Construction Financial Cooperative (Law Firm Subdivision et al., Counsel for the plaintiff-appellant)

Korea Land and Housing Corporation (Law Firm Democratic, Attorneys Gyeong-Gyeong, Counsel for defendant-appellant)

May 18, 2012

1. The defendant shall pay to the plaintiff 5,921,271,016 won with 6% interest per annum from December 11, 2010 to June 1, 2012, and 20% interest per annum from the next day to the day of full payment.

2. The plaintiff's remaining claims are dismissed.

3. The costs of lawsuit shall be borne by the defendant.

4. Paragraph 1 can be provisionally executed.

The money stated in paragraph (1) of this Article and damages for delay

1. Basic facts

A. The relationship between the parties

The Defendant is the owner of the five sections of the construction work of the Daegu-do apartment (hereinafter “instant construction”) and the non-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-party-

(b) Conclusion of a contract for construction works and a performance bond;

(1) On August 27, 2007, the Defendant (limited to the Defendant before joining the Korea Land and Housing Corporation as the Defendant under the Korea Land and Housing Corporation Act; hereinafter the same shall apply) entered into a contract for construction works (hereinafter “the instant contract for construction works”) with a joint supply and demand organization (hereinafter referred to as the 80% east-dong, 00, 190,000 won (hereinafter referred to as the 36,043,922,584 won) composed of 33,740,00,000 won with respect to the instant construction works (hereinafter referred to as the “instant contract”). The instant contract for construction works included 1/100 of the contract amount for delay compensation (hereinafter referred to as the “instant contract for construction works”) as the special terms and conditions of the contract for construction works (the established rules and regulations of June 14, 2007).

(2) On August 27, 2007, the Plaintiff entered into a performance guarantee contract with the Defendant, the guaranteed creditor, the guaranteed amount of KRW 16,870,000,000, and the guaranteed period from August 27, 2007 to November 30, 2009 (hereinafter “instant performance guarantee contract”), and issued a guarantee certificate to the Granddong Co., Ltd. The main terms and conditions of the said contract are as follows.

Article 1 (Guarantee Responsibility) (1) of the Table contained in the main text of this Act (hereinafter referred to as the "Association") where a contractor (hereinafter referred to as the "contractor") fails to perform his/her contractual obligations under a contract for construction (hereinafter referred to as the "principal contract") on the front side (hereinafter referred to as the "Guarantee Accident") (hereinafter referred to as the "Guarantee Creditor"), or where the other party (hereinafter referred to as the "Guarantee Creditor") performs the contractual obligations instead of the other party, or the payment of the relevant Guarantee Deposit (hereinafter referred to as the "Guarantee Claim") is performed in accordance with the terms and conditions as stated in this Guarantee Statement. (2) The obligation to pay the Guarantee Claim under paragraph (1) shall not be included; 1.

(c) Suspension of construction and sprinkling inspections;

(1) During the process of the instant construction project, the construction project was interrupted upon the application for the procedure for the rehabilitation of Daedong-dong-dong on January 23, 2009, while the construction project of the instant case was being implemented by Daedong-dong-dong-dong-dong-dong-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Je-Pa-Pa-Pa-Pe-Pa-Pa-Pe-Pe-Pa-Pa-Pa-Pa-Pe-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-Pa-

Nevertheless, the Defendant, on March 24, 2009, knew about the construction progress of the instant construction project at all, requested for the execution of the construction project by stating that “the construction progress of the construction works of the Daedong-dong-dong-dong-dong-dong-dong-si is scheduled to conduct the confirmation inspection of claims and obligations,” and on the same day, requested the Plaintiff to take a prior measure against the Plaintiff to ensure that it does not interfere with the performance bond, etc. for the performance of the construction project by notifying the Plaintiff of the aforementioned notification on the first day. According to the safafic examination on the Taedong-dong-dong-dong-dong-dong, which was implemented on April 8, 2009, the period of the construction progress rate is 34.23

(2) Upon the occurrence of the construction’s continuous progress, the Defendant succeeded to the remaining construction works, and delayed the construction works, the Defendant urged the completion of the construction works on May 28, 2009, July 10, and July 30, 200, and informed the Plaintiff of the fact.

