Uniform Construction Co., Ltd. and two others (Law Firm Song, Attorneys Yeo-ok et al., Counsel for the defendant-appellant)

Seoul Special Metropolitan City (Law Firm Min & Lee, Attorneys Jeon-soo et al., Counsel for the plaintiff-appellant)

November 23, 2016

1. The defendant shall pay to the plaintiffs 404,149,749 won, and 6% interest per annum from March 11, 2015 to January 25, 2017, and 15% interest per annum from the next day to the day of complete payment.

2. The plaintiffs' remaining claims are dismissed.

3. Of the costs of lawsuit, 10% is assessed against the Plaintiffs, and the remainder is assessed against the Defendant.

4. Paragraph 1 can be provisionally executed.

The defendant shall pay to the plaintiffs 449,05,277 won with 15% interest per annum from the day following the delivery of a copy of the complaint of this case to the day of complete payment.

1. Basic facts

A. Conclusion of the instant contract

1) Around November 2009, the Defendant, via the Seoul Local Government Procurement Service, set the expected construction amount of KRW 25,583,00,000 (including value-added tax) with regard to the construction work by undergroundizing part of the Han River in order to establish a ground access system for Han River in the 222-dong, Mapo-gu, Seoul Metropolitan Government, and creating a park on the upper part of the undergroundized road (hereinafter “instant construction work”), and at least 730 days after the commencement of the construction period, publicly announced the construction by means of a bid for long-term continuing construction period.

2) The plaintiffs (hereinafter referred to as "stock company") and the comprehensive landscape architecture (hereinafter referred to as "comprehensive landscape") were organized for the supply of and demand for the instant construction works. The joint venture of this case determined that the comprehensive landscape should be shared with respect to the landscaping construction business among the instant construction works. The joint venture of this case determined 51% of the unit construction of the plaintiffs, 29% of the unit construction of the plaintiff, and the construction of the plaintiff was 20% of the unit construction of the plaintiff.

3) On December 29, 2009, the instant joint contractors entered into a contract for the instant construction project with the Defendant through the Seoul Regional Procurement Service (hereinafter “instant construction contract”), and began construction work around that time.

4) The instant construction contract is the execution of the instant construction project in the construction cost of KRW 16,128,430,000 (including value-added tax) from January 6, 2010 to January 5, 2012, the Plaintiffs’ total amount of 730 days, and the main contents of the general terms (hereinafter “instant general terms”) are as shown in attached Table 1.

B. Alteration of the instant construction contract and completion of the instant construction project

1) The instant construction contract is a long-term continuing construction contract. The initial total construction cost was KRW 16,128,430,000 for the long-term continuing construction contract, and the total construction period was 730 days from January 6, 2010 to January 5, 2012. However, the total construction cost was changed several times, and the total construction period was finally changed from January 6, 2010 to October 15, 2014. The specific details of the change are as shown in the attached Table 2. (hereinafter referred to as the “number of multiple contracts”), and the overall contract was changed “○○-scale overall contract” and “each of the instant contracts,” if all of them are referred to as “each of the instant contracts,” and the overall contract was changed.

2) On October 15, 2014, the instant joint contractors completed the instant construction and delivered the facilities completed to the Defendant.

C. Plaintiffs’ claim for indirect construction cost

1) On February 27, 2014, the Plaintiff’s unification construction, the representative of the instant joint supply and demand that the Defendant pay the additional indirect construction cost incurred during the construction period extended (from January 25, 2013 to June 30, 2014). The Defendant did not give any reply thereto, and the Plaintiff’s unification construction demanded that the Defendant reply to the claim for the said additional construction cost on June 30, 2014.

2) On July 1, 2014, the Defendant responded to the Plaintiff’s uniform construction that “The Defendant submitted review opinions to the effect that the claim for indirect construction cost of the Plaintiff’s uniform construction is inappropriate from the Sung Engineering Co., Ltd., the representative supervisor of the instant construction (hereinafter “SP”).”

