[1] The legal nature of the prepaid payment made by the contractor in the construction contract (=prepaid payment) and the method of settling the prepaid payment in the pertinent construction contract (i.e., settlement in proportion to the amount and ratio)

[2] Whether a supplier may refuse performance in a continuous transaction where, although the supplier had performed his own obligation prior to the due date, he was not paid the price for the preceding time when the due date has expired, or the other party’s obligation to the subsequent performance has not yet been due, but there is a very unstable reason for the fulfillment of the due date (affirmative)

[3] The meaning of "when there is a substantial reason to make it difficult for the other party to perform his obligations" under Article 536 (2) of the Civil Code, which may refuse the prior performance in a bilateral contract

[4] The case holding that the contractor may not refuse the performance of the duty to complete the work on the ground that the contractor has partially delayed the performance of the obligation to pay the relevant part of the intermediate payment in the construction contract

[5] Where the completion of an object of contract is delayed due to force majeure, whether the object of contract is exempted from compensation for delay (affirmative), and whether the so-called "IMF situation" and the problem of the supply and demand of materials caused thereby constitutes such problem (negative)

[6] Whether the ethical rainfalls constitute grounds for exemption from compensation for delay (negative with qualification)

[7] The time when the contract is cancelled after the completion date of the completion plan (=the next day after the completion date)

[8] The legal nature of the liquidated damages (=predetermination of the amount of damages) and the standard for reduction

[1] To ensure that the advance payment under a contract for construction works can be carried out smoothly without difficulty in securing materials and paying wages, etc., the advance payment that the contractor pays to the contractor is the advance payment that the contractor pays to the contractor in advance. However, considering the fact that if the contractor is already to receive the advance payment and the advance payment is appropriated first to the contractor in advance, the purpose of the advance payment can not be achieved if the advance payment is appropriated first among the given intermediate payment, it is reasonable to settle the amount equivalent to the advance payment according to the ratio of the amount equivalent to the advance payment to the contract amount at the time of paying the advance payment, barring any special circumstance, and then to appropriate the amount equivalent to the advance payment as part of the advance payment.

[2] In a case where the supplier agreed to receive the payment after settling accounts at a certain period of time after the goods or services were first supplied in a continuous transactional relationship, the supplier may refuse to perform his/her own obligation for the following period of time when the supplier is already obligated to pay the pre-payment amount, and the settlement of accounts was completed and the other party’s obligation was not yet paid or the other party’s obligation was not yet due, but the fulfillment of the due date was considerably unstable, in light of Article 536(2) of the Civil Act and the principle of good faith, in a case where the performance of the due date is considerably unstable, the supplier may refuse to pay the pre-payment amount until the other party’s due date is already due or

[3] The phrase "any significant reason why it is difficult for the other party to perform his/her obligation" under Article 536 (2) of the Civil Code refers to a change in circumstances that make it impossible to receive the counter-performance due to such reasons as the other party's bad credit standing or aggravation of property status after the formation of the contract, and thereby making the other party perform the prior performance obligation in accordance with the terms of the original contract go against the concept of fairness and the principle of good faith.

[4] The case holding that the contractor may not refuse the performance of the duty to complete the work on the ground that the contractor has partially delayed the performance of the obligation to pay the part of the intermediate payment in the construction contract

[5] Where the completion of an object is delayed due to force majeure, such as a sudden change in natural disaster or economic conditions equivalent thereto, the contractor shall not be liable to pay compensation for delay, but the so-called IMF situation and the failure in the supply and demand of materials resulting therefrom shall not be deemed to be an force majeure situation.

[6] Generally considering that a contractor’s contractual term under a construction contract does not normally perform work at a reasonable price and reflects the contractual term in light of the fact that the contractor’s contractual term, the contractor’s exemption from the compensation for delay can not be deemed as an exemption from the compensation for delay, unless it is an exceptional figure equivalent to a natural disaster.

[7] Where a contractor cancels a contract after the expiration of the deadline for completion without completing the construction work within the deadline for completion, the time when the payment for delay occurs shall be the day following the deadline for completion.

