Where a long-term continuing construction contract under Article 21 of the former Act on Contracts to Which the State is a Party is extended more than the first additional construction period, whether the contract price adjustment can be recognized by deeming that the construction period has been changed (negative)

[Majority Opinion] Article 21 of the former Act on Contracts to Which the State is a Party (amended by Act No. 11377, Mar. 21, 2012; hereinafter “State Contract Act”) provides that “The head of each central government agency or the public official in charge of contracts may conclude a long-term continuing contract as prescribed by the Presidential Decree in cases of a contract that needs to continue to exist for several years or requires several years to be implemented due to its nature, such as lease, transportation, storage, electricity, gas, and supply. In this case, the pertinent contract shall be performed within the scope of the budget for each fiscal year.” In addition, Article 69(2) of the Enforcement Decree of the State Contracts Act provides that “The long-term continuing construction contract shall be executed within the scope of the budget for the pertinent fiscal year after additional statement of the total construction cost determined by a successful tender, etc.” In this case, a contract after the second construction shall be concluded within the scope of the total construction amount additionally stated (referring to the adjusted contract amount, if any, under Articles 64 through 66).”

As can be seen, a long-term continuing construction contract is not in the form of a separate contract with regard to the total construction cost and the total construction period, but rather in the form of a separate contract with regard to the first construction contract for each individual business year. The total construction cost and the total construction period additionally stated at the time the contract with respect to the first construction is concluded refers to an agreement with regard to the total construction cost and the total construction period. The total construction cost and the total construction period stipulated in the relevant comprehensive contract are based on the scale of the project proposed by the State, etc. at the time of bidding. If the total construction period is extended upon the lapse of the business year, the total construction period and the total construction period are changed as stated in the annual contract, and the total construction period are changed as the total construction amount and the total construction period stated therein

Therefore, the foregoing overall contract is not itself based on a conclusive agreement on the total construction cost or the total construction period, but rather linked to the conclusion of each annual contract. Generally, the parties to a long-term continuing construction contract appear to have the intent to use the total construction cost and the total construction period of each annual contract as a provisional standard in concluding each annual contract. The total construction cost and the total construction period additionally stated in each annual contract are difficult to be deemed to have an intention to generate or have binding rights and duties on the construction cost and the construction period.

In other words, the so-called general contract in a long-term continuing construction contract is merely an agreement on the fact that the contracting party is in the position of concluding each annual contract, and the total scale of the contract is based on the overall contract, as the criteria for the temporary utilization of the overall scale of business, construction amount, construction period, etc. Therefore, the validity of the general contract is limited to the determination of the contracting party (in each annual contract, a competitive bid, etc. need not be followed again), the confirmation of intent to execute the contract (it is not possible to refuse to conclude an annual contract without justifiable grounds, and it is not possible to separately issue an order to separately include the details of the total construction contract), the unit price of the contract (determined by the unit price of the total construction contract when determining the annual contract amount), and it shall be deemed that the specific details of the performance to be performed by the contracting party, the scope of

[Dissenting Opinion by Justice Kim So-young, Justice Jo Hee-de, Justice Kim Jae-hyung, and Justice Noh Jeong-hee] (A) The Majority Opinion focuses on an annual contract by expressing that “a general contract is linked to an annual contract.” However, the actual form of performance of a long-term continuing construction contract is an extension of the total construction period stipulated in an overall contract, an annual contract is additionally concluded within the extended period. The Majority Opinion is discussing on the premise of the situation that

(B) In principle, the establishment of a juristic act is effective only when the purpose of the juristic act is impossible or illegal, or there is no social feasibility. In light of the principle of private autonomy, which is the basic ideology of the Civil Act, the validity may not be restricted at will, and in order to restrict it, there must be reasonable grounds therefor.

The majority opinion does not present grounds for limiting the validity or binding force of a general contract even though it recognizes the formation of a general contract. Furthermore, the validity is not entirely restricted, but only a part of the contract is limited, and the construction cost and construction period, which can be said to be the most important matter in

The majority opinion seems to have the purport of limiting the validity of the relevant statute by interpretation, but it is not reasonable as an exception to the principle is easily admitted by interpretation, even though there is no explicit provision.

Therefore, the Majority Opinion, while recognizing the establishment of a juristic act, limits its effect without any grounds, violates the legal doctrine on the establishment and effect of a juristic act.

(C) The Majority Opinion also contradicts the principle of good faith, which is the ideology pursued by the State Contracts Act, and violates specific relevant provisions.

(D) The Majority Opinion asserts that recognition of binding force of the total construction period is recognized as valid of a contract that takes place for more than one year without a continuing expenditure contract, and thus contravenes the principle of annual budget or infringes on the National Assembly’s right to confirmation of budget or voting rights. However, a long-term continuing construction contract is recognized pursuant to the State Contracts Act, which was enacted by the National Assembly itself. In such a case, it is doubtful whether it violates the principle of annual budget or infringes on the National Assembly’

(E) If the interpretation of the relevant statutes or the terms and conditions applicable to a long-term continuing construction contract is unclear, it is reasonable for the State that prescribed such statutes and the terms and conditions of the contract to suffer disadvantages therefrom. Therefore, if the relevant statutes and the terms and conditions are unclear, it should be interpreted favorably to the construction contractor, who is the contracting party.