3) On July 18, 2014, and August 25, 2014, the Plaintiff’s unification construction requested the Defendant to verify the detailed grounds for determining that the aquatic engineering is inappropriate for claiming indirect construction costs for the Plaintiff’s unification construction.

4) On August 26, 2014, the Defendant responded to the Plaintiff’s Uniform Construction to the effect that “In accordance with the increase in construction cost at the time of the amendment to the General Agreement, the indirect construction cost was already reflected,” and that it is not subject to the claim of indirect construction cost, as the instant joint contractor and the Defendant entered into a modified contract with the aforementioned content, under the agreement between the instant joint contractor and the Defendant.”

5) Meanwhile, the Plaintiffs agreed not to claim part of the additional indirect construction cost incurred since June 30, 2014, which occurred since the extension of the total construction period in the instant case with the Defendant.

D. The defendant's payment of completion money

On the other hand, the Defendant paid to the Plaintiffs the remainder or total amount of the construction cost under the contract by the number of teas, as stated in the “date of completion of payment” in the attached Table 2 of the instant construction contract modification statement, and paid all the construction cost under the relevant number of teas by paying the remainder or total amount of the construction cost according to the contract.

E. Relevant statutes

On the other hand, the main contents of the relevant statutes, such as the Local Government Contract Act (hereinafter “Local Government Contract Act”) that stipulates that the instant construction contract shall apply to the instant general condition I.2.j., are as stated in attached Form 3.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 5, 9, 11, Eul evidence 1, 10 to 15 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. The plaintiffs' assertion

The instant construction contract changed the term of completion of the instant construction project from January 5, 2012 to October 15, 2014 due to reasons not attributable to the Plaintiffs, such as lack of budget and delay of design, etc., and the Plaintiffs requested the Defendant to adjust the contract amount pursuant to Section V II of the instant general terms and conditions. Therefore, the Defendant is obliged to pay the Plaintiffs the total amount of indirect construction expenses, including indirect labor expenses, expenses, general management expenses, profits, etc., that the Plaintiffs additionally paid to the Defendant from January 25, 2013 to June 30, 2014, which was agreed not to claim indirect construction expenses with the Defendant from January 25, 2013 to June 30, 2014, during which the Plaintiffs agreed not to claim indirect construction expenses from the date following the original term of completion of the instant construction project.

3. Determination

(a) Occurrence of indirect construction cost claims;

1) Relationship between a long-term continuing construction contract and an overall contract by vehicle number

In full view of Article 24(1) of the Local Government Contracts Act, Article 73(1) of the former Enforcement Decree of the Local Government Contracts Act (amended by Presidential Decree No. 20283, Sep. 20, 2007; hereinafter the same shall apply), the purport and purpose of the relevant provisions, the characteristics of a long-term continuing contract that can be known therefrom, the Defendant selected the other party to a contract through a tendering procedure and entered into a contract within the scope of the amount calculated by deducting the amount already contracted from the total construction amount additionally stated every fiscal year, the total construction period and the total construction amount are binding between the parties to the contract, and the multiple contracts are binding upon the contents of the general contract, and are bound by the contents of the general contract and are to be performed within the scope of the budget for each fiscal year.

2) Adjustment of contract amount due to the extension of construction period in long-term continuing construction projects

Article 75 of the Enforcement Decree of the former Local Government Contract Act, and Section V. 4. A. of the instant general condition V. of the instant case does not exclude the application of a long-term continuing construction contract with the provision on the adjustment of the contract amount when the terms and conditions of the contract, such as the construction period, are amended. Thus, even in a long-term continuing construction project, if it is necessary to adjust the contract amount due to the extension

However, a long-term continuing construction project has a characteristic of settling accounts after entering into a contract and performing a long-term continuing construction project by dividing the total construction period by number of vehicles, and due to these characteristics, the extension of a long-term continuing construction project takes various forms, such as extension of the total construction period, extension of the total construction period, extension of the construction period by number of vehicles, extension of the construction period by number of vehicles, etc. In such various cases, the question is when the contract amount is adjusted

