The scope of the obligation to pay the subcontract price to a contractor pursuant to Article 14 (1) of the Fair Transactions in Subcontracting Act;

In light of the legislative intent of the former Act on Fair Transactions in Subcontracting (amended by Act No. 9616, Apr. 1, 2009; hereinafter referred to as the "former Subcontract Act") and the former Enforcement Decree of the Fair Transactions in Subcontracting Act (wholly amended by Presidential Decree No. 22297, Jul. 21, 2010; hereinafter referred to as the "former Enforcement Decree of the Subcontract Act"), a contractor shall be obligated to pay a subcontract price to the extent of the contractor pursuant to Article 4(3) of the former Enforcement Decree of the Subcontract Act, except in extenuating circumstances, but the subcontractor shall bear a direct payment obligation for the amount calculated by deducting the portion equivalent to the subcontract price of the subcontractor from the subcontract price already paid to the contractor by the subcontractor from the subcontractor under Article 14(4) of the former Enforcement Decree of the Subcontract Act.

Article 14(1), (2), and (4) of the former Fair Transactions in Subcontracting Act (Amended by Act No. 9616, Apr. 1, 2009); Article 4(3) of the former Enforcement Decree of the Fair Transactions in Subcontracting Act (Amended by Presidential Decree No. 2297, Jul. 21, 2010) (see current Article 9(3))

Supreme Court Decision 2007Da31211 Decided May 13, 2010 (Gong2010Sang, 1091) Supreme Court Decision 201Da2029 Decided April 28, 201 (Gong2011Sang, 1052)

Gender Co., Ltd. (Attorney Park Young-il et al., Counsel for the defendant-appellant)

Hyundai Construction Co., Ltd. (Law Firm continental Aju, Attorneys Inn Sang-chul et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2009Na97644 decided December 29, 2010

The part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the Seoul High Court. The Plaintiff’s appeal is dismissed.

The grounds of appeal are examined.

1. As to the defendant's appeal

A. If a subcontractor (contractor) requests a subcontractor to pay a direct subcontract price equivalent to the portion executed by the subcontractor under Article 14(1) of the former Fair Transactions in Subcontracting Act (amended by Act No. 9616, Apr. 1, 2009; hereinafter referred to as the "former Subcontract Act"), the subcontractor shall be obligated to pay it directly to the subcontractor. The subcontractor’s obligation to pay the subcontract price and the contractor’s obligation to pay the subcontractor under Article 14(2) of the former Subcontract Act shall be terminated within the scope of the subcontractor’s obligation to pay it directly. In addition, Article 14(4) of the former Subcontract Act provides that the subcontractor’s obligation to directly pay the subcontractor to the subcontractor shall be deducted from the subcontractor’s obligation to pay the subcontract price under Article 14(1) of the former Enforcement Decree of the Subcontract Transactions Act (wholly amended by Presidential Decree No. 2297, Jul. 21, 2010; hereinafter referred to as the “former Enforcement Decree of the Subcontract Act”) to the extent of the subcontractor’s obligation to directly pay the subcontract price.

B. According to the reasoning of the lower judgment, the lower court determined that the Defendant, on August 7, 2007, concluded a contract for construction materials supply contract with Nonparty 2 to the effect that the Defendant would not pay KRW 1,480,40 to Nonparty 2 for the construction cost of the instant goods at KRW 80,00, KRW 70, KRW 80, KRW 70, KRW 80, KRW 80, KRW 70, KRW 80, KRW 80, KRW 70, KRW 80, KRW 80, KRW 80, KRW 80, KRW 60, KRW 80, KRW 80, KRW 7, KRW 80, KRW 80, KRW 60, KRW 7, KRW 80, KRW 7, KRW 80, KRW 60, KRW 80, KRW 80, KRW 60, KRW 80, and the Defendant would not pay the instant goods to Nonparty 2’s respective creditors for non-party 3’ non-party 6.

C. However, examining the facts acknowledged by the court below in light of the legal principles as seen earlier, the defendant is obligated to pay the subcontract price to the plaintiff up to the limit of 343,551,093 won (i.e., the contract price of 1,480,241,400 won - the contract price of 1,136,690,307 won) which the defendant pays to the non-party company. However, from the contract price of 203,50,000 won which the defendant paid to the non-party company, the non-party company is obligated to pay the subcontract price directly only for the amount calculated by deducting the amount equivalent to 176,00,000 won from the contract price of 203,50,000 won, which is the plaintiff's subcontract price of 203,50,000 won, which is the contract price of 200,500,000 won which was paid to the non-party company to the non-party company.

In so determining, the court below erred by misapprehending the legal principles on the scope of the obligation to pay the subcontract price under the former Subcontract Act, and such illegality has influenced the conclusion of the judgment.

The defendant alleged in the grounds of appeal that the plaintiff's subcontract price of the non-party company is KRW 176,00,000, and the court below erred in finding that the non-party company's subcontract price is KRW 223,803,580 among the contract price of the non-party company based solely on the tax invoice. However, as seen in the above legal principles, the defendant, as the contractor, bears the duty of direct payment to the non-party company that is the contractor, to the extent of the contractor's duty of payment, not to limit the duty of the plaintiff's subcontract payment to the non-party company that is the contractor. Thus, the non-party company's contract price of the non-party company is KRW 223,803,580, or is KRW 176,000,000.

2. As to the Plaintiff’s appeal

In light of the evidence duly admitted by the court below, the judgment of the court below that recognized that the defendant paid 176,00,000 won to the non-party company out of the contract price to the non-party company as the price for the portion supplied by the plaintiff is just and acceptable. There is no violation of the law of logic and experience or violation of the principle of free evaluation of evidence.

3. Conclusion

Therefore, the part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. The Plaintiff’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee In-bok (Presiding Justice)