Articles 19 and 21 (see current Article 21(2) of the former Act on Contracts to which the State is a Party (Amended by Act No. 11377, Mar. 21, 2012); Articles 66 and 69(2) of the former Enforcement Decree of the Act on Contracts to which the State is a Party (Amended by Presidential Decree No. 25679, Nov. 4, 2014);

Large forest industry corporation

Plaintiff 2 in bankruptcy trustee of the bankruptcy debtor 2, who is the administrator of the rehabilitation debtor joint construction corporation, the lawsuit taking over the lawsuit of Nonparty 1, the bankruptcy debtor joint construction corporation, the lawsuit taking over the lawsuit of Nonparty 2, the bankruptcy debtor joint construction corporation

Sambu Construction Co., Ltd. and nine others (Law Firm LLC, Attorneys Lee Dong-chul et al., Counsel for the plaintiff-appellant)

Korea

Seoul Special Metropolitan City (Law Firm LLC, Attorneys Lee Chang-soo et al., Counsel for the defendant-appellant)

Busan District Court Decision 201Na1448 delivered on May 1, 201

Seoul High Court Decision 2013Na2020067 decided November 5, 2014

The part of the lower judgment against the Defendant in this part of the lower judgment is reversed, and that part of the case is remanded to the Seoul High Court. The Plaintiff’s appeal against the Defendant’s Republic of Korea except the Plaintiff 2, who is the administrator of Nonparty 1’s bankruptcy obligor M&D Co., Ltd., the administrator of Nonparty 2’s bankruptcy obligor M&D Co., Ltd., the bankruptcy obligor M&D Co., Ltd., the administrator of Nonparty 2’s lawsuit acceptance of lawsuit. The costs of appeal between the Plaintiffs and the

The grounds of appeal are examined.

1. Basic facts and issues

A. The facts acknowledged by the lower court by citing the first instance judgment are as follows.

(1) The process of concluding the instant construction contract

(A) The Defendant Seoul Special Metropolitan City (hereinafter “Defendant Seoul Special Metropolitan City”) promoted nine stations with a view to linking the subway 1 from the Seoul subway Line 7 to the Bupyeong-gu Office Station of the Incheon subway line (hereinafter “instant construction”). Around March 2003, the Defendant Seoul Special Metropolitan City (hereinafter “Defendant Seoul Special Metropolitan City”) concluded a business agreement with the Incheon Metropolitan City and Seocheon-si (hereinafter “Supplementary Intervenor”) that is a local government that passed the said extension section, and with respect to the implementation of the project and the bearing of project costs.

(B) The Seoul Urban Infrastructure Headquarters (former name: the subway Construction Headquarters prior to the amendment) under Defendant Seoul Metropolitan Government requested the Administrator of the Public Procurement Service affiliated with Defendant Republic of Korea to conclude the instant construction contract in accordance with the Public Procurement Service Act and its Enforcement Decree. The Administrator of the Public Procurement Service divided the instant construction project into sections 701 to 704 sections, and issued a public tender notice on August 16, 2004.

(C) The Plaintiffs participated in the bidding by organizing a joint supply and demand organization with joint performance method for each construction section as shown in the attached Table 1 of the lower judgment. On December 30, 2004, the Defendant and the Republic of Korea entered into the first-minute contract with the date of completion of the total construction work for each construction section as stated in March 31, 201.

(2) Change of total construction period

(A) On September 27, 2010, the Minister of Land, Transport and Maritime Affairs published the “Modification of the Seoul Urban Railroad 7line Master Plan” and changed the project period from the “2004-2010” to the “2004-2012.”

(B) On February 18, 201, Plaintiff Daelim Industrial Co., Ltd., the representative company of Section 701 project, requested the relevant responsible supervisor to make a change from March 31, 201 to December 31, 2012 from March 31, 201, and from February 28, 2011 to September 30, 201, from February 28, 2011 to make a request for the completion date of the 12th project. Even if the completion period is extended from February 28, 2011 to September 30, 201, the Plaintiff Daelim Industrial Co., Ltd., the representative company of Section 701 project, expressed its opinion that the contract amount should be adjusted to the extent that does not exceed the actual cost by reflecting the changes arising from the extension

(C) On February 17, 2011, Plaintiff Hyundai Construction Co., Ltd., the representative company of Section 702, requested the relevant responsible supervisor to change the completion date of the overall contract from March 31, 201 to December 31, 2012, and the completion date of the eight-minutes construction from March 3, 201 to September 30, 201, and made a request for the change from March 3, 2011 to September 30, 201, that it would charge additional indirect costs due to the extension of the construction period prior to the extension of the overall contract period.

(D) On February 7, 2011, the Plaintiff Daewoo Construction Co., Ltd., the representative company of the 703th construction section, requested the relevant responsible supervisor to change the completion date of the overall contract from March 31, 201 to December 31, 2012, and the completion date of the 8th minute construction from February 28, 201 to June 30, 201, and requested the change from February 28, 2011 to June 30, 201, it stated that even if the completion period of the 8th minute construction is extended, it should be implemented without adjustment of the indirect construction cost, but it would be expected to claim additional indirect construction cost due to extension of the construction period under the overall contract.

(E) On January 13, 2011, Plaintiff Samsung C&T Co., Ltd., the representative company of the 704 construction section, requested the relevant responsible supervisor to change the completion date of the overall contract from March 31, 201 to December 31, 2012, and the completion date of the 9th construction from March 31, 201 to June 30, 201, and expressed his/her intention to adjust the contract amount due to the extension of the construction period of the overall contract.