In light of the overall contract in a long-term continuing construction project as seen earlier and the purpose, relationship, and content of a contract by number of vehicles, and in particular, the contract amount adjustment due to the extension of the construction period shall be made within each number of vehicles, in principle, in a long-term continuing construction project, in light of the fact that a long-term continuing construction project is based on the division of the entire construction works into several vehicles and the settlement of construction price after performing the construction works. However, since contracts by number of vehicles are limited to the part to be performed in the relevant number of vehicles during the total construction period, the adjustment of contract amount due to the extension of the total construction period that is not included in the scope or content of a contract by number of vehicles cannot be made through the modification of the relevant number of vehicles. Ultimately, the contract amount adjustment should be made through the

From this point of view, if the total construction period is changed due to a change in the total construction period in a long-term continuing construction period overlaps with the change in the construction period by number of vehicles, namely, if the total construction period is changed due to a change in the construction period by number of vehicles, the contract amount due to the change in the construction period can be sufficiently achieved through the change in the total construction period. As such, the extent of the total construction period by the change in the total construction

In the text of Section V. 4.b. of the instant General Conditions II. 2.1(a) of the instant general terms and conditions only provide that a change in the terms and conditions of the contract should be completed before the commencement of the implementation of the part that changed the terms and conditions of the contract, such as the construction period, distance, etc., as stipulated in Section V. 1(a) of the instant General Conditions V. 4.b. of the instant case, and cannot be said to have been concluded before the commencement of the implementation of the part that changed the terms and conditions of the contract. In addition, the instant general terms and conditions II. 4. D of the instant general terms and conditions only provide that a change in the contract amount should be made upon the request of the other party to the contract when the contract is increased, and it does not explicitly provide that the contract amount shall be adjusted within 30 days from the date on which the other party’s request for the adjustment of the contract amount was received, and it is difficult to interpret the contract amount in harmony with the instant general terms and conditions V.1(g) of the instant general conditions, even before the construction period is changed.

In light of the above circumstances, if it is necessary to adjust the contract amount due to the change of the construction period, it is sufficient for the other party to the contract to have an agreement on extension of the construction period with the ordering agency prior to the commencement of the extended construction period due to obtaining approval from the ordering agency, etc., and it is not necessary to complete the application for adjustment of the contract amount or its subsequent adjustment before the commencement of the changed construction period. However, since the payment of the contract amount is completed finally and finally, it shall not be subject to the contract amount adjustment from the perspective of protecting the trust of the parties (see Supreme Court Decision 2004Da28825, Sept. 14, 2006). Thus, it is reasonable to view that the other party to the contract should complete the application for adjustment of the contract amount due to the extension of the contract amount due to the extension of the number

However, if the total construction period is not modified and the total construction period is extended in excess of the extended construction period by the number of vehicles, such as the case where the total construction period is extended without being modified and the total construction period is extended in excess of the extended construction period by the number of vehicles, the change of the construction period cannot be adjusted through the contract price adjustment procedure by the number of vehicles, and thus, the contract price adjustment procedure due to the extension of the construction period by the overall contract cannot be reflected in the change of the construction period. In this case, the application for adjustment of the contract price can be deemed to have been made before the final payment of the general contract was received

3) In the instant case (the Plaintiff claimed only the indirect construction cost incurred during the period from January 25, 2013 to June 30, 2014 out of the total extension period of the instant construction work, and thus, the Plaintiff’s claim should be examined only for the said period).

