[1] The method of interpreting the intent of the parties expressed in the disposal document

[2] In a case where a contract is rescinded on the ground of delay of performance, whether the peremptory notice of performance, which is a prerequisite for premise, should be specified in advance for a certain period (negative), and in a case where the obligor notifies the rescission of the contract on the ground of the obligor’s default, whether it can be deemed that the peremptory notice of performance had

[3] Requirements to cancel a contract in a case where it is evident that the contractor’s discontinuance of construction works or delay in construction works is impossible to complete construction works within the agreed construction period

[4] Whether it can be readily concluded that the performance of a contract was impossible solely because one of the parties to the contract had defaulted during the contract term due to the fact that the contract was not performed (negative), and the standard for determining whether the contract is impossible

[5] The validity of a standardized contract that provides that a business operator shall grant a business operator the right of rescission or termination which is not provided by law, or a business operator shall exercise the right of rescission or termination under law which might put customers at an disadvantage

[1] Article 105 of the Civil Act / [2] Articles 543 and 544 of the Civil Act / [3] Articles 544 and 668 of the Civil Act / [4] Article 390 of the Civil Act / [5] Articles 6 and 9 subparagraph 2 and 3 of the Regulation of Standardized Contracts Act

[1] Supreme Court Decision 2004Da60065 Decided May 27, 2005 (Gong2005Ha, 1031), Supreme Court Decision 2006Da15816 Decided September 20, 2007 / [2] Supreme Court Decision 94Da35930 Decided November 25, 1994 (Gong195Sang, 102), Supreme Court Decision 2002Da24942 Decided August 27, 2002 (Gong202Ha, 2295) / [3] Supreme Court Decision 96Da21393, 21409 (Gong196Ha, 3425) Decided October 25, 1996 / [3] Supreme Court Decision 2008Da66784 Decided April 26, 2006

Suwon Construction Co., Ltd. (LLC, Kim & Lee LLC, Attorneys Oi-seok et al., Counsel for the defendant-appellant)

Samsung C&T Co., Ltd. (LLC, Kim & Lee LLC, Attorneys Song-seok et al., Counsel for the defendant-appellant)

Specialized Construction Financial Cooperative (Law Firm KEL, Attorneys Dog-dam et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2012Na30726 decided June 21, 2013

Of the part against the defendant in the judgment below against the defendant, the part against the contract deposit for the second construction subcontract and the part against the plaintiff Daewoo Construction Co., Ltd. is reversed, and this part of the case is remanded to the Seoul High Court. The remaining appeal by the defendant is dismissed.

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

1. As to the Defendant’s ground of appeal

A. As to the ground of appeal on the part of the contract deposit related to the construction subcontract contract Nos. 1 and 3 of the judgment below

(1) In a case where there is a difference between the parties regarding the interpretation of a contract, and the interpretation of the intention of the parties expressed in the disposition document is at issue, it shall be reasonably interpreted in accordance with logical and empirical rules by comprehensively taking into account the contents of the text, the motive and background leading up to the agreement, the purpose to be achieved by the agreement, the parties’ genuine intent, etc. (see, e.g., Supreme Court Decisions 2004Da6065, May 27, 2005; 2006Da15816, Sept. 20, 2007).

In cases where a contract is rescinded for a delay of performance, the peremptory notice of performance, which is a prerequisite for such delay, does not necessarily have to be clearly stated in advance for a certain period, and the right of rescission arises after a reasonable period has elapsed from the time of the peremptory notice. In cases where a debtor's notification is given that he/she would rescind the contract on the ground of the debtor's default, it can be deemed that the peremptory notice of performance was made unless the purport of refusing the receipt of the payment is particularly included. If the contract is not performed after a reasonable period has elapsed, the obligee may rescind the contract (see Supreme Court Decisions 94Da35930, Nov. 25, 1994; 2002Da24942, Aug. 27, 2002).

