[1] The meaning and validity of the so-called "general contract" in a long-term continuing construction contract under Article 21 of the former Act on Contracts to Which the State Is a Party, and Article 69 (2) of the Enforcement Decree of the Act on Contracts to which the State is a Party, and the validity thereof / Whether an application for the adjustment of contract amount on the grounds of extension of the total construction

[2] The elements to recognize an application for adjustment based on an extension of a construction period as an application for the adjustment of a construction amount for an extension of a construction period by the relevant number

[1] Article 21 of the former Act on Contracts to Which the State is a Party (amended by Act No. 1739 of Jun. 9, 2020), and Article 69(2) of the Enforcement Decree of the Act on Contracts to which the State is a Party is a long-term continuing construction contract, not in the form of entering into a separate contract concerning total construction cost and total construction period, but in the form of additional statement of total construction cost and total construction period, when entering into a primary construction contract for each business year, prior to the conclusion of the contract. The agreement on total construction cost and total construction period additionally stated at the time of entering into the primary construction contract is ordinarily called a "general contract" and such general contract is not in conformity with the final agreement on total construction cost and total construction period, but rather linked with the conclusion of each annual contract. In other words, the general contract is not based on the overall scale, construction period, construction period, etc. of each party to the contract, and the terms and conditions of the comprehensive contract should be determined based on the terms and conditions of the contract as a whole contract.

Meanwhile, even if the cause for the adjustment of the contract amount due to the extension of the construction period has occurred, the adjustment of the contract amount by itself is not automatically performed, but is done only by the legitimate application for the adjustment of the contract amount against the other party. Thus, it is difficult to view the application for adjustment of the contract amount on the ground of an extension of the total construction period under the overall

[2] In order to recognize an application for adjustment based on the extension of construction period as an application for adjustment of construction amount for the extension of construction period by the relevant number of units, the requirements for application for adjustment of the contract amount should be met, such as completing the last period of each type of contract or the payment of construction cost before the completion of construction. In full view of the forms and contents of application for adjustment such as the extension of construction period by the relevant number of units, the time of application for adjustment, the method of calculating adjustment amount, etc., the intention of application for adjustment for extension of construction period by the relevant number of units should be considered to the extent that it can be objectively stated.

[1] Articles 19 and 21 of the former Act on Contracts to Which the State is a Party (amended by Act No. 1739 of Jun. 9, 2020); Articles 66(1) and 69(2) of the Enforcement Decree of the Act on Contracts to which the State is a Party / [2] Articles 19 and 21 of the former Act on Contracts to which the State is a Party (amended by Act No. 1739 of Jun. 9, 2020); Articles 66(1) and 69(2) of the Enforcement Decree of the Act on Contracts to which the State is a Party

[1] Supreme Court en banc Decision 2004Da28825 Decided September 14, 2006 (Gong2006Ha, 1721), Supreme Court en banc Decision 2014Da235189 Decided October 30, 2018 (Gong2018Ha, 2370), Supreme Court Decision 2017Da201699 Decided November 29, 2018

Uniform Construction Co., Ltd. and two others (Attorney Yellow-il, Counsel for the defendant-appellant)

Seoul Special Metropolitan City (Law Firm LLC, Attorneys Park Dong-young et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2017Na201296 decided August 16, 2019

The part of the lower judgment against the Defendant regarding the ancillary claim is reversed, and that part of the case is remanded to the Seoul High Court.

The grounds of appeal are examined.

1. On the grounds indicated in its reasoning, the lower court: (a) determined that the Plaintiffs’ application for the adjustment of the contract amount on February 27, 2014 (hereinafter “instant application for adjustment”) can be deemed legitimate application for the adjustment of the contract amount for the extended construction period of the fourth unit contract; and (b) accepted part of the Plaintiffs’ conjunctive claim.

2. However, we cannot accept the judgment of the court below for the following reasons.

A. Article 21 of the former Act on Contracts to Which the State is a Party (amended by Act No. 1739, Jun. 9, 2020; hereinafter “State Contract Act”) and Article 69(2) of the Enforcement Decree of the Act on Contracts to which the State is a Party is a long-term continuing construction contract, is not in the form of concluding a separate contract with regard to total construction cost and total construction period, and is not in the form of concluding a separate contract with regard to the total construction cost and total construction period for each individual business year, but rather in the form of adding the total construction cost and total construction period to the initial contract. The agreement on the total construction cost and total construction period additionally stated at the time of concluding the first contract with regard to construction work is ordinarily referred to as a “general contract”. Such general contract is not in itself based on a conclusive agreement with regard to the total construction cost or total construction period, but rather linked with the conclusion of each annual contract. In other words, a general contract is a specific standard for executing a contract with regard to total construction cost and total construction period, 2010.