(F) The Plaintiffs and Defendant Seoul Special Metropolitan City changed the completion date from March 31, 201 to December 31, 2012 for Section 701; Section 702 for Section 4, March 201 for Section 702; Section 703 for Section 703; Section 704 for Section 704 for Section 704.

(3) Application for a contract price adjustment following extension of the construction period

(A) Since then, the Plaintiffs requested the Seoul Urban Infrastructure Headquarters for the adjustment of the contract amount due to the extension of the deadline for completion of each construction work on February 9, 2011, on February 28, 2011 for Section 701, on March 3, 201 for Section 702, on February 28, 201 for Section 703, on February 28, 2011 for Section 704, and on March 9, 2011 for Section 704, on June 9, 201, the Seoul Urban Infrastructure Headquarters submitted that the Plaintiffs did not constitute grounds for the adjustment of the contract amount due to the amendment to the terms and conditions of the contract, since the instant construction was implemented without interruption by entering into an annual contract under a long-term continuing construction contract.

(B) On July 5, 2011, the Plaintiffs filed an application for the adjustment of the contract amount due to the extension of the construction period on the grounds that the construction period has been extended without any cause attributable to the Plaintiffs again with the Seoul Urban Infrastructure Headquarters. However, on July 22, 2011, the Seoul Urban Infrastructure Headquarters responded to the Plaintiffs on July 22, 2011 that the instant construction project was long-term continuing construction contracts concluded and implemented through an annual contract with the Plaintiffs, and that the cost of extension of construction was already included in the annual contract amount.

(4) Amendment to annual contracts and general contracts;

With respect to the instant construction project, the Plaintiffs and Defendant Seoul Special Metropolitan City entered into an annual contract on several occasions on the grounds of changes in design, price fluctuation, and change in the construction area for each construction section as shown in the attached Table 2 of the lower judgment, and accordingly, changed the total construction period and total construction cost, which

B. The Plaintiffs seek for the payment of the increased indirect construction cost due to the extension of the total construction period of the instant construction project. In cases of a long-term continuing construction contract, the Plaintiffs have additionally stated the terms such as “total construction amount” and “total construction period” in preparing an annual contract without separately preparing a comprehensive contract (a contract setting the total construction amount and total construction period).

The main issue of this case is whether the adjustment of the contract price can be recognized by considering the change of the construction period when the total construction period is extended more than the first additional construction period in a long-term continuing construction contract.

2. Regarding the overall contract and annual contract relationship in a long-term continuing construction contract (Defendant Seoul Metropolitan Government and its assistant’s ground of appeal No. 1)

A. (1) Article 21 of the former Act on Contracts to Which the State is a Party (amended by Act No. 11377, Mar. 21, 2012; hereinafter “State Contract Act”) provides that “The head of each central government agency or the public official in charge of contracts may conclude a long-term continuing contract as prescribed by the Presidential Decree in cases of the lease, transportation, storage, electricity, gas, and water supply for several consecutive years or the contract requires several years to be implemented. In this case, the pertinent contract shall be implemented within the scope of the budget of each fiscal year.” In addition, Article 69(2) of the Enforcement Decree of the State Contracts Act provides that “The long-term continuing construction contract shall be additionally stated in the total cost determined by the successful bid, etc. and the primary construction shall be performed within the scope of the budget of the pertinent fiscal year. In this case, the contract after the second construction shall be concluded within the scope of the total cost additionally stated (where the contract amount adjusted under the provisions of Articles 64 through 66 is included).”

(2) As such, a long-term continuing construction contract is not in the form of concluding a separate contract with regard to the total construction cost and the total construction period, but rather in the form of adding the total construction cost and the total construction period to the first construction contract for each business year. The agreement on the total construction cost and the total construction period stated at the time of concluding the first construction contract for the first year refers to an agreement on the total construction cost and the total construction period. The total construction cost and the total construction period stipulated in the said comprehensive contract are based on the scale of the business that the State, etc. planned at the time of bidding. If the total construction period is extended as a result of the lapse of the business year, an additional contract is changed as the total construction cost and the total construction period stated therein are the same as the total construction cost and the total construction period additionally

(3) Therefore, the foregoing overall contract is not based on a conclusive agreement on the total construction price or the total construction period, but rather linked to the conclusion of each annual contract. Generally, the parties to a long-term continuing construction contract appear to have the intent to use the total construction price and the total construction period of each annual contract as a provisional standard in concluding each annual contract. The total construction price and the total construction period stated in each annual contract themselves cannot be deemed to have an intention to generate or have binding rights and duties on the construction price and construction period.

In other words, the so-called general contract in a long-term continuing construction contract is merely an agreement on the fact that the contracting party is in the position of concluding each annual contract, and the total scale of the contract is based on the overall contract, as the criteria for the temporary utilization of the overall scale of business, construction amount, construction period, etc. Therefore, the validity of the general contract is limited to the determination of the contracting party (in each annual contract, a competitive bid, etc. need not be followed again), the confirmation of intent to execute the contract (it is not possible to refuse to conclude an annual contract without justifiable grounds, and it is not possible to separately issue an order to separately include the details of the total construction contract), the unit price of the contract (determined by the unit price of the total construction contract when determining the annual contract amount), and it shall be deemed that the specific details of the performance to be performed by the contracting party, the scope of

(4) The following circumstances also support such interpretation.

