2016Da215721 Construction Price

Korea-U.S. and one other

Attorney Strict-hoon et al.

National Railroad Authority (titled before modification: Korea Rail Network Authority)

Law Firm Han-chul et al., Counsel for the plaintiff-appellant

[Defendant-Appellant] 1 and 2 others

Seoul High Court Decision 2015Na2025745 Decided March 10, 2016

January 14, 2021

All appeals are dismissed.

The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. A claim for indirect construction costs incurred by extension of the construction period;

A. Article 21(2) of the Act on Contracts to which the State is a Party (hereinafter “State Contracts Act”) provides that “The head or a contracting officer of each central government agency may conclude a long-term continuing contract, as prescribed by Presidential Decree, if it is necessary to continue to maintain the contract for several years or if it is necessary to implement the contract in light of its nature, such as lease, transportation, storage, supply of electricity, gas, and tap water. In such cases, the State shall require the performance of the relevant contract within budgetary limits of each fiscal year.” Article 69(2) of the Enforcement Decree of the Act on Contracts to which the State is a Party shall additionally state the total cost determined by a successful bid, etc., and shall conclude a contract with the State to perform the first construction within budgetary limits of the pertinent fiscal year. In such cases, a contract after the second construction must be concluded within the extent of the total cost additionally stated (referring to the total cost adjusted if the contract price is adjusted under Articles 64 through 66).”

On the other hand, a long-term continuing construction contract is a contract in which annual installments are executed in accordance with the fiscal year by setting the total amount of projects over several fiscal years with prior approval of the National Assembly for the total expenses of the project and adding annual installments to the annual installments. On the other hand, a long-term continuing construction contract is executed in the form of adding the total cost and total construction period to the primary construction contract (the agreement on the total cost and total construction period stated at the time of entering into the first construction contract).

Supreme Court en banc Decision 2014Da235189 Decided October 30, 2018 ruled that "the validity of the so-called general contract in a long-term continuing construction contract is limited to the decision of the contracting party, the determination of the intention to perform the contract, the contract price, the details of the performance to be performed by the contracting party, the scope of the contract price to be paid to the contracting party, the period of execution of the contract, etc." Therefore, the binding force of the total construction contract period in a contract that is in progress for more than one year among the contracts to which the State is a party is only recognized as a continuing expenditure contract (see the above en banc Decision), and

B. According to the reasoning of the lower judgment, the following facts are revealed.

On November 18, 2004, the plaintiffs formed a joint venture, and entered into a contract with the defendant and the defendant on November 18, 2004, under which the total cost of construction in the form of a long-term continuing contract is KRW 24,33,00,000, the total construction period of the first contract is KRW 48 months from the commencement date of the construction, the construction cost of the first contract is KRW 150,00,000, and the construction cost of the first contract is KRW 150,000 from the commencement date of the construction period, and December 31, 2004 from the commencement date of the construction period. Thereafter, the plaintiffs and the defendant entered into a modified contract by reflecting the design change or change of construction period arising from the construction process, while maintaining the deadline for the total construction cost and the construction cost was changed to the former long-term continuing contract (hereinafter referred to as the "Continuing expenditure contract in this case"), and the plaintiffs did not have any obligation to pay the total construction cost in addition to the changed contract.

Examining the reasoning of the lower judgment in light of the relevant legal principles, the instant contract concluded by the method of a long-term continuing contract is not recognized as having been changed to a single continuing expenditure contract retroactively through the instant continuing expenditure contract. Although the reasoning of the lower judgment is inappropriate, the lower court did not err by misapprehending the legal doctrine regarding the relationship between continuing expenditure contracts and long-term continuing contracts, interpretation of modified contracts, adjustment of indirect construction costs, and requirements for claims, etc., contrary to what is alleged in the grounds

2. Claim for agreed amount;

The lower court rejected the Plaintiffs’ claim for the agreed amount on the ground that it is difficult to recognize that the Defendant agreed to pay the Plaintiffs the sum of KRW 42,500,000,000, which occurred from January 1, 2010 to February 28, 2012, as additional indirect expenses, by citing the judgment of the first instance court.

Such judgment below did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules.

3. Conclusion

The plaintiffs' appeals are dismissed in entirety as it is without merit, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

The presiding Justice shall mobilization by the presiding Justice

Justices Kim Jae-sik in charge

Justices Min Min-young

Justices Noh Tae-ok