Meanwhile, even if the cause for the adjustment of the contract amount due to the extension of the construction period has occurred, it does not automatically perform the adjustment of the contract amount by itself, but rather takes place upon the party’s legitimate application for the adjustment of the contract amount to the other party (see Supreme Court Decision 2004Da28825, Sept. 14, 2006, etc.). Thus, the application for adjustment of the contract amount on the ground of an extension of the total construction period stipulated in the general contract rather than the construction period

In order to recognize an application for adjustment based on the extension of a construction period as an application for the adjustment of a construction amount for the extension of a construction period by the relevant number of vehicles, the application for adjustment of a contract amount shall meet the requirements for the relevant number of vehicles, such as completing the contract amount prior to the execution of the final payment of the construction cost or the payment of the construction cost. In full view of the forms and contents of the application for adjustment such as the extension of construction cost by the relevant number of vehicles, the time of application for adjustment, the method of calculating adjustment amount, etc., the intention of an application for adjustment for extension of a construction period by the number

B. Review of the facts and records acknowledged by the lower court reveals the following facts.

1) Around December 2009, the Defendant entered into a contract by adding the date of completion of the total construction to January 5, 2012 with a joint supply and demand organization consisting of the Plaintiffs who participated in the tender of the instant construction.

2) As the instant construction was carried out, the construction period and the total construction period by the number of teas were extended several times. The instant construction period and the total construction period by the number of teas concluded around January 2013 was also set on December 31, 2013. However, around September 28, 2013, the term of completion of the instant construction was changed to February 28, 2014, and the total construction completion date by June 30, 2014.

3) On February 27, 2014, prior to the date of receipt of the completion price of the contract by the fourth number of vehicles, the Plaintiffs filed the instant application for mediation with the Defendant. The written application for mediation sent at the time stated that “the instant application for mediation shall claim indirect costs for the extension of the construction period of the instant construction (from January 25, 2013 to June 30, 2014)” as the title “cases of claims for indirect costs arising from the extension of the construction period.”

4) On February 28, 2014, the Plaintiffs received the completion price of each contract by the fourth number of teas, and concluded the fifth number of teas contract on March 2014 and continued the fifth number of teas contract. The fifth number of teas contract was extended on October 15, 2014 by the final completion date.

5) The Plaintiffs filed the instant lawsuit by asserting that the instant application for mediation was an application for the adjustment of the total construction cost due to extension of the total construction period, and that the instant application for mediation was not accepted by the first instance court, and that the instant application for mediation contains an application for adjustment of construction cost for extension of the construction period by the fourth number of teas.

C. As such, considering that the extended construction period stated by the Plaintiffs in the instant application for conciliation is not the pertinent rent but the total construction period, the Plaintiffs entered into the 5th unit contract after the instant application for conciliation and carried out the 5th unit construction work, and the Plaintiffs asserted that the instant application for conciliation was an application for conciliation for extension of the total construction period and filed the instant lawsuit, it is difficult to regard the instant application for conciliation as an application for conciliation for extension of the construction period by the number of teas, and therefore, it is difficult to recognize it as the lawful contract amount for the extended construction period by the number of teas

Nevertheless, the court below held that the application for the conciliation of this case is a legitimate application for the conciliation of the contract amount with regard to the extension of the overall contract period due to the extension of the overall contract period, even if the contracting party presented only the extension of the overall contract period due to the reasons, the application for conciliation of this case should be interpreted as including the intent of additional cost claim arising from the extension of the overall contract period by the number of teas. In such a case, the court below erred by misapprehending the legal principles on the relationship between the overall contract in a long-term continuing construction contract, the annual contract, and the validity of the total construction period as stipulated in the overall contract, which affected the conclusion of the judgment. Furthermore, the purport of the judgment of the above

3. Therefore, without examining the remaining grounds of appeal, the part against the Defendant regarding the conjunctive claim among the judgment below is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Noh Tae-tae (Presiding Justice)