(A) The foregoing interpretation is reasonable in that recognizing the binding force of the total construction period under the overall contract for a long-term continuing construction contract is ultimately recognized as effective of a contract that takes place for more than one year, and it may be contrary to the principle of annual budget or infringe on the National Assembly’s right to deliberate on, determine, or decide the budget. The binding force of the total construction period under a contract that takes place for more than one year can only be recognized

(B) Article 20(9) of the amended General Conditions of the Construction Contract stipulates that a claim for the adjustment of the contract price by the other party to a long-term continuing construction contract may be made by the payment of the adjustment amount before the payment of the construction cost by the number of the following. Such provision is to recognize the adjustment of the construction price based on an annual contract, and it does not recognize the binding force of the total construction period as stipulated in the overall contract. The amended general conditions were implemented since May 25, 2006, but they were not new contents, but are merely a confirmation of the contents to be applied by interpretation. Therefore, even if the amended general conditions do not directly apply to the previous long-term continuing construction contract

(C) The Enforcement Decree of the State Contracts Act requires the return of the portion corresponding to the part of the contract bond the performance of which has been completed upon completion of an annual contract (Article 50(3)), and all of the warranty period, warranty bond, warranty bond, and liquidated damages are calculated based on annual contracts (Articles 60, 62, and 74). This shows that a long-term continuing construction contract is implemented based on annual contracts.

(D) If the other party to a contract grants a lump-sum claim for additional construction costs during the pertinent period after a considerable period from the first scheduled date of completion after entering into an annual contract without any objection and receiving all construction costs, it would bring a big burden on the formulation and execution of the budget, and goes against the legislative intent of the law that provides for the execution of long-term continuing construction contracts within the scope of the budget of each fiscal year.

(E) In a long-term continuing construction project, the settlement of construction cost should be settled whenever the annual construction is completed, and even if the contract amount needs to be adjusted, an application for the basis of calculation should be submitted to the extent that the annual construction cost does not exceed the actual cost before the annual construction cost is paid. Nevertheless, if the total construction cost is permitted to claim additional construction cost due to the extension of construction period at once after the completion of the entire construction work, this would not only contravene the principle of the annual construction cost settlement, but also make it difficult to accurately calculate actual cost

B. Nevertheless, under the premise that the total construction period stipulated in the general contract is legally binding, the lower court partially accepted the Plaintiffs’ claim for increase in the total construction cost on the ground that the total construction cost under the general contract is the total construction cost including indirect construction cost during the total construction period, and thus, the total construction cost under the general contract is all the construction cost including indirect construction cost during the total construction period, and even if the construction is executed without interruption of construction, the total construction cost for the extended total construction period can be adjusted.

In so determining, the lower court erred by misapprehending the legal doctrine on the relationship between the general contract and the annual contract and the validity of the total construction period stipulated in the general contract, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal by the Defendant Seoul Metropolitan Government and the Intervenor on this point is with merit.

3. As to the remaining grounds of appeal

A. As to the ground of appeal by the plaintiff (Appellant)

The court below accepted the judgment of the court of first instance and, on the grounds as stated in its reasoning, it is reasonable to deem that the defendant Seoul Metropolitan Government agreed to the plaintiffs to have the rights and obligations of the construction contract of this case with respect to the implementation of the contract, such as the commencement of construction works and the payment of prices, etc.

Examining the relevant legal principles and evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal principles on the legal nature of the procurement contract and the interpretation of the first-minute construction contract, which is a disposal document, contrary to what is alleged in the grounds of appeal

B. As to the ground of appeal on Defendant Seoul Special Metropolitan City’s non-committee agreement

The lower court, based on its stated reasoning, determined that it is insufficient to recognize that the Plaintiffs and Defendant Seoul Metropolitan Government agreed on the claim for indirect construction costs arising from the extension of the construction period of this case between the Plaintiffs and the Defendant Seoul Metropolitan Government, and there is no other evidence to acknowledge it.

In light of the relevant legal principles and the evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal principles as to the non-committee agreement, as otherwise alleged in the grounds of appeal.

4. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal by Defendant Seoul Special Metropolitan City and its assistant, the part of the judgment of the court below against the Defendant Seoul Special Metropolitan City is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The remaining plaintiffs' appeals against Defendant Republic of Korea except for Plaintiff 2 by the bankruptcy obligor administrator of the rehabilitation obligor 1, the bankruptcy obligor 2, the receiver of the bankruptcy obligor 2, the bankruptcy obligor gate construction corporation, the bankruptcy obligee of Nonparty 1, the bankruptcy obligee of Nonparty 1, the bankruptcy obligor gate construction corporation, the lawsuit receiver of Nonparty 2, are all dismissed. The costs of appeal between the above plaintiffs and the defendant shall be borne

Unless there is a dissenting opinion by Justice Kim So-young, Justice Jo Hee-de, Justice Kim Jae-hyung, and Justice Noh Jeong-hee as to the determination on the grounds of appeal by Defendant Seoul Metropolitan Government and its assistant as to the overall contract of long-term continuing construction and the relationship between annual contracts, etc., the decision is delivered with the assent of all participating Justices, and there is a concurrence

5. Dissenting Opinion by Justice Kim So-young, Justice Jo Hee-de, Justice Kim Jae-hyung, and Justice Noh Jeong-hee as to the grounds of appeal by Defendant Seoul Government

A. (1) The major issue of the instant case is whether the adjustment of the contract amount can be recognized by deeming that the construction period has been changed when the total construction period is extended more than the first additional construction period under a long-term continuing construction contract.