Notwithstanding the Section for Construction Promotion on August 6, 2009, the Defendant requested the Plaintiff to take measures to ensure that the performance of construction guarantee, etc. was not interrupted if it was determined that the construction for the first time was possible to complete the construction and that there was no intent to perform the construction works, and that the Plaintiff was notified of the Section for the construction during the construction. On August 17, 2009, the Defendant finally demanded the Plaintiff to demand that the Plaintiff perform the guaranteed obligation. According to the safafafafafafafafafafafaf for the first time implemented on September 1, 2009, the safafafafafafafafafafafafafafafafag, which was 4.07% at the above time, did not reach the expected progress rate of 94.02%. However, the construction period was 263 days in preparation for the progress rate.

D. Plaintiff’s performance of guarantee and claim for construction cost

(1) On September 9, 2009, the Plaintiff received the Defendant’s request for performance of guarantee, and asked about whether the company qualified as a guarantee performance company had the intent to execute the construction. However, there was no association member who expressed his intention to execute the construction. On September 23, 2009, the Plaintiff did not appear to participate in the tender even though it made an emergency tender announcement. Thus, on October 6, 2009, the Plaintiff continued the construction of this case upon obtaining the Defendant’s approval. On November 16, 2009, the Plaintiff requested the Defendant to extend the construction period of this case to the Defendant on November 16, 2009. The Defendant extended the period of completion of the construction of this case by 30 days. Accordingly, the period of completion of the construction of the construction of this case became November 30, 2009.

(2) On May 7, 2010, the Plaintiff completed the construction and machines construction work on May 13, 201, and completed the civil engineering work on May 13, 201 (this is advanced compared to the estimated construction period in comparison with the estimated construction period at the time of the inspection of stegrative stegrative steging). Under Article 48(3) of the General Conditions of the Construction Contract (Accounting Rules of March 5, 2007), which included the contents of the instant construction contract, the Defendant, who directly ordered the instant construction contract, requested the Plaintiff to pay only the completion payment of KRW 19,878,058,058,167 (i.e., the completion payment of KRW 36,043,922,584), 165,864,417, 2010, 2005, 20610, 2065, 2016, 2005, 2016

[Ground of recognition] Facts without dispute, Gap evidence 1 through 9, 11 through 20 (including branch numbers; hereinafter the same shall apply), Eul evidence 3, the purport of the whole pleadings

2. Determination as to the cause of action

According to the above facts, barring any special circumstance, the Defendant is obligated to pay to the Plaintiff the remaining construction cost of KRW 5,921,271,016 (i.e., the completion payment of KRW 19,878,058,058,167 (i.e., the completed construction payment of KRW 13,805,805,194,92,230 (i.e., waste disposal, etc. - the settlement cost of KRW 151,592,230 (i., the sum of KRW 5,660,271,016 and penalty of KRW 261,00,00) and damages for delay from December 11, 2010, which is the following day.

3. Determination on compensation for delay and defenses against the deduction of penalty

A. The parties' assertion and the issues of this case

(1) The defendant's assertion

Since the penalty for delay and penalty, which shall have been borne by Taiwan under the instant construction contract, are included in the scope of guarantee of the instant contract, the amount equivalent to the penalty for delay and penalty shall be deducted from the construction cost. The terms and conditions of the instant contract shall be narrowly interpreted to the disadvantage of the originator, and Article 1(1) of the terms and conditions of the instant contract does not completely distinguish both as the guarantee of contract and the construction of the guarantee. It is contradictory that the scope of the guarantee obligation varies depending on the method of performing the guarantee obligation. Even in accordance with the opposite interpretation of Article 1(2) of the terms and conditions, the penalty for delay and the penalty shall be included in the scope of the guarantee obligation, and Article 9 of the terms and conditions of the instant contract are based on the premise that the penalty for delay shall be included in the scope of the guarantee obligation as a matter of course. In the instant entrustment contract concluded with Il Il-il case, the Plaintiff agreed to pay the Plaintiff to the Defendant on the condition that the Plaintiff bears the penalty for delay, and also requested the Defendant to approve the said entrustment contract.