In addition, the court determines whether the assertion of facts is true in accordance with logical and empirical rules on the basis of the ideology of social justice and equity with free evaluation of evidence taking into account the overall purport of pleadings and the result of examination of evidence (Article 202 of the Civil Procedure Act). The facts duly confirmed by the court of final appeal that the court below did not go beyond the bounds of the free evaluation of evidence (Article 432 of the same Act).

(2) Review of the reasoning of the lower judgment and the first instance judgment partially accepted by the lower court reveals the following facts.

(A) On November 1, 2005, the Plaintiff Treatment Construction Co., Ltd. (hereinafter “Plaintiff Treatment Construction”) entered into a subcontract with respect to five sections of tunnel construction (the first construction in the original judgment; hereinafter “first construction”) among the six sections of construction sections of 99,00, the construction period of which was set at KRW 16,76,20,000 among the construction works of 6 sections of 99,00,000, and on November 30, 2009, the construction price was changed to KRW 17,823,410,000.

② On November 26, 2007, the Plaintiffs entered into a subcontract with respect to the construction period of the 31st phase 2nd phase 31 national highways among the first phase 2nd radioactive waste disposal facilities (the third phase 3 construction as indicated in the judgment of the court, and hereinafter “third phase 3 construction”) from November 26, 2007 to October 31, 2009, the construction cost was KRW 8,778,000,000.

③ Since then, the construction period of the first and third subcontract works was changed by April 30, 2013 and June 30, 201, respectively.

(B) Article 4 of the 1 and 3 construction subcontract agreement provides that the performance guarantee for the down payment shall be 10% of the contract amount, and the down payment shall be made in full, regardless of the progress rate at the time of breach of the contract.

The amount of the first contract deposit is KRW 1,782,341,00 at the time of August 12, 2009, and the amount of the third contract deposit was KRW 87,80,000 at the time of November 29, 2007, and the amount of the third contract deposit was changed thereafter). The Defendant’s guarantee agreement stipulates that the Defendant bears the guaranteed liability if the obligor fails to perform his/her obligation or obligation to the other party due to the cause attributable to the said construction subcontract, and the content of the guarantee accident regarding contract guarantee is “cancellation or termination of the contract due to the failure to perform the contract within the guarantee period”.

(C) (1) Article 15 of the respective special conditions of the subcontract for the 1 and 3 works provides that “If a subcontractor commences a procedure of default, bankruptcy, corporate reorganization, or fails to pay on-site payments for at least two months, the subcontractor may cancel or terminate the relevant contract in whole or in part.”

② Meanwhile, Article 25(1)2 of the Standard Subcontract Form for Construction Business (hereinafter “Standard Subcontract Form”) which forms the contents of a subcontract for construction works is stipulated as follows: “When it is clearly deemed that a subcontractor is unable to complete construction works in the air due to a cause attributable to the subcontractor, such as default and bankruptcy, etc., due to the cause attributable to the subcontractor,” the subcontractor may cancel or terminate all or part of the relevant contract when the contract is not performed within the prescribed period after demanding the subcontractor to perform it in writing.

(D) On June 8, 2010, when performing the construction works Nos. 1 and 3, 2010 (hereinafter “the instant default”). Accordingly, on June 9, 2010, the Plaintiff Daewoo Construction sent a termination notice to the Jinjin Construction that it is impossible to perform the obligations under each of the instant subcontract agreements due to the instant default, and notified the termination of each of the said subcontract agreements pursuant to Article 15 of the Special Conditions for the Contract for the Construction Works and Article 25 of the Standard Subcontract Agreement. On June 15, 2010, the Plaintiff notified the Plaintiff that the said subcontract was terminated due to the failure to perform the obligations under each of the instant construction works. On February 13, 2012, the Plaintiff notified the Plaintiff of the termination of the first subcontract for construction works on the ground that the third subcontract was terminated.