(2) The instant construction cost, for which the Plaintiffs seek a contract price adjustment, is the indirect construction cost, which is the cost incurred by the extension of the construction period. Indirect construction cost includes indirect labor cost, indirect materials cost, and other expenses. Among them, even if the construction cost does not increase, such as personnel cost of the management office or management office rent, there are items that occur when the construction period expires. The Plaintiffs are seeking only the expenses for additional items that arise due to the extension of the construction period.

(3) In reality, there is an ordinary gap between the annual contract conclusion during the process of implementing a long-term continuing construction contract, and the parties to the contract also enter into a long-term continuing construction contract with a certain understanding as to this point. However, the parties to the contract trust that the construction is to be completed within the total construction period and conclude a long-term continuing construction contract. The bid price, including indirect construction cost, is also determined on the premise of this. Therefore, insofar as there is no change in the total construction period, even if the construction has occurred during the total construction period, or the construction has been continued without a blank space, or there is an increase or decrease in the construction period of each annual contract, the increase or decrease in the total construction cost is deemed to be included in the total construction amount, barring any special circumstance. In other words, there is no need to adjust the contract amount, barring any special circumstance. In other words

In the process of implementing a long-term continuing construction contract, where the construction project is not performed within the total construction period due to reasons such as failure of budget, etc., the total construction period shall be extended, and the annual contract shall be additionally concluded within the extended total construction period. With respect to applying for an increase in the total construction price to the person placing an order when the construction project agrees to an extension of the total construction period, the construction project owner may file a lawsuit seeking an indirect construction cost as seen in

The Majority Opinion states that “a general contract is linked to an annual contract” and places emphasis on an annual contract. However, as seen earlier, if the actual form of the performance of a long-term continuing construction contract is extended within the extended period, an annual contract is additionally concluded within the extended period. The Majority Opinion argues that the form of reality is premised on the situation that is opposite to the reality.

(4) The Majority Opinion does not have any legal binding force on the total construction period and total construction price, etc. under a long-term continuing construction contract, and thus, even if the total construction period is extended on the responsibility of the person placing an order, the contractor cannot claim

Specific contents are as follows. A general contract is a standard for the temporary utilization of the overall scale, construction amount, period of construction, etc. of a project. Specifically, it is deemed that the contracting party is in the position of entering into each annual contract and the scale of the contract is based on the overall contract. Therefore, the binding force of a general contract is limited to the determination of a contracting party (in each annual contract, a competitive bid, etc. need not be followed again), confirmation of intent to perform a contract (it is not possible to refuse to enter into an annual contract without justifiable grounds). The content of the performance subject to the contract, the scope of the construction price to be paid to the contracting party, the period of execution of the contract, etc.

However, the Majority Opinion is not only inconsistent with the legal principles as to the formation and validity of a contract, but also inconsistent with the ideology pursued by the State Contracts Act, and is an interpretation contrary to individual relevant provisions. Therefore, I cannot agree with the Majority Opinion. The reasons are as follows.

B. As seen earlier, the Majority Opinion recognizes the establishment of an overall contract.

In order to establish a contract, the agreement between the parties is required to be reached, and such agreement is not required with respect to all matters that form the content of the contract, but with respect to the essential matters or important matters, an agreement should be made on the standards and methods, etc. that are either specific or specific in the future with respect to the essential matters or important matters. In cases where the parties fail to reach an agreement on matters that the agreement should be reached, a contract shall not be concluded unless there are special circumstances (see, e.g., Supreme Court Decisions 2000Da51650, Mar. 23, 2001; 2015Da34437, May 30, 2017).

In particular, the Supreme Court held that a large-scale construction subcontracted project with a construction cost of KRW 14 months or longer with a construction period of 14 months or more shall, barring any special circumstances, be bound by an agreement on important matters, such as the method of and preparation for specific construction works, methods of payment of construction expenses, etc., in addition to the construction cost, unless there is an agreement on the portion, and the agreement on the important matters that the contract would not have been concluded, and it shall not be deemed that the negotiating party submitted documents, such as a written estimate, written statement of performance, written guarantee of subcontract, etc. for the purpose of concluding a subcontract (see Supreme Court Decision 9Da40418, Jun. 15, 2001).

Even if the total construction period of the long-term continuing construction contract of this case is stated in the method of additional entry, there is an agreement between the parties as to the total construction period. In this regard, the Majority Opinion is reasonable to have determined that the overall contract was concluded. However, the Majority Opinion did not explain the grounds for restricting the effect of the overall contract even though recognizing the establishment of the overall

In principle, the establishment of a juristic act is effective only when the purpose of the juristic act is impossible or illegal, or there is no social feasibility. In light of the principle of private autonomy, which is the basic ideology of the Civil Act, the validity may not be restricted at will, and in order to restrict it, there must be reasonable grounds therefor.

The Majority Opinion recognizes the establishment of an overall contract, but does not present grounds for restricting its validity or binding force. Furthermore, it does not limit its validity in whole, but only a part of the contract is limited, and it is also the construction cost and construction period that can be said to be the most important matter in the construction contract. The Plaintiffs of the construction business company did not have such intent, and there is no lack of such intent, and there is no such restriction in relevant statutes.

The majority opinion seems to have the purport of limiting the validity of the relevant statute by interpretation, but it is not reasonable as an exception to the principle is easily admitted by interpretation, even though there is no explicit provision.

Therefore, the Majority Opinion, while recognizing the establishment of a juristic act, limits its effect without any grounds, violates the legal doctrine on the establishment and effect of a juristic act.