[8] The agreement on compensation for delay is an estimate of the amount of compensation for delay as to delay in the completion of the same day. Thus, in case where the contractor is liable to pay the compensation for delay because he did not complete the work within the agreed period and did not deliver it to the contractor, the court may reduce the amount of the compensation for delay calculated according to the agreement by taking into account all the circumstances such as the status of the party to the contract, purpose and contents of the contract, the motives scheduled to pay the compensation for delay, the actual damages and the amount of the compensation for delay, the comparison between the damages and the compensation for delay, the transaction practices at the time, and economic conditions, etc.

[1] Articles 105 and 664 of the Civil Act / [2] Articles 2 and 536 (2) of the Civil Act / [3] Articles 2 and 536 (2) of the Civil Act / [4] Articles 536 (2) and 664 of the Civil Act / [5] Articles 390 and 664 of the Civil Act / [6] Articles 390 and 664 of the Civil Act / [7] Articles 387, 393, and 664 of the Civil Act / [8] Articles 398 (2) and 664 of the Civil Act

[1] Supreme Court Decision 9Da5060 delivered on December 12, 1997 (Gong1998Sang, 256), Supreme Court Decision 9Da5519 delivered on December 7, 199 (Gong2000Sang, 148) / [2] Supreme Court Decision 93Da5387 delivered on February 28, 1995 (Gong1995Sang, 1444, 13761 delivered on July 9, 199 (Gong1999, 1579), Supreme Court Decision 2001Da9304 delivered on September 18, 201 (Gong2099, 1579, 2097) / [209Da93797989 delivered on September 16, 209] Supreme Court Decision 98Da37979 delivered on September 18, 2001

Support General Construction Co., Ltd. (Attorney Cho Young-gu, Counsel for the defendant-appellant)

Defendant 1 and six others

Busan High Court Decision 2000Na2924 delivered on November 30, 2000

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

1. Fact-finding and judgment of the court below

A. The first instance court, as cited by the lower court, acknowledged the following facts based on the evidence produced by the lower court.

(1) On October 2, 1997, the Plaintiff: (a) removed part of the hospital building on the instant land owned by the Defendants; and (b) concluded a contract with the Defendants so that the Defendants may rescind the contract if it is evident that the construction is likely to be completed within the completion period due to a cause not attributable to the Defendants, such as a cause not attributable to the Defendants or a natural disaster, etc.; and (c) the time limit for completion shall be July 5, 1998; and (d) the compensation rate for delay shall be 1/100 of the construction cost per day; and (e) the amount of additional construction cost may be deducted from the construction cost; and (e) the Plaintiff may not demand any additional construction cost for any reason not attributable to the Defendants; and (e) the period may be extended if the construction is delayed due to a cause not attributable to the Plaintiff, but there is a clear possibility that the Defendants may cancel the contract.

(2) After that, the Plaintiff demanded additional construction costs on the grounds that material prices, etc. were so wide due to the so-called IMF incident, and there was a dispute, such as suspending construction from February 13, 198 to March 14, 1998, and from March 27, 198 to March 17, 1998, the Defendants, among the Plaintiff on April 10, 1998, charged the Plaintiff with the construction of the internal facilities in a stove practice room and golf practice room with the amount of KRW 417,443,50 during the said construction, and set the amount of the remainder for the instant construction to be carried out by the Plaintiff as KRW 1,90,312,150.

(3) On May 8, 1998, the Plaintiff was ordered by Nonparty 1, the supervisor of the above construction, to suspend construction for the purpose of structural safety diagnosis on May 14, 1998, upon receiving the order from Nonparty 1 to suspend construction for the purpose of structural safety diagnosis, and suspended each of the above construction works on May 20 and 21, 1998.

(4) Meanwhile, the Plaintiff did not consent to the Defendants while demanding the recognition of additional construction costs and the extension of the completion date from mid- June 1998. The Plaintiff completed only the structural construction from the underground floor to the rooftop floor, from the underground floor to the second floor, from the underground floor, and from August 16, 1998, he suspended construction from August 23, 1998. The Defendants notified the Plaintiff of the cancellation of the construction contract on the ground that the Defendants did not complete the construction within the completion period due to the reasons attributable to the Plaintiff on November 25, 1998, on the ground that the Plaintiff did not complete the construction within the completion period. However, on May 23, 1999, the remainder of the construction completion period excluding the completed portion of the instant construction work by the Plaintiff was set as the contract for construction work, but the construction was delayed on February 23, 200.

