Construction Financial Cooperative (Attorney Su-dae et al., Counsel for the plaintiff-appellant)

Korea Land and Housing Corporation (Law Firm LLC, Attorneys Park Jong-soo et al., Counsel for the plaintiff-appellant)

November 2, 2012

Seoul Central District Court Decision 2011Gahap113597 Decided June 1, 2012

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The defendant shall pay to the plaintiff 5,921,271,016 won with 6% interest per annum from December 11, 2010 to the service date of a copy of the complaint of this case, and 20% interest per annum from the next day to the day of complete payment.

2. Purport of appeal

The part against the defendant in the judgment of the first instance shall be revoked, and the plaintiff's claim corresponding to the revoked part shall be dismissed.

1. Quotation of judgment of the first instance;

The reasons for the decision regarding this case are as follows: (a) add the following 2.2.3 to 9 to 9 to 9 to 9 to 9 to 12 to 12 to 13 (b) to 9 to 9 to 9 to 9 to 9 to 9 to 9 to 9 to 9 to 12 to 12 to 3.3 to 3. To see this as is stated in the corresponding part of the reasoning of the judgment of the first instance; and (b) therefore, it

2. The addition;

Article 2 subparag. 10 of the General Conditions of the Construction Contract applicable to the construction contract of this case concluded between the joint contractors and the defendant composed of Dae Dong-dong and Cho Il-il and the defendant shall be governed by the Enforcement Decree of the Act on Contracts to Which the State is a Party, the Special Cases concerning the Enforcement Decree of the Act on Contracts to which the State is a Party for Specific Procurement, the Enforcement Rule of the Act on Contracts to Which the State is a Party, and the Rules on Contracts to Which the State is a Party and the Rules on Accounting and Construction.

3. Parts used in relation to the contract of this case (the interpretation of the contract of this case);

(a) Relationship under Articles 1 and 3 of the terms and conditions;

Under Article 54(1) of the Framework Act on the Construction Industry, the Plaintiff is a mutual-aid association established by constructors for the promotion of autonomous economic activities through a mutual cooperative organization between constructors and for various guarantees, loans, etc. necessary for the operation of construction business. Under Article 56(1)1 of the same Act and Article 56(2)3 of the Enforcement Decree of the same Act, the Plaintiff carries on a performance guarantee business with the content that “where a partner fails to perform contractual obligations of contracted construction works, he/she shall bear the contractual obligations on behalf of the partner or guarantee the payment of a certain amount if he/she does not perform his/her contractual obligations.” Article 56(4) of the Enforcement Decree of the same Act provides that the said performance guarantee shall be implemented by setting terms and conditions on the specific contents

Article 1 of the terms and conditions of the contract established and implemented by the Plaintiff to apply the guarantee contract of this case is called "guarantee liability". Article 1 (1) of the terms and conditions of the construction mutual aid association (hereinafter referred to as "cooperative") provides that "where a contractor (hereinafter referred to as "debtor") fails to perform his/her contractual obligations under a contract for construction works (hereinafter referred to as "main contract") on the front side, the contractor shall perform the contractual obligations instead of the other party (hereinafter referred to as "guarantee Creditor") or the payment of the relevant deposit (hereinafter referred to as "Guarantee Creditor") shall be performed in accordance with the matters and terms and conditions set out in this guarantee document, and Paragraph (2) of the same Article provides that "the warranty obligation of paragraph (1) shall not include the obligation to guarantee ( subparagraph 1) or the obligation to return the deposit received by the debtor from the guarantee creditor ( subparagraph 2)" and Paragraph (1) of the same Article provides that "the partnership shall, in principle, designate a third party (hereinafter referred to as "guarantee contractor") in the event a cause attributable to the debtor's performance of the guaranteed obligation."

Furthermore, Article 48 of the General Conditions of the Construction Contract applicable to the construction contract in this case between the joint contractor and the defendant as the main contract for the instant construction contract also provides that where a joint guarantor has been appointed at the time of concluding the contract or a performance bond has been submitted, even if there are grounds for cancellation or termination of the contract, such as failure to complete the construction by the deadline for completion due to a cause attributable to the other party to the contract, the contract shall not be cancelled or terminated, and where such request is made, the joint guarantor or the guarantee agency shall have the priority to completing the construction to the joint guarantor or the guarantee agency without delay. Upon such request, the joint guarantor or the guarantee agency shall have the interest in the conclusion of the contract for the continuous construction work, and the joint guarantor or the guarantee agency shall have the interest of the other party to the contract. However, the guarantee agency may substitute for the performance of the guaranteed obligation by paying the amount prescribed in the performance bond to the ordering agency in cash instead of performing the guaranteed obligation under the above general conditions under paragraph (5) in lieu of performing the guaranteed obligation under the above general conditions, the amount of the performance bond and the construction contract under Articles 43 and 48 (the general performance bond.