C. The Majority Opinion also contravenes the principle of good faith, which is the ideology pursued by the State Contracts Act, and specific relevant provisions.

(1) Article 5(1) of the State Contracts Act provides, “The contract shall be concluded by the agreement of the parties on an equal footing, and the parties shall implement the terms and conditions of the contract in good faith.” Article 4 of the Enforcement Decree of the State Contracts Act provides, “The head of each central government agency or a public official delegated or entrusted by him/her shall not make any special agreement or condition that unreasonably limits the contractual interests of the other party to the contract as stipulated in the Act, this Decree, and relevant statutes, in entering into

The contract price adjustment system based on extension of the construction period is a system that has been embodied on the basis of the principle of good faith. In other words, recognizing binding force on the original contract amount is recognized as contrary to the principle of good faith, even though there were circumstances, such as price fluctuation, design modification, and change of the construction period. However, according to the Majority Opinion, a construction business entity unilaterally bears indirect construction costs incurred due to the extension of the total construction period, but on the other hand, requests the construction business entity to conclude an annual contract. The ordering person may extend the total construction period substantially by adding an annual contract without the need to extend the construction period of an annual contract. The ordering person may extend the total construction period by adding an annual contract without incurring an indirect construction cost. This is unreasonable. Such interpretation is contrary to the principle of

The Majority Opinion ultimately results in allowing a long-term continuing construction contract to be used as a means to transfer the risk of delay of construction due to a lack of budget to the construction company and to avoid the payment of reasonable prices, beyond being utilized as a system to supplement the disadvantages of a contract for continuing expenditure, such as the lack of budget execution and infringement of the National Assembly’s right to review budget. This conclusion needs to be ensured.

(2) Examining the relevant provisions, it can be revealed that the total construction period or the total construction price under the overall contract becomes the standard for executing long-term continuing construction contracts. In other words, the Enforcement Decree of the State Contracts Act provides that in cases of long-term continuing construction contracts, the estimated price shall be determined within the scope of the total construction cost indicated in the budget (Article 8(2)), the total construction price determined by the successful tender, etc. shall be additionally stated in the event of concluding the contract, and the total construction price determined by the successful tender, etc. shall be determined by the contract unit price when determining the annual contract price (Article 69(2) and (4)), the total construction price shall be paid at least 10/100 of the total construction price as the contract deposit, and the contract bond shall be reverted to the National Treasury if the other party to the contract fails to conclude the second or subsequent construction contract (Articles 50 and 51). In particular, according to Articles 64(1) and 66(1) of the Enforcement Decree of the State Contracts Act, the contract price adjusted due to the total construction period extended during a long-term construction contract shall be “the total price immediately”.

D. The Majority Opinion asserts that recognizing binding force of the total construction period is not a continuing expenditure contract, but a contract that takes effect for more than one year, and thus contravenes the principle of annual budget or infringes on the National Assembly’s right to confirmation of budget or voting rights. However, a long-term continuing construction contract is recognized pursuant to the State Contracts Act, which was enacted by the National Assembly itself. In such a case, it is doubtful whether it violates the principle of annual budget or infringes on the National Assembly’s right to confirmation

In addition, Article 20(9) of the amended General Conditions of the Construction Contract provides to the effect that in cases of a long-term continuing construction contract, an application for the adjustment of the contract amount shall be filed before receiving the payment for annual completion of construction works. The Enforcement Decree of the State Contracts Act requires the return of the part corresponding to the part for which performance has been completed upon completion of an annual contract (Article 50(3)), and both the warranty period, the warranty period, the warranty bond, the warranty bond, and the liquidated damages are calculated based on annual contracts (Articles 60, 62, and 74). However, the view recognizing the legal binding force of the total construction period is not inconsistent with the above provisions. Article 20(9) of the General Conditions of the Construction Contract cannot be said to be contrary to the above provisions. This is because the State’s practice that does not recognize the adjustment of the contract amount for the extension of the total construction period, and the above provisions of the Enforcement Decree of the State

E. Relevant statutes or terms and conditions applicable to long-term continuing construction contracts are enacted or determined by the State, and such provisions are unclear, the principle of disadvantage for authors should be applied.

The Supreme Court declared the legal principles of disadvantage of the person who prepared the contract, and became a firm legal principle. In relation to the Act on the Regulation of Terms and Conditions, the principle of trust and good faith, which acts as the content control principle, shall be interpreted fairly and reasonably in consideration of the purpose and purpose of the contract, and objectively and uniformly based on average customer's understanding potential without considering the purpose and intent of individual parties to the contract, and should be interpreted objectively and uniformly after the above interpretation in light of the process of formation of the contract which establishes the contract without sufficient opportunity to review or confirm the specific contents of the contract (see Supreme Court en banc Decision 90Meu23899 delivered on December 24, 191, 191, and etc.).

The above legal principle shall apply not only to the terms and conditions, but also to similar cases. This is because the principle of trust and good faith is based on the principle of trust and good faith.

If the interpretation of the relevant statutes or the terms and conditions applicable to a long-term continuing construction contract is unclear, it is reasonable for the State that prescribed such statutes and the terms and conditions of the contract to suffer disadvantages therefrom. Therefore, if the relevant statutes and the terms and conditions are unclear, it should be interpreted favorably to the Plaintiffs, the contracting party, and the binding force should be recognized. In this regard, we cannot agree

F. Recognizing the binding force of the overall contract on the total construction period and the total construction cost is also necessary for the State as well as the other party to the contract. Contrary to the issue of increase in indirect construction cost, for instance, it is difficult to allow the construction company to enter into an annual contract and delay construction over a period exceeding two times the first agreed total construction period, without using necessary equipment and human resources.