(3) Based on the foregoing factual basis, the lower court determined that: (a) the first and third construction subcontract was legally terminated upon the notice of termination as of February 13, 2012; (b) the third construction subcontract was due to the instant default on payment; (c) the cause for termination on the first and third construction subcontract was occurred pursuant to Article 15 of each special condition of the first and third construction subcontract; and (d) the notification of termination as of June 9, 2010 cannot be deemed to have satisfied the requirements for the notification of termination as of June 9, 2010; (c) the first construction subcontract as of February 13, 2012; and (d) the third construction subcontract as of June 15, 2010 was legally terminated upon the notice of termination as of June 15, 2010; and (e) the suspension of construction due to the instant default on payment on payment on payment on payment on payment on payment on payment on payment on payment on payment on payment on payment on payment on payment on payment on payment on the guarantee.

(4) In addition to the above facts, the reasoning of the lower judgment and the evidence duly admitted reveal the following circumstances.

(A) Although the construction project is proceeding on January 31, 2007, it was discontinued due to the reasons such as the lack of budget in the ordering office, the Plaintiff Daewoo Construction paid KRW 113,520,180 in advance to the Jinho Construction, and the subcontract for the first construction project was modified on March 20, 2008; the construction cost was changed on January 30, 209 and January 8, 2010; the construction period was changed on April 30, 2013; and on August 7, 2009, it continued to implement the first construction project on August 12, 2009, including where the first guarantee contract was issued with respect to the contract performance guarantee; however, it was difficult to deem that the first construction project was suspended on the spot after the discontinuance of the construction project and only 1 management staff was paid on the site and the cause for the instant construction project was deteriorated due to the suspension of the construction project’s financial condition or aggravation of the construction site.

(B) In addition, on December 2, 2009, when the construction was resumed on December 22, 2009, the Plaintiff Medical Treatment Construction submitted a letter of waiver of construction that “if the construction is discontinued without consent, the remaining construction is waived and the contract is terminated, and no objection is raised.” Moreover, on May 17, 2010 immediately before the instant bankruptcy, the number of field management personnel was insufficient, and on May 18, 2010, the Plaintiff Medical Treatment Construction submitted a schedule of schedule of work for the first construction and requested the commencement of construction until the date of the instant default.

(C) On May 7, 2010, Jin-do paid the first default on May 20, 201, when the principal creditor bank received a subsidy of KRW 7 billion for new funds. On May 20, 2010, the first default on the payment of KRW 11 billion for three days, and the second default on the payment of KRW 11 billion was refused on June 8, 2010. The first default on the payment of this case was finally made on June 8, 2010. The Jin-do had maintained the immediately preceding 49 construction contracts, but only 12 of the instant default was proceeding, and the remainder was waived or suspended after the instant default on the payment of this case, and the employees who had been 392 persons immediately preceding the instant default on the payment of this case continued to reduce the amount to 50 persons on April 11, 2011, which practically lost the ability to carry out the construction works.

(D) Meanwhile, the Plaintiff sent the notice of termination as of June 9, 2010 and, if there is an objection, stated that the Plaintiff should submit its opinion in writing within one week after the receipt of the document. However, the Plaintiff did not submit any opinion within the said period, and thereafter filed an application for corporate rehabilitation procedures immediately thereafter.

(5) Examining these circumstances and the reasoning of the lower judgment in light of the aforementioned legal principles and the legal principles seen in the above sub-paragraph (b) above, the instant default occurred due to reasons attributable to the Plaintiff, and thereby, the construction as set forth in the 1 and 3 construction subcontract was suspended due to which the Plaintiff failed to perform the construction work properly, and the termination notification as set forth in the 1 and 3 construction subcontract was invalid as it was admitted by the lower court, but it was not effective as the notification of termination as set forth in the 1 and 3 construction subcontract, and the Defendant was obligated to pay the performance guarantee amount as a contract, on June 9, 2010, when it applied for corporate rehabilitation procedures without submitting any opinion or taking any other measure, due to the Plaintiff’s failure to perform the construction work within the air set forth in the 1 and 3 construction subcontract as at the time of the notification of each termination of the said contract. (B) Ultimately, as the result of the instant default and the interruption of construction work, which caused the termination of the subcontract for construction works.

