[1] Whether it is necessary to specifically examine and determine the actual amount of damages when determining whether the “determined amount of damages” was unreasonably excessive (negative), and whether it is necessary to prepare for the actual amount of damages or estimated amount of damages in case where the actual amount of damages or estimated amount of damages can be known in the record (affirmative)

[2] The case reversing the judgment of the court below that reduced the estimated amount of damages on the ground that the actual amount of damages or estimated amount of damages, which can be seen on the record, was not considered in light of the circumstances inappropriate as the grounds for consideration

[1] Article 398(2) of the Civil Act / [2] Article 398(2) of the Civil Act

[1] Supreme Court Decision 95Da33658 delivered on November 10, 1995 (Gong1995Ha, 3912) Supreme Court Decision 2004Da3543 Delivered on July 22, 2004

Il Construction Co., Ltd. (formerly Revised: Pungsung Corporation) (Law Firm Barun Law, Attorneys Lee Dong-mo et al., Counsel for the plaintiff-appellant)

Seoul Guarantee Insurance Co., Ltd. (Attorney Choi Sung-sung, Counsel for defendant-appellant)

Co., Ltd. and one other

Seoul High Court Decision 2009Na63085 decided July 1, 2010

The part of the judgment below against the plaintiff as to contract deposit shall be reversed, and this part of the case shall be remanded to the Seoul High Court.

The grounds of appeal are examined.

1. The lower court, as indicated in its reasoning, acknowledged that the Plaintiff’s construction of 10 billion won and 20 billion won of the 20th anniversary of the conclusion of the subcontract agreement with the Defendant’s Intervenor, Co., Ltd. (hereinafter “Supplementary Intervenor”) on March 28, 2007 regarding the 1, 2nd complex construction among the said new construction works (hereinafter “instant 40% of the contract amount”). The lower court guaranteed the payment of the said contract deposit through the guarantee insurance contract concluded by the Defendant with the Intervenor, and subsequently, acknowledged the Defendant’s claim for insurance proceeds under the instant 40% of the contract amount to the Defendant on November 2, 2007, after the rescission of the instant 19 billion won contract amount for the instant 20 billion won and the Defendant’s claim for insurance proceeds under the instant 40% of the contract amount, which appears to have been unfairly 10 billion won or less than the contract amount to be paid to the Plaintiff on March 28, 2007.

2. However, the lower court’s determination on the reduction of the estimated amount of damages is difficult to accept for the following reasons.

Whether the estimated amount of damages is unreasonably excessive shall be determined by taking into account all the circumstances, such as the status of the obligee and the obligor, purpose and content of the contract, the motive behind the scheduled amount of damages, the ratio of estimated amount of damages to the amount of debts, the expected amount of damages, the transaction practices at the time of the determination of whether the estimated amount of damages is unreasonably excessive, in consideration of the size of damages expected to actually occur, the actual amount of damages should not be specifically examined and determined, but it is necessary to prepare for the actual amount of damages or estimated amount of damages if the actual amount of damages can be known in the record (see, e.g., Supreme Court Decisions 95Da33658, Nov. 10, 1995; 2004Da3543, Jul. 22, 2004).

(2) According to the facts duly established by the lower court, it is reasonable for the Intervenor to prepare and obtain the schedule of construction from the Intervenor without delay after entering into the instant construction contract. On the other hand, if it is necessary to adjust the construction work related to the instant tin to facilitate the construction of the said tin, the Intervenor would not be able to modify the construction period of the instant tin construction work after consultation with the Intervenor (Articles 3(2) and 4(1)). On the other hand, the Intervenor would not be able to undertake subsequent construction works, such as dismantling the outer wall, installing landscaping facilities, and installing inner floor and floor walls to the Plaintiff by 0.7 percent of the price of the instant tin construction work after the completion of the instant construction work, and the Plaintiff would not be able to present the schedule of construction by 0.7 percent of the price of the instant tin construction work to the Intervenor’s 20.4 billion won of the price of the instant tin construction work after the completion of the construction work, considering the fact that the 2nd 6th mar construction work was scheduled to be supplied to the Plaintiff.

Meanwhile, as stated in the holding of the court below, 10% of the subcontract amount is determined as the down payment and there are many cases where the supplementary intervenor agreed on the predetermined amount of compensation for damages in light of the facts acknowledged by the court below and the records. However, if the contract is terminated due to the failure of the supplementary intervenor to perform the instant stone construction contract in accordance with the agreement, it is reasonable to view that the ratio of the estimated amount of compensation for damages in this case is higher than the case of other subcontracted works, since it is expected that the degree of damages to be incurred by the plaintiff is relatively high compared to the case of other subcontracted works. Accordingly, the estimated amount of compensation for damages in this case is not easily reduced solely on the ground that the ratio of the estimated amount of compensation for damages in this case is somewhat higher than that of ordinary cases.

Furthermore, according to the facts acknowledged by the court below, the plaintiff cancelled the instant stone construction contract on the ground of the plaintiff's non-performance of the obligation, and disbursed 1.2 billion won more than the construction price of the portion agreed upon with the supplementary intervenor for the completion of the non-performance of the non-performance of the construction part. In light of the records, the plaintiff needs to carry out the construction of the non-execution part as above at a rapid and rapid rate in order to reach the greatest extent possible time for the air delayed due to the plaintiff's non-performance of the obligation and to minimize the damage arising from the delay of the construction part, and thus, it is not inevitable to additionally pay the construction cost as above. Thus, the increased construction cost is deemed as losses incurred by the supplementary intervenor's non-performance of the expenses within the reasonable scope disbursed for the completion of the non-execution part, unless there are special circumstances. The amount exceeds 1.2 billion won and the estimated amount for compensation for damages of this case exceeds 9,21

As seen above, it may be remarkably unreasonable in light of the principle of equity to reduce the estimated amount of damages of this case on the ground that the estimated amount of damages of this case is unfairly excessive. Nevertheless, the lower court did not take into account the actual amount of damages or estimated amount of damages and limited the Defendant’s guaranteed liability to the extent that the estimated amount of damages of this case was reduced to 50% and then reduced the Defendant’s guaranteed liability. In so doing, the lower court erred by misapprehending the legal doctrine on reduction of the estimated amount of damages of this case, thereby adversely affecting the conclusion of the judgment.

3. Therefore, the part of the judgment of the court below against the plaintiff as to contract deposit is reversed, and that part of the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Nung-hwan (Presiding Justice)