A) Grounds for the extension of the air period of the instant construction

In full view of the purport of the arguments in Gap's evidence Nos. 5, 7, 8, Eul evidence Nos. 1, 5, and 6, the plaintiffs and the defendant concluded the second comprehensive contract for modification on the ground of the second comprehensive contract for modification on the ground of reflecting on-site changes during the construction period of the second and second construction contract for each of the construction contracts of this case, and the conclusion of the fourth comprehensive contract for modification on the ground of reflecting on on-site changes during the construction period of the second and the fourth construction period for each of the construction contracts of this case, and the unification construction of the plaintiff brings about an obstacle to the third-minute construction on October 31, 2012. Thus, it can be acknowledged that the plaintiffs requested the supervision group to secure sufficient budget for the fourth construction work. Such grounds for the extension are not attributable to the plaintiffs' responsibility but from the defendant's responsibility.

Although it is unclear the grounds for extension of the period under each general contract as above, the general condition of this case does not include the relevant number of days when a public official in charge of contract deems that the construction has been delayed due to reasons not attributable to the other party to the contract, and if such reasons arise within the contract period, the other party to the contract may claim extension of the contract period. In such a case, if the contract period is extended, the contract amount shall be adjusted to the extent that does not exceed the actual cost according to the changed contents (Article 5.1. C, 5.3, 5.2. A, and 4). Therefore, it is reasonable to deem that the contract amount can be adjusted according to the extension of the contract period if the construction period is extended without any reasons attributable to the plaintiffs. Thus, the plaintiffs may request the defendant to adjust the contract amount equivalent to the indirect construction cost due to the extension of the contract period pursuant to Article 5.2.4(a) of the General condition

B) Parts that overlap with the extension of contract by number of vehicles

(1) According to the attached Table 2. According to the statement on the amendment of the instant construction contract, 59 days from January 1, 2014 to February 28, 2014 during the construction period extended under the 5th general contract amendment agreement (181 days from January 1, 2014 to June 30, 2014) were due to the extension of the contract period by the 4th number, and thus, the adjustment of the contract amount during the said period may be sufficiently achieved through the adjustment of the contract by the number of vehicles. Accordingly, the Plaintiffs may file an application for the adjustment of the contract amount with the Defendant prior to the date of receipt of the 4th general contract price in each of the above periods.

(2) On February 27, 2014, before March 3, 2014, the Plaintiff’s Uniform Construction demanded the Defendant to pay the additional indirect construction cost incurred during the extended construction period on the ground that the total completion date of the instant construction was changed from January 24, 2013 to June 30, 2014, which was fully paid the completion amount of the instant construction contract by the type of the fourth vehicle. As seen earlier, the Plaintiffs may claim for the payment of the said 59 days during the extended construction period under the 5th comprehensive contract.

C) Sub-determination

Therefore, barring special circumstances, the Defendant is obligated to pay indirect construction costs for the period from January 25, 2013 to June 30, 2014, for which the Plaintiffs seek, during the construction period extended under the instant general contract modification agreement.

B. Judgment on the defendant's argument

1) Summary of the defendant's assertion

At the time of entering into an amendment agreement to each of the instant overall contracts, all expenses incurred in extending the total construction period were reflected in the contract amount at the time of entering into the amendment agreement, and this was already paid to the Plaintiffs, as such, the Plaintiffs’ separate indirect construction cost claim is unreasonable.

2) Determination

As seen earlier or according to the evidence evidence Nos. 2 and 4 above, the plaintiffs and the defendant concluded the second comprehensive contract due to changes in design, etc., with the total cost of KRW 23,026,027,870,000 from KRW 17,598,430,000 to KRW 23,026,870,000 (= KRW 23,026,300,000 - KRW 17,598,430,000), which included KRW 1,557,00,00 in indirect construction cost; while entering into the fifth comprehensive contract, the total cost of the contract was included from KRW 24,540,60,00 to KRW 25,320,50,000, KRW 709, KRW 700, KRW 205,005, KRW 205,005, KRW 205,005).