In full view of the provisions of the above Acts and subordinate statutes and the terms and conditions of the construction contract applicable to the main contract subject to guarantee, Article 1 of the terms and conditions of the contract provides the contents of the entire guarantee liability guaranteed by the performance bond. Article 3 of the terms and conditions of the contract provides the guarantee performance company for the plaintiff to perform the guaranteed obligation by designating the performance company as a result of the specific performance method. However, in the event that the performance of the guarantee is not possible, the right of choice for the plaintiff to perform the guaranteed obligation by paying the principal contract and the security deposit in accordance with the relevant Acts and subordinate statutes within the scope of the guaranteed amount specified in the letter of guarantee, shall be interpreted as granting the plaintiff the right of choice to perform the guaranteed obligation, so long as the plaintiff selects the performance of the construction project, which is the principle of performance bond for performance under Article 3(1) of the terms and conditions

The defendant asserts that the scope of the guaranteed obligation under Article 3 (1) of the Terms and Conditions does not include the obligation to pay liquidated damages, there is a gap in the compensation secured by the existing contract performance guarantee, while even if the obligation to pay liquidated damages is interpreted to include the obligation to pay liquidated damages, there is no unfair result in the plaintiff.

The performance bond system was introduced by the amendment of the Enforcement Decree of the State Contracts Act on December 31, 1996 to supplement or replace the contract bond and joint and several sureties. Article 48 of the General Conditions of the Construction Contract shall not cancel or terminate the contract even in the case of cancellation or termination of the contract, such as the joint and several sureties's failure to complete the construction by the deadline for completion due to a cause attributable to the other party to the contract, and shall first claim the completion of the construction to the joint and several sureties or the guarantee agency (Article 1). Upon such a request, the joint and several sureties or the guarantee agency shall perform the guarantee duty without delay (Article 2). Meanwhile, Article 64(2) of the former Enforcement Rule of the State Contracts Act (amended by Ordinance of the Ministry of Strategy and Finance No. 161 of Jul. 21, 2010) provides that where the joint and several sureties under Article 66 has fulfilled the contractual obligation, the contract bond or the warranty bond which the contractor has paid pursuant to Articles 51 and 522 of the State Contracts Act shall not be included in the amount of the construction work.

B. Interpretation of Article 9 of the Terms

Article 9 of the Clause provides that the guarantee creditor shall not impose the penalty for delay corresponding to the period from the receipt date of the written claim for performance of the guarantee obligation to the date prior to the date of performance of the guarantee obligation, as seen above. The above provision can be interpreted as the number of days to be deducted from the calculation of the number of days of the penalty for delay in cases where the plaintiff has the obligation to pay the penalty for delay in the case of the plaintiff. In addition, the performance guarantee obligation is only the obligation to pay the construction guarantee obligation, and the obligation to pay the penalty for delay in the contract for construction works of the government agency which did not guarantee the obligation to the joint guarantor of the contract for construction works (see Article 25 (3) 4 and (4) of the General Conditions of the Construction Contract). In addition, even according to the interpretation of Article 9 of the Clause, if the guarantee agency selects the performance of the guarantee obligation as the method of performance of the performance of the guarantee obligation,

Meanwhile, in full view of the purport of the arguments in the evidence Nos. 15, 16, and 3 above, the plaintiff suspended the construction work, and the plaintiff entered into an emergency bidding notice to select a surety performance company on September 23, 2009, and calculated the amount including the estimated amount of liquidated damages for delay arising during the period of delay of the joint contractor and the defendant as the amount of the remaining construction work determined at the time of examination of dypology between the joint contractor and the defendant on September 23, 2009, and announced the public announcement. However, if there is no constructor who participated in the above public announcement of construction, the plaintiff entrusted the construction work on October 8, 2009 to the first class of the joint contractor which is the cause of the above public announcement of construction, and requested the defendant to approve the execution of the construction work in this case by requesting the execution of the construction work by the plaintiff, and it can be acknowledged that the plaintiff is liable for delay in the execution of the construction work in the first class of the joint contractor.

However, it cannot be said that the scope of the Plaintiff’s guaranteed liability as stipulated in the letter of guarantee and the terms and conditions may not be changed on the ground that the Plaintiff mispers the scope of the guaranteed liability as above, thereby making an emergency bidding notice for construction enterprises, and concluded a contract for construction work and construction work entrustment.

5. Conclusion

Therefore, the defendant's appeal is dismissed as it is without merit. It is so decided as per Disposition.

Judges Cho Young-chul (Presiding Judge)

(1) Article 6 (Commencement of Performance of Guarantee Obligations) The Union shall commence the performance of the Guarantee Obligations within 30 days from the date of receipt by the Guarantee Creditor of a written claim for the performance of the Guarantee Obligations.