In case where it is deemed that matters not specified in the general conditions of the subcontract can be determined as special conditions, whether the contract performance guarantee can be determined as a penalty for breach of contract under special conditions different from the amount determined as the security of damages or the estimated amount of damages under the general conditions (affirmative)

Articles 105 and 398 of the Civil Act

Supreme Court Decision 200Da35771 Delivered on December 8, 2000 (Gong2001Sang, 262) Supreme Court Decision 2000Da42632 Delivered on January 19, 2001 (Gong2001Sang, 513)

z. S. Construction Co., Ltd. (Attorney Jeon Young-young, Counsel for the plaintiff-appellant)

Specialized Construction Financial Cooperative (Law Firm Gyeong & Yang, Attorneys Kim Yong-ki et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2007Na110307 decided Dec. 24, 2008

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

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

With regard to the general condition of the subcontract of this case (hereinafter “general condition”), Article 7(5) of the General condition of the Subcontract of this case (hereinafter “○○ Construction”) provides that “where the Plaintiff cancels or terminates all or part of the contract due to the Plaintiff’s failure to perform contractual obligation, the Plaintiff may claim payment of the amount equivalent to losses arising from the cancellation or termination of the contract,” and Article 4(2) of the Special Conditions for the Subcontract of this case (hereinafter “Special Conditions”) provides that “where the contract is terminated or terminated due to the cause attributable to ○○ Construction, the amount deposited as the contract deposit belongs to the Plaintiff in full as the penalty, and where additional damages are proved, the amount deposited as the contract deposit belongs to the Plaintiff in full, and the additional damages should also be repaid if it is proved, the general condition is generally defined as “amount equivalent to losses,” and it cannot be deemed that the specific condition is contrary to or inconsistent with the overall contract deposit as stipulated in the special condition, and thus, the lower court rejected the Plaintiff’s claim that the remainder of the contract deposit under the special condition of this case belongs to the total damages.

According to the records, Article 1 of the General Conditions provides that "other contracts the contents of which are contrary to the terms of this contract shall take precedence over those of this contract: Provided, That this shall not apply to the matters not specified in this contract under Article 30 (Special Conditions) with the plaintiff and ○○ Construction on an equal footing, and Article 30 of the General Conditions provides that "the matters not specified in this contract may be determined by special agreement on an equal footing." This provision provides that "The plaintiff and ○○ Construction may be determined by special agreement on an equal footing." The purport of the provision is that legal relations between the plaintiff and ○○ Construction shall be applied first in principle, but if special agreement is stipulated by the agreement between the plaintiff and ○○ Construction, the special conditions shall be applied first in preference to the general conditions, and it shall not be deemed that the special conditions are more specific than those of the contract performance bond, so it shall not be deemed that the provisions of the general conditions are more specific than those of the contract performance bond, and it shall not be deemed that the general conditions are more specific than those of the contract performance bond, and shall not be applied to the plaintiff.

On the other hand, where the contract is terminated due to the reasons attributable to the contractor who entered into the contract and the terms and conditions of the contract, whether the contract performance bond belongs to the contractor shall be determined individually in a specific case by taking into account the contract and the terms and conditions, etc., and the penalty is presumed to be liquidated damages under Article 398(4) of the Civil Act. Thus, the special circumstance that the penalty for breach of contract is to be interpreted as penalty for breach of contract should be asserted and proved (see Supreme Court Decisions 2000Da35771, Dec. 8, 200; 200Da42632, Jan. 19, 2001, etc.).

However, Article 24 of the General Conditions, which are the contents of the subcontract of this case, provides that "if ○○ Construction fails to complete the construction work within the time limit for construction completion stipulated in the contract, the interest rate for delay as stipulated in the contract amount and the number of delayed days shall be paid to the plaintiff," and separate provisions concerning contract deposit under Article 7 (5) of the General Conditions and Article 4 (2) of the Special Conditions provide for matters concerning contract deposit separate from the contract deposit, but there is an agreement for liquidated damages, but Article 4 (2) of the Special Conditions provides that "if additional damages are proved, the additional damages shall also be paid if the amount of damages incurred by the cancellation or termination of the contract exceeds the contract deposit, the additional damages shall be paid." In light of the fact that the contract deposit of this case shall be deemed to be excessive damages if the contract of this case is cancelled or terminated due to reasons attributable to ○○ Construction, the court shall be deemed to have the nature of the contract deposit of this case, and therefore, it shall not be deemed to have the nature of the liquidated damages if it exceeds the contract deposit.

Nevertheless, the court below did not further decide on the defendant's assertion that the contract performance bond of this case was reverted to the plaintiff regardless of whether the contract performance bond of this case was damaged or not, and that the contract performance bond of this case should be unfairly reduced as the liquidated damages. The court below did not err by misapprehending the legal principles as to the interpretation of the contract performance bond.

However, according to the facts established by the court below, the subcontract of this case was terminated due to the cause attributable to ○○ Construction, and the contract performance bond of this case is only 1/10 of the total construction cost. In general, in light of the fact that 10% of the subcontract price is determined as contract deposit in the construction subcontract and that the contract performance bond of this case is a transaction business practice, it is deemed that the contract performance bond of this case is unreasonable, and the above error of the court below does not affect the conclusion of the judgment. The allegation in the grounds of appeal on this part is not acceptable.

2. Regarding ground of appeal No. 2

The court below, based on its adopted evidence, found facts as stated in its decision. The plaintiff and ○ Construction made an agreement on the settlement of construction price on April 2004 immediately after the agreement on the increase of construction price was reached between the plaintiff and the National Agricultural Cooperative Federation, and thereafter, did not reach an agreement on the settlement of construction price in relation to the increase of construction price by the price index increase rate to the plaintiff. In light of the above facts, it is reasonable to deem that the plaintiff and ○ Construction settled the construction price in consideration of price fluctuations up to the price fluctuation portion at the time of the settlement agreement, on the premise that ○ Construction has the claim for the construction price of KRW 151,313,800 increased due to the price fluctuation portion against the plaintiff, the court below rejected the defendant's defense that the above claim against the defendant is offset against the amount equal to the contract deposit claims against the plaintiff. In light of the records, it is just and there is no violation of the rules of evidence or misapprehension of legal principles as to offset, etc. as alleged in the grounds for appeal.

3. Conclusion

Therefore, the appeal is dismissed, 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.

Justices Park Ill-sook (Presiding Justice)