Therefore, even if there are some inappropriate parts in relation to the reasoning of the court below that the failure to pay for the cancellation of the subcontract for construction works Nos. 1 and 3 merely due to the failure to pay for the cancellation of the subcontract for construction works, the court below's conclusion that the failure to pay for the construction works No. 1 and 3 has occurred due to the failure to pay for the damages caused by the failure to pay for the construction works No. 1 and 3 subcontract, and the occurrence of the occurrence of the guarantee of the first and third guarantee contract for the construction works is acceptable. In so doing, contrary to what is alleged in the ground of appeal, the court below did not err by misapprehending the legal principles on the meaning of failure to pay for

B. As to the ground of appeal on the part of contract deposit related to the second subcontract of construction works as stated in the judgment below

(1) Where it is evident in a contract for construction works that the contractor’s discontinuance of construction works or delay in construction works is impossible, the contractor may rescind the contract even before the expiration of the contract, but the contractor must demand the contractor to complete the construction works within a reasonable period of time from the above contract. In exceptional cases where the contractor expresses in advance his/her intention not to perform the construction works, the contract may be rescinded without the above peremptory notice (see, e.g., Supreme Court Decisions 96Da21393, Oct. 25, 1996; 96Da21393, Oct. 25, 1996).

Inasmuch as one of the parties to a contract has defaulted during the contract period, it cannot be readily concluded that the performance of the contract becomes impossible due to its own fault. Determination of whether performance of the contract is impossible by taking into account all the circumstances, including the degree of performance of the contract before and after the default, the cause leading to the default, the continuation or resumption of the business after the default, the financial situation of the performance of the contract, and other circumstances (see Supreme Court Decision 2004Da16976, Apr. 28, 2006, etc.).

In addition, the clause of a contract which is unfair in violation of the principle of trust and good faith, which is likely to put customers at an unreasonable disadvantage by granting a business operator the right of rescission or termination which is not prescribed by law, or by relaxing the requirements of the business operator's right of rescission or termination under the law, is null and void (Article 9 subparagraphs 2 and 3 of the Regulation of Standardized Contracts Act, and Article 6

(2) Review of the reasoning of the lower judgment and the first instance judgment partially accepted by the lower court reveals the following facts.

(A) On December 15, 2009, the Plaintiff Daewoo Construction entered into a subcontract with the construction period of KRW 32,780,000,000 for one construction section (the second construction in the original judgment, hereinafter “second construction”) among the construction works of the 24 construction sections of the Nakdongdong River-gu Seoul Metropolitan Government (hereinafter “the second construction”) from December 15, 2009 to December 15, 201, with the contract amount of KRW 32,780,000.

(B) Article 4 of the 2nd subcontract agreement of the construction project provides that “The contract deposit shall be deemed to be 10% of the contract amount, and the contract deposit shall be paid in full for the construction of the plaintiff treatment regardless of the progress rate at the time of violation of the contract.”

On December 29, 2009, Jup-up entered into a contract guarantee agreement with the Defendant with respect to the payment of the contract deposit for the second subcontract of construction works, and issued a contract guarantee to the Plaintiff treatment construction (hereinafter “second contract guarantee”). The Defendant’s guarantee terms and conditions stipulate that the Defendant bears the guaranteed obligation in the event the obligor fails to perform the obligation or obligation to the other party on the grounds of his/her responsibility in connection with the said contract for construction works, and the content of the contract guarantee event provides that “the cancellation or termination of the contract for nonperformance within the guarantee period”.

(C) (1) However, Article 2(7) of the subcontract agreement provides that “In the event of a subcontractor’s breach of contract, or an application for default, seizure, provisional seizure, preservation, bankruptcy, or commencement of reorganization proceedings, the issuing, endorsement, guaranteed bills, checks, etc. are defaulted, and in the event of a failure to perform the contract due to force majeure, such as a natural disaster, the subcontractor loses all the benefit of time, such as return of advance payment, construction performance, etc., and the subcontractor may terminate the contract without a separate performance peremptory notice.”

