[1] The case holding that Article 64 (2) of the Enforcement Rule of the Act on Contracts to which the State is a Party cannot be deemed as a provision excluding the application of Article 64 (2) of the Enforcement Rule of the Act on Contracts to which the State is a Party

[2] Whether the contract bond can be deemed as a penalty for breach of contract solely on the ground that the contract bond is also stipulated in addition to the contract bond (negative)

[1] Article 105 of the Civil Act, Article 12(3) of the Act on Contracts to Which the State is a Party, Article 64(2) of the Enforcement Rule of the Act on Contracts to Which the State is a Party / [2] Articles 105 and 398(1) and (4) of the Civil Act

[2] Supreme Court Decision 2000Da50350 decided Dec. 8, 2000 (Gong2001Sang, 268) Supreme Court Decision 2004Da40579 decided Nov. 10, 2005

Plaintiff, an incorporated association (Law Firm Korea, Attorneys Lee Young-dae et al., Counsel for the plaintiff-appellant)

Construction Financial Cooperative (Law Firm and Persons, Attorneys Noh Don-ro et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2006Na32950 decided January 23, 2007

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. On the first and second grounds for appeal

In light of the developments leading up to the conclusion of the instant contract, the purpose of the contract, and the specific contents of the contract provisions admitted by the court below, the court below is just in holding that the relevant Acts and subordinate statutes, such as the Enforcement Rules of the Act on Contracts to Which the State is a Party (hereinafter “State Contract Act”), shall apply to the instant contract except as otherwise provided in the general conditions of the instant contract, and there is no error in the misapprehension of legal principles as to the interpretation of the contract, the scope of application of the statutes

2. On the third ground for appeal

According to the court below's findings, Article 8 (1) of the General Conditions of the Contract of this case provides that "if a party to the contract fails to perform any contractual obligation without any justifiable reason, the contract bond shall be reverted to the National Treasury." Article 64 (2) of the Enforcement Rule of the State Contracts Act provides that "if a joint guarantor performs any contractual obligation, the contract bond shall not be attributed to the National Treasury" under Article 12 (3) of the State Contracts Act, which is the same purport as Article 8 (1) of the General Conditions of the State Contracts Act. Thus, it shall not be deemed that Article 8 (1) of the General Conditions of this case provides that "if a joint guarantor performs any contractual obligation, the contract bond shall not be attributed to the National Treasury." In addition, it shall not be deemed that Article 64 (2) of the Enforcement Rule of the State Contracts Act is a provision excluding the application of Article 64 (2) of the Enforcement Rule of the State Contracts Act or any separate provision of the contract of this case to exclude it from the application of Article 8 (1) of the Enforcement Rule of the State Contracts Act.

In the same purport, the court below is just in rejecting the Plaintiff’s assertion that the application of Article 64(2) of the Enforcement Rule of the State Contracts Act should be excluded from the contract of this case, and there is no error in the misapprehension of legal principles as to the interpretation of general terms and conditions

3. On the fourth ground for appeal

According to the evidence duly admitted by the court below, Article 8 (1) of the General Conditions of the Contract of this case provides that the contract bond shall belong to the National Treasury when the other party to the contract (contractor) fails to perform the contractual obligation. However, with respect to delay of performance, Article 25 (1) of the General Conditions Article 25 (1) of the General Conditions, if the contractor fails to complete the construction work within the deadline for completion, the contract shall pay in cash the contractor the amount calculated by multiplying the rate of compensation for delay as stipulated in the contract by the contract amount per every number of days, and there is no provision that the contractor may belong to the whole contract bond or the amount equivalent to compensation for delay of the contract from among the contract deposit due to delay of performance, and there is no agreement to that effect. On the other hand, since the penalty is presumed to be the estimate of compensation for delay pursuant to Article 398 (4) of the Civil Act, it is difficult to view the contract bond of this case as a penalty for breach of contract only on the ground that the contract bond of this case was stipulated in addition to the contract bond of this case.

In full view of the above circumstances, in the instant contract, even if the contractor has performed the obligation to complete the construction work ultimately, even if the performance of the obligation exceeds the original contract date and the contractor has a delay liability, the contractor shall be liable to pay the compensation for delay calculated according to the rate of the compensation for delay to the contractor, apart from the fact that the contractor is liable to pay the contractor the compensation for delay, the contractor shall not immediately revert the contract deposit to himself/herself on the ground of the contractor’s delay (Article 44(1)3 of the General Terms and Conditions of the instant contract shall be subject to the compensation for delay and shall not be able to terminate the contract if it is determined that there is no possibility that the contractor may complete the construction work even with the extension of the contract period (Article 44(1)3 of the General Terms and Conditions of the instant contract shall be subject to the cancellation and termination of the contract)

In the same purport, the court below is just in holding that although non-party 1 corporation, the contractor of the contract of this case, passes the deadline for the initial completion, the plaintiff's contract bond of this case cannot be attributed to the plaintiff. There is no error in the misapprehension of legal principles as to the interpretation of Article 64 (2) of the Enforcement Rule of the State Contracts Act as otherwise alleged in the

4. On the fifth ground for appeal

According to the court below's findings, under the guarantee agreement of this case, the guarantee creditor shall be the amount to be forfeited or forfeited to the extent of the amount guaranteed under the principal contract or related Acts and subordinate statutes. However, if the principal contract does not include the forfeiture or reversion clause, it shall be the actual amount of damages out of the amount claimed by the guarantee creditor within the limit of the guaranteed amount (Article 3 (1) of the guarantee agreement), and the actual amount of damages shall not be included in the agreed amount of compensation for delay (Article 3 (2) of the guarantee agreement).

In full view of the above terms and conditions of the contract of this case and the general conditions of the contract of this case as seen earlier, the Plaintiff, the guarantee creditor, cannot claim the security deposit equivalent to the contract deposit on the ground that the contract deposit has accrued to himself/herself if the completion of construction has been delayed, and cannot claim the security deposit equivalent to the contract deposit for delay. However, it is only possible to claim the security deposit corresponding to the amount of damages by proving

In the same purport, the court below is just in holding that the defendant cannot be held liable to guarantee the obligation to compensate for delay borne by the non-party 2 corporation, the contractor of the contract of this case, to the plaintiff, and there is no error in the misapprehension of legal principles as to the interpretation of contract guarantee clause as otherwise

5. On the sixth ground for appeal

In light of the reasoning of the judgment below and the records, the provision of Article 64(2) of the Enforcement Rule of the State Contracts Act that if a joint and several surety performs a contractual obligation, the contract deposit shall not be attributed to the contractor is not immediately a ground for payment of the security deposit under the contract of this case, but the Plaintiff is not a party to the contract of this case. Thus, there is no problem regarding the violation of the duty to specify and explain the contract of this case or

Although the court below did not make any particular decision as to the plaintiff's above assertion, it is clear that the argument is dismissed, so it does not affect the conclusion of the judgment, and it cannot be said that there is an error of omission of judgment as alleged in the ground of appeal

6. Conclusion

Therefore, the appeal is dismissed and the costs of appeal are assessed against the plaintiff. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Cha Han-sung (Presiding Justice)