In addition, if the total construction period under the general contract is not binding any binding force, there is no reason to require the Plaintiffs to apply for extension of the construction completion period in this case and to follow the procedures such as approving it.

Even if the authority to conclude an annual contract is recognized as binding force of the overall contract on the total construction cost and the total construction period and imposes an obligation on both the other party and the State, etc. to conclude the annual contract accordingly, if it is impossible for the State, etc. to continue construction without obtaining approval of the budget from the National Assembly, etc., it shall be deemed that “the contract may be rescinded or terminated when any inevitable circumstance occurs by the authority awarding the contract objectively,” under Article 45 of the General Conditions of the Construction Contract. Therefore, there is no unreasonable situation since the

Since the adjustment of the total construction price according to the extension of the total construction period stipulated in the overall contract is logical to deem that the application is made only before the final receipt of the total construction price. As such, the distinction between the construction price under the overall contract and the construction price under the annual contract is made, an application for the adjustment of the contract price with respect to the former cannot be deemed to have been made until the final receipt by the latter. It is logical contradiction to recognize the autonomy and binding force of the overall contract and to again apply for the adjustment of the contract

G. The lower court rejected the Defendants’ assertion that: (a) indirect construction cost, which accounts for the total construction cost of an overall contract with a change in the total construction period, is related to the construction period until March 31, 201, which is the initial time limit for completion of the instant construction project; (b) indirect construction cost calculated and reflected in each annual contract concluded during the extended period, is part of indirect construction cost prescribed in the initial total construction cost; and (c) it does not include indirect construction cost additionally paid due to the extension of the construction period, as it is calculated according to the percentage of the direct construction cost that had not been spent by the initial time limit for completion; and (d) the lower court determined that the Plaintiffs’ application for the adjustment of the contract amount was lawful at the time of the extension of the total construction period, while determining that the contract amount was already concluded lawfully at the time of the extension of the construction period; and (e) as long as the contract was concluded by each annual contract, all of the subsequent legal relations should be determined on the basis of each annual contract.

Such determination by the lower court is justifiable in light of the legal doctrine as seen earlier. In so determining, the lower court did not err by misapprehending the legal doctrine regarding the overall contract and the annual contract relationship, legal nature, etc. in a long-term continuing construction contract

For this reason, I cannot agree with the Majority Opinion.

6. Concurrence with the Majority by Justice Cho Jae-chul and Justice Park Jung-hwa

A. In a long-term continuing construction contract, a contractor shall file an application for the adjustment of the contract amount before the annual completion cost is received. It shall not be deemed that the payment of the adjustment amount is made only before the final receipt of the total construction cost as stated in the lower judgment or the Dissenting Opinion. Specifically, this paper

(1) A long-term continuing construction contract is a long-term continuing construction contract that provides the details and scale of the total construction contract and tenders the total construction cost. However, since construction works are performed without securing the total budget for the entire project, it is unique that construction works are performed by entering into an annual contract within the budget limit of each fiscal year and the construction cost is paid and settled according to the annual contract.

(2) Meanwhile, as long as long as long-term continuing construction contracts take place until the completion of construction, there are many cases where construction works are completed in excess of the initial construction amount and the scheduled construction period. There are many problems in securing budget. However, it is common to say that various causes are involved in a complex, such as design change, price fluctuation, and economic situation change, without necessarily limiting the scope of budget. In fact, rather than increasing the construction period, the construction amount is often frequently increased. Moreover, there are many points that there are many factors in budget waste in relation to long-term continuing construction contracts.

(3) The possibility of such a change in a long-term continuing construction plan is well known to, or anticipated to, both an ordering person and a contractor. A long-term continuing construction contract mainly covers large public construction projects, and the contractor is deemed to participate in a large-scale public construction project by taking into account the possibility of extending the construction period and the possibility of increasing the construction cost.

B. (1) The so-called “long-term long-term continuing construction contract” refers to the form of a contract for the first construction project in the first year and an additional statement of the total construction cost and the total construction period. In a case where the total construction period is extended upon the lapse of a business year, an additional annual contract is made when the total construction period is extended, and the total construction period is changed as stated in the annual contract. It is not a separate contract

(2) The relationship between an overall contract and an annual contract can be deemed as the relationship between a basic contract and an individual contract. For example, the relationship between a financial transaction basic agreement and an individual loan agreement concluded between a financial institution and a user is similar. The content of an individual loan agreement shall prevail in relation to the execution of a loan. The validity of a basic agreement shall not be uniformly determined, and the decision shall be made by comprehensively taking into account the intent of the parties to the agreement or relevant legal provisions

(3) From the perspective of the parties’ intent, the possibility of a change in a long-term continuing construction plan is well known or anticipated by both an ordering person and a contractor. The recognition of binding force of the total construction period under a long-term continuing construction contract does not contravene the intent of the ordering person or contractor.

The various provisions of the State Contracts Act are premised on that the adjustment of the contract amount is made based on the annual contract. The purpose of performance, namely, the specific contents of the construction project to be performed by the contractor, the construction amount, and the construction period are determined by the annual contract.

Therefore, the majority opinion that does not recognize the binding force of the total construction period stipulated in the general contract is faithfully based on the parties' intentions or relevant legal provisions.