(5) The Defendants paid KRW 608,643,830 out of the total amount of KRW 784,904,930 (the contract price of KRW 1,900,312,150 x 41.304%) to the Plaintiff until the termination of the contract.

B. As to the Defendants’ assertion that the amount of compensation for delay should be deducted from the amount of the remaining payment of the instant construction work, the period of compensation for delay shall be July 6, 1998, which is the day following the completion date of the construction work, and the termination date of the construction work in this case shall be August 16, 1998, which is the day following the completion date of the construction work. Even if the Plaintiff’s cancellation of the construction work in this case and immediately requested another business operator to complete the construction work, the completion of the remaining construction work shall be deemed necessary. The Defendants and the non-party company shall be required to complete the construction work. Here, the deduction of the remaining three days after the suspension of the construction work due to inevitable reasons shall be made February 8, 199, and the compensation for delay that occurred during 218 days under the above recognition by applying the agreed rate of 1/100 shall be reduced to 414,268,048 won (1,90,12, 150 won x 210/1000 days).

2. As to the grounds of appeal Nos. 1 and 2

A. The court below rejected the Plaintiff’s assertion that there was no duty to pay liquidated damages on the grounds that the delay in the construction work of this case occurred due to the Defendants’ failure to pay the construction cost, failure to work due to an abnormal rain, failure to supply and demand of materials due to the so-called IMF situation, Defendants’ unreasonable construction demand and interference, etc., and thus, the Plaintiff’s assertion that there was no duty to pay liquidated damages on the grounds that there was no cause attributable to the Plaintiff. The Defendants’ assertion that there was no duty to pay liquidated damages until the termination of the contract for the construction work of this case is about 784,904,904,930 won (80% under the agreement) and about 77.5% (80% under the agreement), the amount paid by the Defendants to the Plaintiff prior to the termination of the contract for the construction work of this case. The court below rejected the Plaintiff’s assertion that there was no other evidence to acknowledge the Defendants’ assertion that there was no additional duty to pay the construction work of this case for each of the above 10th witnesses.

B. To ensure the smooth progress of the construction work without difficulty in securing materials and paying wages, the advance payment under the construction contract is the advance payment to be made by the contractor in advance (see Supreme Court Decision 97Da5060, Dec. 12, 1997). If advance payment is made by the contractor in advance and the Defendants’ advance payment can not achieve the above advance payment purpose, the advance payment should be calculated in proportion to the amount equivalent to the contract amount, and the remaining amount should be appropriated as part of the advance payment to the Plaintiff at the time of the payment of the completed portion, and it is reasonable for the Plaintiff to receive the remainder after deducting the advance payment from the 10th advance payment from the 10th advance payment. According to the facts and records acknowledged by the court below, the Plaintiff and the Defendants were paid 10th advance payment from the 10th advance payment to the contractor in advance, and the remainder after deducting the first advance payment from the intermediate payment to the Plaintiff at the time of completion of the construction contract from the 20th advance payment.

However, even if the Defendants were to deduct the advance payment from the intermediate payment pursuant to the above purport of the contract between the parties, the contract price paid to the Plaintiff until the termination of the contract for the instant construction work is below KRW 784,904,930, which is equivalent to the amount of KRW 77.5%, and the Defendants were to have delayed the payment of the intermediate payment to a certain extent after the claim for the intermediate payment was made in the second order. In light of the principle of good faith and the principle of good faith, it is difficult for the Defendants to view that the Defendants were to have refused the payment of the intermediate payment to a certain extent until the due date after the first supply of the goods and services, and that the Defendants were to have refused the payment of the said advance payment until the due date after the due date’s settlement was completed (see, e.g., Supreme Court Decision 200Du9360, supra).

Therefore, the court below's rejection of the Plaintiff's assertion that the Plaintiff did not have any cause attributable to the delay of construction on the grounds that the Defendants delayed the performance of the obligation to pay the relevant intermediate payment.