(2) In addition, Article 15(1) of the Special Conditions for the second subcontract of construction works provides that “If a subcontractor commences a procedure for default, bankruptcy, corporate reorganization, or fails to pay an on-site payment for at least two months, a subcontractor may cancel or terminate all or part of the relevant contract without a separate peremptory notice of performance.”

(3) Meanwhile, Article 25(1)2 of the Standard Subcontract Form, which forms the content of a second subcontract for construction works, provides that “When it is clearly acknowledged that a subcontractor is unable to complete construction works in the air due to a cause attributable to the subcontractor, such as failure to perform construction works, bankruptcy, etc., the subcontractor may cancel or terminate all or part of the relevant contract, if the contract is not performed within the specified period after giving written notice of performance.”

(D) On June 8, 2010, inasmuch as it is impossible to perform the obligations set forth in each of the above subcontract agreements due to the instant default on the payment of the debt for the instant construction works on the date of the bankruptcy on June 9, 2010 and the Plaintiff Daewoo Construction, on June 9, 2010, notified that the second subcontract agreement was terminated pursuant to Articles 7 and 15 of the Special Conditions for the Subcontract on Construction Works, and Article 25 of the Standard Subcontract Agreement.

(3) Based on the foregoing factual basis, the lower court determined that: (a) the instant default on the payment of the purchase price of the 2nd subcontract for the construction project; (b) the second subcontract for the construction project was lawfully terminated on June 9, 2010; and (c) Article 15(1) of the 2nd subcontract agreement falls under the terms and conditions; but (b) each of the above provisions falls under Article 6 and Article 9 subparag. 3 of the Regulation of Standardized Contracts Act; and (c) the said provisions cannot be deemed null and void on the grounds of Article 9 subparag. 3 of the 2nd subcontract agreement.

(4) However, examining the above facts and circumstances revealed by the evidence duly admitted in light of the aforementioned legal doctrine, the following is determined.

(A) Article 25(1)2 of the Standard Subcontract Agreement explicitly provides for the grounds for termination in paragraph (7), and provides that matters other than the conditions set forth in the second subcontract agreement may be set at the end of the contract as special conditions, etc., and complementaryly complements the terms and conditions of the standard subcontract agreement. Thus, in interpreting the grounds for termination and the requirements for exercising the right to terminate, such as default stipulated in paragraph (7) of the second subcontract agreement or Article 15(1) of the Special Conditions, it cannot be based on the principle of the grounds for termination and the procedure for termination as stipulated otherwise.

(B) Article 2(7) of the 2nd subcontract agreement provides that a subcontractor may terminate a contract without the peremptory notice of performance if the grounds for termination arise. However, given that a subcontractor’s breach of contract, negligence, seizure, provisional seizure, etc., which is stipulated as the grounds for termination under the 2nd subcontract agreement may resolve the said grounds within a considerable period of time or may implement a construction contract within the air regardless of such reasons, it is insufficient to readily conclude that the subcontractor is unable to perform the construction contract or that it is impossible to implement the construction contract within the air only because such grounds arise. Nevertheless, allowing the subcontractor to terminate the contract without the peremptory notice of the performance of the construction contract only if such grounds arise, granting the subcontractor the right to terminate the contract, which is not stipulated under the Civil Act, or eases the requirements for exercising the right to terminate the contract due to the discontinuance or delay of construction by the contractor, which is recognized under the Civil Act, and thereby, may unfairly disadvantage the subcontractor.

(C) In addition, the concerns that the relaxation of the requirements for the exercise of the right to terminate the contract may put customers at an unreasonable disadvantage may be deemed to fall under the case of Article 15(1) of the Special Conditions that provides that the subcontractor may terminate all or part of the contract without the notice of performance of the subcontractor’s default.