(4) Ultimately, only when the annual construction period has been extended, the contract amount can be the ground for the extension of the construction period. Since the total construction period is only the provisional scheduled construction period, it cannot be recognized as a final binding force, and it should be deemed that the additional construction cost cannot be claimed due to the excess thereof.

C. (1) The Dissenting Opinion argues that the Majority Opinion recognizes the establishment of a general contract, which is a juristic act, and, in particular, fails to present the grounds for restricting the binding force of the total construction period.

However, a separate issue is whether to acknowledge the establishment, scope, and validity of a contract. This is a matter of interpretation of the parties’ intent and interpretation of a contract. It is always possible to determine or withhold the validity of a part of the contents that constitute a contract within a single contract. The possibility of changes in long-term continuing construction contracts, especially the total construction cost and the possibility of changes in the total construction period, are well known or may be anticipated to be easily known or anticipated by both an ordering person and a contractor. Furthermore, Article 21(2) of the State Contracts Act and Article 69(2) of the Enforcement Decree of the same Act provide that a long-term continuing construction contract shall be performed through an annual contract. Under such relevant provisions, denying the binding force of the total construction period stipulated by the Majority Opinion is based on the parties’ intent interpretation

(2) The Dissenting Opinion argues that the total construction cost and the total construction period stipulated in the overall contract are the standards for execution of long-term continuing construction contracts.

However, a long-term continuing construction contract is executed by adding the total construction cost and the total construction period to the annual contract, and no separate contract is prepared with regard to the overall contract. This is because the execution of an annual contract is performed based on the nature of a long-term continuing construction contract. The Dissenting Opinion is unreasonable to regard the general contract that exists only in an additional form as the standard

(3) The Dissenting Opinion argues that, in accordance with the Majority Opinion, only an ordering person unilaterally takes a favorable position, this is contrary to the principle of good faith as prescribed by the State Contracts Act. However, all relevant provisions, which provide for the operation of long-term continuing construction contracts based on annual contracts, are intended to harmoniously consider the interests of the construction business chain recipients and ordering persons, and do not intend to unilaterally

In the case of long-term continuing construction, in order to consider the uncertainty of securing the budget and to enhance the efficiency of national contracts through thorough management of contracts such as settlement of contract, it is concluded by dividing the entire construction separately from the overall contract into annual contracts and settling the construction cost after the annual construction is performed in principle.

In addition, if the adjustment of the construction amount is necessary due to the extension of the construction period, the method of adjusting the actual cost is used. Since it is necessary to confirm the actual cost, it is difficult to confirm it after a considerable period of time.

As such, the time of application for adjustment in long-term continuing construction contracts can be limited to interpretation or recognition of relevant regulations in order to harmoniously consider the interests of the project owner and the contractor.

Inasmuch as the fixed cost for a long-term continuing construction project is not subject to the contract price adjustment in terms of trust protection of the parties (see, e.g., Supreme Court Decision 2001Da11130, Nov. 26, 2002). As such, the other party to the contract should complete an application for contract adjustment due to a change in the terms and conditions of the contract before the payment of the final price (or the cost for completion) is made at the latest. It is reasonable to interpret that the time of application for adjustment should be determined based on the annual contract where specific execution is performed in the case

In addition, Article 20(9) of the General Conditions of the Construction Contract amended after the above Supreme Court precedents provides that a claim for the adjustment of the contract amount by the counter-party to a long-term continuing construction contract may be paid to the counter-party to the contract prior to the receipt of the annual completion cost, and the above revised general conditions were enforced from May 25, 2006. The Majority Opinion is justifiable to deem that the above revised general conditions are not a new provision, but a confirmation of the content that should be applied to the interpretation is not a new one. Therefore, even if the above revised general conditions are not directly applied to a long-term continuing construction contract concluded before the enforcement date of the above case, it is reasonable to interpret them equally. This interpretation cannot be said to contravene the principle

(4) The Supreme Court precedents cited by the Dissenting Opinion are the purport of applying the principle of disadvantage to the person who prepares a contract, in cases where the meaning of the terms and conditions is unclear with respect to the regulation of the terms and conditions. As seen earlier, the intent of the parties to a long-term continuing construction contract or the relevant legal provisions are apparent. The principle of disadvantage to the person who enters into a long-term continuing construction contract may not be applied in cases where such purport is unclear. Accordingly, the

D. The total construction cost and the total construction period in a long-term continuing construction contract are less than the amount of a provisional estimate, and are limited to making an additional statement in the overall manner at the time of an annual contract by reflecting these points. Nevertheless, the Dissenting Opinion argues that granting independent binding power during the total construction period originally stated, and recognizing additional construction cost for the excess period is contrary to the purport of relevant legal provisions, and is also inconsistent with the unique nature of a long-term continuing construction contract.

Whether to extend the construction period in a long-term continuing construction contract ought to be determined on the basis of the construction period of an annual contract. In addition, if there is a reason to adjust the contract amount, such as a claim for additional construction cost due to the extension of the construction period, the application shall be made not later than the payment of the cost for completion of the annual contract, in accordance with the procedures and methods prescribed by the State Contracts Act. After the completion of the total construction period, the first additional additional period

By interpreting as the majority opinion, it will reduce disputes over additional construction costs in a long-term continuing construction contract and enhance the accuracy of contract price adjustment.

As above, I express my concurrence with the Majority Opinion.

Justices Kim Jong-soo (Presiding Justice)