C. In addition, in the event the completion of an object is delayed due to force majeure such as a natural disaster or a sudden change in economic situation, the contractor shall not be obliged to pay compensation for delay. However, the contractor shall not be obliged to pay the compensation for delay. ① The so-called "IMF situation" and the failure in the supply and demand of materials from such situation, which are alleged in the ground of appeal, cannot be viewed as force majeure. ② In general, in light of the fact that the contractor does not normally perform a normal work when setting the construction period according to the construction contract, the contractor does not take the exemption from the compensation for delay if it is not an exceptional force majeure corresponding to a natural disaster. In light of the records, the construction in this case cannot be considered as a delay due to the above force majeure, but it is difficult to find materials to see that the construction in this case has been done within the construction period as a force majeure similar to a natural disaster, and it cannot be viewed as an exemption from the compensation for delay which can be viewed as a cause for the reduction of the compensation for delay, and ③ there is no evidence to find the plaintiff's allegation that the construction in this case as legitimate interference or delay.

D. Therefore, the fact-finding and judgment of the court below which rejected the plaintiff's defense that the delay in the construction of this case did not cause the plaintiff's cause attributable to the plaintiff is just and acceptable, and there is no violation of the rules of evidence, incomplete deliberation, incomplete reasoning, or misapprehension of the legal principles as to the occurrence of the obligation to pay liquidated damages, etc., which affected the conclusion of the judgment.

E. Furthermore, according to the facts and records acknowledged by the court below, the plaintiff and the defendants agreed on the extension of the construction period that "if the construction is delayed due to reasons not attributable to the plaintiff, such as the causes attributable to the defendant, natural disasters, force majeure, etc., the plaintiff may demand the extension of the construction period to the defendants." Thus, in order to legitimate the plaintiff's demand for extension of construction period, it should be presumed that the construction is delayed due to reasons not attributable to the plaintiff, but for reasons not attributable to the plaintiff. Thus, the construction of this case was delayed due to reasons not attributable to the plaintiff, or the termination of the contract relationship of this case cannot be viewed as due to the defendants' causes attributable to the plaintiff. Thus, the plaintiff's demand for extension of construction period is justified on the premise that the plaintiff's demand for extension of

3. As to the third ground for appeal

Where a contractor cancels a contract after the expiration of the deadline for completion without completing the construction work by the deadline for completion, the time when the contract occurs for the delay shall be the following day after the deadline for completion (see Supreme Court Decision 2000Da56112, Jan. 30, 2001, etc.).

According to the records, the court below's decision to recognize the time of calculating liquidated damages as July 6, 1998, which is the day following the deadline for completion stipulated in the original contract of this case, as the time of calculating liquidated damages was just and acceptable in accordance with the above legal principles, and there is no evidence to find that the air was extended at the plaintiff's legitimate request, and there is no error of law such as misunderstanding of legal principles as to the time of delay period and violation of the rules of evidence, etc. in the judgment of the court below, on the premise of this case.

4. As to the fourth ground for appeal

The agreement on liquidated damages for delay is scheduled to be paid by the contractor as a result of the contractor’s failure to complete the work within the agreed period and deliver it to the contractor. Thus, in case where the contractor is liable to pay liquidated damages for delay due to the contractor’s failure to deliver it, the court may reduce the liquidated damages for delay in accordance with the agreement to the extent that the amount of liquidated damages calculated pursuant to the agreement is deemed unfairly excessive beyond the permitted limit of ordinary people’s payment, by taking into account all the circumstances such as the contractual party’s status, purpose and contents of the contract, the motive scheduled for liquidated damages, the comparison between the actual damages and the liquidated damages, the comparison between the amount of the liquidated damages, the transaction practices at the time, and the economic conditions (see Supreme Court Decision 9Da14846 delivered on October 12, 199, etc.).

The court below reduced the amount of KRW 180,000 on the ground that the contract terms and conditions of this case were set led by the Defendants, making it difficult to change the construction cost difficult, and the construction period was relatively short compared to the scale of the construction, and the price of imported materials was reduced due to the so-called IMF situation at the time of the construction work in this case, and the Plaintiff, the contractor, was difficult. In light of the above legal principles and records, 414,268,048, the agreed penalty for delay was reduced to KRW 180,000,000 on the ground that the excessive amount was excessive. In light of the above legal principles and records, the judgment of the court below is just and acceptable, and there is no error of law by misunderstanding the facts finding against the rules of evidence or by misunderstanding the legal principles on reduction of liquidated damages

5. Therefore, the appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Ji-dam (Presiding Justice)