However, the aforementioned facts and evidence Nos. 11 through 15 of the General Conditions II. 1. D of the instant case, which can be known by comprehensively taking account of the purport of the entire pleadings, i.e., ① indirect labor expenses, industrial accident insurance premium and occupational health and safety management expenses, etc. concerning an increase in the contract amount due to a modification of a design, and general management expenses and profit rates, such as indirect labor expenses, industrial accident insurance premium and occupational health and safety management expenses, based on the increase in the contract amount due to a modification of a design, and general management expenses and profit rates on the calculation sheet. Such a provision provides that “The ratio of indirect labor expenses, such as the increase in the contract amount due to a modification of a design, and the rate of indirect labor expenses, general management expenses and profit-making expenses shall be determined according to the increase in the contract amount at the time of a modification of a design.” The purport of the provision is to reflect the increase in the contract amount at the time of an extension of the construction period, which is no relation with the extension of the construction period, in fact that indirect labor expenses were not related with the extension of the construction period.

Therefore, the defendant's above assertion is without merit.

C. Scope of indirect construction cost

1) Principles for calculating the amount of indirect construction cost

Article 22 of the Local Government Contracts Act provides for the adjustment of the contract amount due to changes in the terms of contract, such as design change and price fluctuation, in addition to the change of construction period, and Article 75(1) of the former Enforcement Decree of the Local Government Contracts Act provides that the adjustment shall be made to the extent that does not exceed the actual cost according to the changed terms, and Article 75(1) of the former Enforcement Decree of the Local Government Contracts Act also provides for the same purport. The standard for calculating the actual cost under the relevant Acts and subordinate statutes is prescribed in the Standards for Local Government Tender and Contract Execution. Although the said standard is not an absolute standard in claiming indirect construction cost by the plaintiffs, it appears that the said standard serves as an important standard in calculating the actual cost, even if the said standard does not constitute an absolute standard in claiming indirect construction cost by lawsuit. Meanwhile, the actual cost prescribed under the said provision must not

2) Adjustment of indirect construction costs

According to the instant construction contract, only the standard for adjusting the contract amount due to the amendment to the terms and conditions of the contract and the limit when the contract amount is adjusted by agreement between the parties to the extent not exceeding the actual cost, but also the adjusted amount is not immediately calculated in accordance with certain formula, such as the contract price or the successful bid price adjustment rate or the adjustment rate due to the change of design or price fluctuation. Thus, the court may also determine the reasonable adjustment amount within the actual cost limit, considering the developments leading up to the amendment of the terms and conditions of the contract in accordance with the good faith and the principle of equity and the principle of fairness, and the reasons, etc. thereof. In light of the following circumstances acknowledged as a whole after considering the overall purport of the arguments as a result of appraisal by appraiser ○○○○○○○, the possibility that the contract amount adjustment is conducted within the extent of actual cost, i.e., the possibility that the contract

3) Specific calculation

Based on the foregoing legal doctrine, according to the appraiser ○○○○’s appraisal result that calculated the indirect construction cost spent by the Plaintiffs due to the extension of the total construction period from January 25, 2013 to June 30, 2014, the fact that the Plaintiffs additionally spent indirect construction cost due to the extension of the total construction period during the foregoing period can be acknowledged as constituting 449,05,277.

Thus, the indirect construction cost for the above period to be paid by the Defendant is 404,149,749 won (=449,05,277 won) calculated by multiplying the above 449,05,277 won by 90% (i.e., 100% - 10%) (i., 449,05,277 won x 90%, and less than won).

D. Sub-committee

Therefore, the Defendant, as of the date of completion of the instant construction work, is obligated to pay to the Plaintiffs damages for delay at each rate of 15% per annum under the Commercial Act from March 11, 2015 to January 25, 2017, which is the date when the copy of the complaint of this case was served on the Defendant as requested by the Plaintiffs as of March 11, 2015, which is clear from the date when the copy of the complaint of this case was served to the Defendant.

4. Conclusion

Therefore, the plaintiffs' claims are justified within the scope of the above recognition, and the remaining claims are dismissed as they are without merit. It is so decided as per Disposition.

(attached Form omitted)

Judges Lee Jong-young (Presiding Judge)