(5) Therefore, if Article 2(7) of the 2nd subcontract agreement and Article 15(1) of the 15th Special Conditions are terms and conditions as acknowledged by the lower court, it is reasonable to deem that each of the above provisions falls under Article 9 subparag. 2 and subparag. 3 of the 2nd subcontract agreement, and Article 6 of the 2nd subcontract agreement as invalid. Nevertheless, the lower court deemed that the 2nd subcontract agreement was lawfully terminated on the sole basis of Article 15(1) of the 2nd subcontract agreement and Article 15(1) of the 15th Special Conditions and recognized the occurrence of a guarantee accident of the 2nd contract guarantee, and thus, the lower court erred by misapprehending the legal doctrine on the Regulation of Terms and Conditions, or by failing to exhaust all necessary deliberations

On the other hand, Article 15 (1) of the 2nd subcontract agreement and Article 15 (7) of the 2nd subcontract agreement is null and void, as in the case of the 1st and the 3rd subcontract agreement, the grounds and procedures for termination as stipulated in Article 25 (1) 2 of the 2nd subcontract agreement shall be applied or the general legal principle under the 25th Civil Code shall be applied. In addition, the above notice of termination as of June 9, 2010 cited Article 25 of the 2nd subcontract agreement as one of the grounds for termination. Thus, the court below shall point out that it is necessary to additionally

2. As to the ground of appeal on Plaintiff Treatment Construction

A. According to the reasoning of the lower judgment and the first instance judgment partially admitted by the lower court and the evidence duly admitted, the following facts are revealed.

(1) On April 12, 2010, Jin-up entered into an advance payment guarantee agreement with the Defendant on the second subcontract for construction, and received an advance payment guarantee from the Defendant and submitted it to the Plaintiff Treatment Construction (hereinafter “instant advance payment guarantee”).

(2) ① Under the terms and conditions of guarantee by the Defendant, if the obligor fails to perform any obligation or obligation that the obligor owes to the other party due to the cause attributable to the subcontract for the second construction works, the Defendant bears the guaranteed obligation, and the content of the guaranteed accident is “non-performance of obligation to return advance payment arising within the period of

② However, Article 8(1)4 of the Guarantee Terms and Conditions provides that the Defendant shall not pay the security deposit in the event of the cancellation of the guarantee-related contract before the date of receipt of the letter of guarantee.

(3) On March 22, 2010, the Nonparty, the Nonparty, as the Nonparty, on the recommendation for the filling-up of the Plaintiff on March 22, 2010, received a decision of provisional seizure of claims (hereinafter “provisional seizure”) against KRW 28,99,300 among the claim for construction cost under the third subcontract for the Construction of the Plaintiff Treatment, and on March 26, 2010, the written decision of provisional seizure was served on the Plaintiff Construction.

B. Based on the foregoing factual basis, the lower court acknowledged that the instant provisional attachment constitutes grounds for termination stipulated in Article 2(7) of the 2nd subcontract agreement, and recognized that there existed grounds for termination of the 2nd subcontract agreement prior to the conclusion of the instant advance payment guarantee contract, and determined that the Defendant was exempted from the obligation to pay advance payment deposits to the Plaintiff Construction in accordance with Article 8 of the

C. However, as examined in the part of the second contract guarantee regarding the second contract subcontract for construction works, if Article 7 of the second contract subcontract for construction works provides that if the second contract for construction works is a standardized contract, the above provision may be deemed as a ground for termination of the subcontract without demanding performance only due to the occurrence of a certain fact, such as default and provisional seizure, and thus, it is null and void by Article 9 subparag. 2, subparag. 3, and Article 6 of the Act on the Regulation of Terms and Conditions, and therefore, it cannot be viewed as a ground for termination of the second contract for construction

D. In so determining, the lower court erred by misapprehending the legal doctrine on the interpretation of legal act and standardized contract, or by failing to exhaust all necessary deliberations, which affected the conclusion of the judgment, on the premise that paragraph (7) of the second subcontract agreement is valid.

3. Conclusion

Therefore, among the judgment below, the judgment of the court below on the remaining grounds of appeal by the defendant regarding the contract deposit amount of the contract deposit related to the second subcontract of construction works is omitted, and all of the part against the plaintiff Daewoo Construction Co., Ltd. is reversed and remanded to the court below for further proceedings consistent with this Opinion. The defendant's remaining appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Sang-ok (Presiding Justice)