected the defendant's assertion that the plaintiffs' direct payment of subcontract price should be deducted from the plaintiffs' subcontract price for non-construction costs and defect repair costs due to defective construction costs, and the defendant's assertion that the defendant's direct payment of subcontract price to the plaintiffs should be deducted from the plaintiffs' subcontract price for non-construction costs, as stated in its reasoning, on the ground that the contract that the plaintiffs and the defendant become the parties to the instant construction contract, or the plaintiffs cannot be deemed to be directly liable for defect repair or non-construction costs due to the contract between the defendant and the court below, and otherwise, there is no evidence to support that the plaintiffs

2. However, it is difficult to accept the above judgment of the court below for the following reasons.

A. Interpretation of a juristic act is clearly confirming the objective meaning which the parties gave to the act of expressing the juristic act, and it is not subject to the text, but is required to reasonably interpret the objective meaning given by the parties to the act of expressing the juristic act according to the contents of the text regardless of the parties’ internal intent. In a case where the objective meaning is not clearly expressed by the party’s language, it shall be reasonably interpreted in accordance with logical and empirical rules, social common sense and transaction norms so that it conforms to the ideology of social justice and equity, comprehensively taking into account the contents of the text, the motive and background leading up to the juristic act, the purpose and genuine intent to be achieved by the party to the juristic act, transaction practices, etc. (see Supreme Court Decision 2000Da40858, Mar. 23, 2001).

According to the court below's determination or records, the plaintiffs' failure to pay the subcontract price to the plaintiffs due to the financial shortage of room integrated construction was faced with the crisis that the construction work in this case will be interrupted due to their suspension of each subcontracted construction from source integrated construction around June 2004. On July 1, 2004, the court below entrusted the non-party head of the site office of the construction in this case with the authority to use and execute the expected revenues related to the construction in this case (existing, commercial, and outstanding apartment, unsold apartment, and additional loans to union members): the defendant promised to pay and pay the subcontract price for each of the plaintiffs on July 8, 2004 to the non-party for the construction cost of this case; the plaintiffs' failure to pay the construction cost of this case from 19-1 et al. to 2004 (the new 19-1 et al., new al., new 19-1) and the construction cost of this case; the plaintiff's failure to pay the construction cost of this case to 30% of construction cost and 10% of sale.

As shown in the above facts, in light of the developments leading up to the receipt of the "construction cost payment certificate" and "liability construction report" between the plaintiffs and the defendant, and the title and contents of each of the above documents, it is reasonable to view that the plaintiffs and the defendant promised to pay the unpaid subcontract price directly to the plaintiffs who are the subcontractor on July 8, 2004, while the plaintiffs also agreed to complete the subcontracted construction work directly to the defendant.

Therefore, the defendant's assertion that the plaintiffs should deduct or offset the costs of construction and the costs of defect repair due to defective construction works from the subcontract price for which the plaintiffs seek the cost of defect repair due to defective construction works, the court below should have further examined whether the plaintiffs' defects exist in the non-construction part or the construction part related to the execution of each subcontracted construction work.

B. In addition, when there is a defect in the object completed in a contract for work, the contractor may claim for the repair of the defect against the contractor and claim for damages in lieu of or together with the repair of the defect (see Supreme Court Decision 96Da7250, 7267, Jul. 12, 1996, etc.). Since these claims are in a concurrent performance relationship with the contractor's claim for the construction price (see Supreme Court Decision 96Da7250, 7267, Jul. 12, 1996, etc.), the contractor who takes over the contractor's obligation for the construction price to the subcontractor may oppose the subcontractor as a defense of simultaneous performance due to the contractor's claim for defect repair or damage compensation in lieu of the defect in the contractor's simultaneous performance relationship between the subcontractor and the subcontractor unless there are special circumstances. According to the records, it is unfair that the defendant receives all the construction cost as alleged by the defendant due to the defect repair in the unconstruction portion and the defect repair due to the defect repair.

Therefore, even if the defendant assumes the obligation to pay the subcontract price to the plaintiffs in the comprehensive housing construction project, as shown in the judgment of the court below, the court below should have judged the defendant's simultaneous performance defense based on the defect repair claim or damage claim related to the simultaneous performance of the subcontract between the plaintiffs.

C. Nevertheless, the court below rejected the defendant's assertion on the grounds as stated in its holding. The court below erred by misapprehending the legal principles as to the concurrent performance defense of the contractor who has taken over the obligation of interpretation of juristic act or the obligation of the subcontract price, and failing to exhaust all necessary deliberations, which affected the conclusion of its judgment

3. Therefore, 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 Shin Hyun-chul (Presiding Justice)