(2) The plaintiff's assertion

The penalty for delay and the penalty for delay are not included in the scope of the guaranteed obligation under the instant guarantee agreement, so the Defendant should not be deducted from the construction price to be paid to the Plaintiff. In light of the background and purport of the introduction of the performance bond system in the Act on Contracts to Which the State is a Party (hereinafter “State Contract Act”), in the performance bond, the scope of the guaranteed obligation should be deemed limited to the performance guarantee, as in the case of the joint construction guarantor. The provisions regarding the penalty for delay under the instant guarantee agreement Article 9 of the terms of the instant guarantee agreement and the instant entrustment agreement merely refer to the compensation for delay inherent due to the Plaintiff’s own fault in performing the performance

(3) The issues of the instant case

In full view of the above allegations by the parties, the issue of this case is whether the scope of the guaranteed obligation in the performance bond includes the obligation to pay the liquidated damages and the penalty, and accordingly, whether the Defendant can deduct the amount of the liquidated damages and the penalty from the construction price to be paid to the Plaintiff.

B. Relevant provisions

The main relevant provisions of the performance bond among the general conditions of the construction contract which constitutes the contents of the instant construction contract are as follows.

(3) With respect to the submission, etc. of a performance bond under Article 52 (1) 3 of the Enforcement Decree of the Act, in addition to paragraphs (1) and (2), the submission, etc. of a performance bond under Article 52 (1) 3 of the Enforcement Decree shall be governed by the provisions of Chapter X of the Standards for Tender and Contract Execution by the Government, in addition to the provisions of paragraphs (1) and (2), the other party to the contract falls under any of the subparagraphs of Article 44 (1) and the other party to the contract has been appointed at the time of concluding the contract, or the performance bond under Article 52 (1) 3 of the Enforcement Decree has been submitted, the public official in charge of contracts may, without delay, designate the performance bond or the performance guarantee institution under Article 9 to perform the construction work as a joint and several surety or the performance guarantee institution under Article 52 (1) 3:

C. Determination

(A) The general conditions of the contract and the interpretation of the Enforcement Decree of the State Contracts Act

The general conditions of the above construction contract provide further specific guidelines on the method of performance guarantee stipulated by the Enforcement Decree of the State Contracts Act. Article 48 of the Act provides that “A contracting officer shall request the joint guarantor or the guarantee agency to complete the construction work,” and provides the same guarantee obligation of the joint guarantor and the performance bond agency. The specific content is that if a performance bond is submitted, the performance bond bears the obligation to complete the construction work at the request of the public official in charge of the contract, and the construction completion may be substituted by cash payment. Thus, if the performance bond agency selects to perform the guaranteed obligation by the completion of construction, the general conditions of the construction contract are reasonable to interpret that the performance bond has characteristics as a performance bond, such as the joint performance bond.

In the instant construction contract, such interpretation as to the nature of performance bond is derived from the understanding of the performance bond system under the Enforcement Decree of the State Contracts Act. This case’s construction work includes the general contract conditions to be incorporated into the contents of an ordinary government-funded construction contract, even though it is not a government-funded construction work, and the Enforcement Decree of the State Contracts Act, which is the general condition of the said construction contract, was enacted on July 6, 1995, has been amended as follows.

. Where the head or a contracting officer of a central government agency intends to conclude a construction contract on July 6, 1995 (Presidential Decree No. 14710), he/she shall have the counter-party to the contract pay one or more joint and several sureties who guarantee the performance of the contract concerned: Provided, That this shall not apply in cases where he/she pays two or more times the contract deposit under Article 50 (1) and (3). The head or a contracting officer of a central government agency who guarantees the performance of the construction contract shall have the counter-party to the contract pay one or more of the contract deposits under Article 100 (Presidential Decree No. 15186) instead of performing the contract;

In the amendment of 199, the performance bond system was introduced as a means of replacing the entry of the construction joint guarantor by the method of performance guarantee with respect to the construction contract. In the amendment of 199, three methods of performance guarantee, including the performance bond system, were arranged as a parallel structure. In the amendment of 2010, the performance bond system and the performance bond system remain as only the construction joint guarantor system were abolished. In light of the aforementioned transformation process, the performance bond system was introduced to supplement the construction joint guarantor system and to replace the construction joint guarantor system, and is understood to have been combined with the joint and several construction guarantee and the contract bond system. Thus, if the performance guarantee company selects the performance of contractual obligations, the legal principles of the joint and several performance guarantor system and the contract bond system are applied respectively.

