[1] The method of determining the nature of the warranty bond agreed to be reverted to the contractor when the contractor's failure to repair the defects

[2] Where only a warranty bond is agreed without separately stipulating the damages, the case holding that the nature of the warranty bond is scheduled as liquidated damages

[1] Where a contractor who has been incorporated into a contract for work and a standardized contract for the contract receives a request for the repair of defects from a contractor during the warranty period, and fails to comply therewith, whether the warranty bond belongs to the contractor shall be determined individually in a specific case by considering the contract and the above standardized contract, etc., and the interpretation of intent to decide individually in a specific case. Since penalty is presumed to be an estimate for the amount of damages under Article 398(4) of the Civil Code, special circumstances should be asserted and proved to be interpreted as a penalty for breach of contract.

[2] The case holding that where a contractor fails to fulfill the obligation of repair of defects under the general terms of a contract for construction, the warranty bond belongs to the contractor, but it does not separately provide that the contractor shall compensate for the damages suffered by the contractor, but rather, if the contractor's actual expenses exceed the warranty bond deposited by the contractor under the contract for the repair of defects, the provisions on the reversion of the warranty bond shall substitute the warranty bond for the compensation of damages where the contractor fails to perform the obligation of repair of defects, the warranty bond shall be deemed to have the nature of the liquidated damages.

[1] Articles 105 and 398 of the Civil Act / [2] Articles 105 and 398 of the Civil Act

[1] Supreme Court Decision 2000Da35771 decided Dec. 8, 2000 (Gong2001Sang, 262)

Yongjin Construction Industry Co., Ltd. (Attorney Seo-gu, Counsel for the defendant-appellant)

Korea National Housing Corporation (Attorney Kim-type, Counsel for defendant-appellant)

Daejeon High Court Decision 2000Na4034 delivered on February 2, 2001

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

We examine the grounds of appeal.

1. On the first ground for appeal

A. According to the reasoning of the judgment below, the court below held that the plaintiff was awarded a contract for the construction of tin-type apartment located in Chungcheongnam-si, Chungcheongnam-si, Chungcheongnam-si, and Article 18 (1) of the General Conditions of the Construction Contract applicable to the contract for the construction work provides that "the contractor shall pay or submit in cash or in securities, etc. the warranty bond calculated by multiplying the contract amount by the warranty bond rate (3/100) for the construction work in order to guarantee the repair of the defect, until the contractor pays the consideration for the construction work after the completion of the construction work." Paragraph (3) of the same Article provides that the contractor shall guarantee the repair of the defect in question during the warranty period from the date the completion of the construction completion inspection to the date of the contract." Paragraph (4) provides that "if the contractor or joint guarantor fails to comply with the request of the contractor for the repair of the defect, the warranty bond shall belong to the contractor, and Paragraph (5) provides that the contractor shall be returned at the request of the plaintiff and the contractor within 75 days of the defect warranty bond.

B. Where a contractor who has been incorporated into a contract for work and the terms and conditions of the contract receives a request for the repair of defects from the contractor during the warranty period, and fails to comply therewith, whether the warranty bond belongs to the contractor shall be determined individually in a specific case by comprehensively taking into account the contract for work and the above terms and conditions. Since the penalty is presumed to be an estimate for the amount of damages under Article 398(4) of the Civil Act, special circumstances should be asserted and proved in order to interpret the penalty as a penalty for breach of contract (see Supreme Court Decision 2000Da35771, Dec. 8, 200).

However, according to the records, if the contractor fails to perform the obligation of repair of defects under the general terms of the contract for construction, which is the contents of the contract of this case, the warranty bond belongs to the contractor, and it does not separately provide that the contractor shall compensate for the damages suffered by the contractor. Rather, as stated in the reasoning of the court below, if the costs actually paid by the contractor for the repair of defects under the contract of this case exceed the warranty bond deposited by the contractor, the contract of this case cannot be held more responsibilities against the contractor. If the contractor fails to perform the obligation of repair of defects, the provisions on the ownership of the warranty bond of this case shall be deemed to substitute the compensation for damages by forfeiture of the warranty bond

Nevertheless, the court below erred by misunderstanding the fact that the warranty bond under the contract for construction works of this case constitutes a penalty for breach of contract or a penalty. However, as long as the above warranty bond can be seen as the liquidated damages, the conclusion that the defendant can confiscate the whole warranty bond under Article 18 (4) of the general conditions of the above contract for construction works in this case where the contractor and the joint guarantor did not perform the defect repair in spite of the occurrence of defects within the warranty period, the defendant's decision that the defect warranty bond can be confiscated under Article 18 (4) of the above contract for construction works is justifiable. Thus, the above error of the court below cannot affect the conclusion of the judgment. The ground of appeal pointing this out is based on the premise that the above warranty bond is merely a warranty bond to secure expenses incurred by the defendant

2. On the second ground for appeal

In light of the contents, form, etc. of the construction contract of this case, the above warranty bond provision shall be deemed to fall under the terms and conditions, but it shall not be deemed to fall under the provisions of Article 398 of the Civil Code, which are the provisions of the discretionary law permitted under the law, and it shall not be deemed to be naturally reverted to the defendant regardless of whether the repair is performed or not, and in consideration of the fact that the contractor can avoid the attribution of the warranty bond by having others, such as himself/herself or a joint guarantor, such as the contractor, perform the repair of defects, he/she may avoid the reversion of the warranty bond, it shall not be deemed to be a clause which is unreasonably unfavorable to the customer, or a clause which is in violation of Articles 6 and 8 of the Regulation of Standardized Contracts Act, which imposes excessive liability on the customer.

The judgment of the court below to the same purport is just and there is no error of law by misapprehending the legal principles of the Regulation of Standardized Contracts Act. The ground of appeal on this point is without merit

3. On the third ground for appeal

In order for the court to reduce the estimated amount of damages to be unfairly excessive, the following should be considered: (a) the economic status of the obligee and the obligor; (b) the purpose and content of the contract; (c) the scheduled amount of damages; (d) the estimated amount of damages; (e) the ratio of the estimated amount of damages to the obligation; and (e) the anticipated amount of damages; and (e) the details leading to nonperformance and transactions after the contract.

According to the court below's findings, although the defendant requested the repair of defects over several occasions for both the plaintiff and the joint guarantor, the defendant did not comply with it for not more than two years, and the defendant spent half of the above defect repair expenses as the defect repair expenses. According to the records, the defendant, due to the defendant's failure to perform the plaintiff's defect repair obligation, suffered significant loss or intangible loss in addition to the defect repair expenses actually incurred. In light of all the above circumstances mentioned in this case, it is not recognized that the above defect repair amount as the amount of the defect repair bond which the plaintiff planned to vest in the defendant at the time of the plaintiff's non-performance of the defect repair obligation

The court below's rejection of the Plaintiff's assertion of reduction is justified, and therefore, it cannot be deemed that there is an error of law by misunderstanding the legal principles that affected the conclusion of the judgment, as otherwise alleged in the ground of appeal. This part of the ground

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

Justices Lee Han-gu (Presiding Justice)