However, the guarantee liability of a joint guarantor of the contract for construction works of the government agency is limited to the execution guarantee unless there are special circumstances (see Supreme Court Decision 2003Da55134, Mar. 25, 2005). The agreement on compensation for delay is an estimate of the amount of compensation for delay to the contractor's delay in the completion of work (see Supreme Court Decision 2001Da1386, Sept. 4, 2002). The guarantee liability of the joint guarantor of the contract for construction works of the government agency is not included in the scope of the guarantee liability of the contractor, unless there are special circumstances. Thus, it is reasonable to view that the guarantee liability of the joint guarantor of the contract for construction works of the government agency does not extend to the contractor's obligation to pay the compensation for delay (see Supreme Court Decision 2009Da36081, Aug. 20, 209). The above legal principle also applies to the guarantee agency issuing the performance bond, and if the contractor performs the guarantee obligation by the method of completion of construction works.

(B) Interpretation of the instant guarantee agreement

The terms and conditions of the instant contract do not go against the above interpretation. Article 3 of the terms and conditions of the instant contract provides that the obligation of the guarantee agency at the time of the occurrence of a guarantee accident shall be first guaranteed construction obligation and, if the construction is not possible, the obligation to pay money under the main contract may be interpreted as not bearing the obligation to pay money within the limit of the guaranteed amount. In addition, even though Article 1(2) of the terms and conditions excludes the obligation to pay money in advance within the scope of the guaranteed amount, the obligation not included in the opposite interpretation is limited, and it is difficult to view that all the obligation not included in the opposite interpretation is the content of the guaranteed amount. The liquidated damages under Article 9 of the terms and conditions of the instant contract refer to the inherent liquidated damages to be borne by the Plaintiff in the event of the delay of construction due to the Plaintiff’s cause attributable to the Plaintiff in the status of the guarantee agency. Therefore, it is reasonable to view that the said terms and conditions also include the obligor’s obligation to pay compensation for delay and penalty within the scope of the Plaintiff’s guarantee liability and the Plaintiff’s obligation to pay compensation for delay to the Plaintiff.

(C) Consideration according to the nature of the performance bond system

If there was no performance bond, the Defendant would have imposed the penalty for delay and penalty pursuant to the agreement on the suspension of construction (if the construction is discontinued due to the lack of contractor’s ability, most of it would be low possibility of recovery), and the remainder of construction work should have been completed by concluding a construction contract again with another contractor. The purpose of the performance bond system is to save the time and expenses incurred in concluding the re-construction contract in the event of nonperformance of contractor’s obligation, and to guarantee the guarantor’s performance according to the original obligation, not to guarantee the payment of liquidated damages and penalty to compensate damages for damages during the original period of suspension of construction (However, the legal principles of the performance bond securing monetary liability where the guarantee agency selects the payment of contract deposit in lieu of the performance bond, and if it is selected by the original contractor as the performance guarantee agency, the obligation to compensate for delay and penalty should be included in the scope of liability for delay, which are the original performance guarantee institution’s obligation to pay the penalty for delay, which would be contrary to the purport of the performance guarantee system by choosing the obligee’s obligation to pay the penalty for delay and penalty without additional construction contract.

(D) Sub-committee

In full view of the aforementioned circumstances and the ordinary meaning of construction guarantee (referring to substitute for construction), the background leading up to the incorporation of the general conditions of the construction contract used in the government-funded construction works into the instant construction contract, the status of the Plaintiff and the Defendant, and the background leading up to the conclusion of the guarantee contract, etc., it is interpreted that the compensation for delay and the penalty to be borne by the obligor when the guarantee agency of the performance of the guarantee is performing the performance of the guaranteed obligation does not fall under the scope of the guarantee liability. As long as the compensation for delay and the penalty to be borne by the obligor do not fall under the scope of the Plaintiff’s guarantee liability, the Defendant cannot be deducted from the

4. Conclusion

Therefore, the Defendant is obligated to pay to the Plaintiff the remainder of the construction cost of KRW 5,921,271,016 and damages for delay at the rate of 6% per annum under the Commercial Act and 20% per annum under the Act on Special Cases Concerning Expedition, etc. of Legal Proceedings from June 1, 2012, which is the date of this decision, until June 1, 2012, where the Defendant determined that the existence and scope of the obligation is reasonable.

Thus, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remainder of the claim (part of the claim for delay damages) is dismissed as it is without merit.

Judges Kang Jae-chul (Presiding Judge)