Nowon-gu Co., Ltd. (Law Firm Jeong, Attorney Kim Jong-chul, Counsel for the plaintiff-appellant)

Korea

March 21, 2013

Seoul Central District Court Decision 201Gadan459043 (Main Office), 2012Gadan505245 (Counterclaim) Decided October 17, 2012

1. Of the judgment of the court of first instance, the part against the plaintiff (Counterclaim defendant) in excess of the money ordered to pay the counterclaim is revoked and the defendant (Counterclaim plaintiff)'s claim corresponding to the revoked part is dismissed.

2. The Plaintiff (Counterclaim Defendant) pays to the Defendant (Counterclaim Plaintiff) 23,556,673 won with 5% interest per annum from November 17, 2011 to November 19, 2013, and 20% interest per annum from the next day to the date of full payment.

3. All of the appeals against the Plaintiff (Counterclaim Defendant) and the remaining appeals against the counterclaim are dismissed.

4. The total costs of the lawsuit are assessed against the Plaintiff (Counterclaim Defendant) by adding the principal lawsuit and the counterclaim to 70%, and the remainder is assessed against the Defendant (Counterclaim Plaintiff).

1. Purport of claim

In this lawsuit: It is confirmed that there is no damages liability arising from the purchase contract between the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”) and the Defendant (Counterclaim Plaintiff; hereinafter “Defendant”) on September 20, 2010.

Counterclaim: The plaintiff shall pay to the defendant 3,652,390 won with 6% interest per annum from November 17, 201 to the service date of a copy of the counterclaim of this case, and 20% interest per annum from the next day to the day of complete payment.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff and the defendant confirm that there is no damages liability arising from the purchase contract of September 20, 2010 between the plaintiff and the defendant. The defendant's counterclaim is dismissed.

A principal lawsuit and a counterclaim shall be deemed simultaneously.

1. Facts of recognition;

A. On September 16, 2010, the Plaintiff (former: CY) was selected as a successful bidder for 110 items, including sirens, through competitive bidding for national electronic procurement. On September 20, 2010, the Plaintiff entered into a purchase contract with the Army Headquarters and the contract amounting to 59,315,00 won, deposit amounting to 5,931,500 won, and delivery date from September 20, 2010 to January 2, 2011 (hereinafter “instant contract”). The main contents of the contract special terms attached to the instant contract are as follows.

Article 3 (Lending of Specifications and Samples)

1.A “B” (referring to the Plaintiff; hereinafter the same shall apply) shall apply to the specifications list within 10 working days after the conclusion of the contract, and the samples shall be applied to the quality inspection division;

2. The term "B" shall prepare a detailed statement of securing raw materials, a plan for production/purchase, and an inspection report for items lent with specifications and samples within seven working days, and submit them to the quality inspection division;

(Interim omitted)

6. To secure and submit the same item at the time of loss or damage: Provided, That if it is not submitted, it shall be reimbursed with the operating unit price of the Army Equipment Maintenance Information System for the corresponding year;

Article 9 (Inspection)

1. “B” shall be supplied with items consistent with the requirements, such as specifications, samples, drawings, etc., and the items shall have passed various inspection organizations (raw materials, trial process, complete works, attachment, performance test, and supply) according to the items;

(hereinafter omitted)

Article 10 (Guarantee)

1. “B” shall guarantee that the standard and quality of the supplied goods are the same as those of the terms and conditions of the contract for a period of two years from the date of delivery;

2. If a quality inspection officer of "A" (referring to the Army Headquarters; hereinafter the same shall apply) finds that the standards and quality of the supplied goods are different from those of the terms of the contract within the period prescribed in paragraph 1, he/she may notify the "B" of the fact, and may request repair or replacement supply of the goods in question, and all expenses incurred therefrom shall be borne by "B".

3. “B” shall be repaired or replaced within 60 days from the date of receipt of the notification that a defect has occurred from the quality inspection supervisor of “A”, and where the repair or substitute supply (exchange) has not been made within this period, compensation for delay shall be paid to “A” in accordance with the following formula: Provided, That compensation for delay shall not exceed 30/100 of the contract amount of the product that has occurred of the defect:

* Damages for delay = (Contract unit price for the relevant item) ¡¿ [The number of days until the date of designation (60 days) 】 (0.15% of the liquidated damages for delay for the relevant goods)

4. “A” may claim against “B” the amount equivalent to 130% of the contractual unit price for the good in compensation for damages, where the warranty has not been made (including where repair or substitute supply is not possible and where “B” may be deemed to have refused to comply with the obligation of defect repair, etc.) despite the demand for repair or substitute supply of the good.

(hereinafter omitted)

B. The Army Headquarters provided samples to the Plaintiff without providing the Plaintiff with a specification stating material, etc. different from other products regarding “bab and baves Hand (SC450)” among the instant contract products. The samples provided were made as carbon (SC450) with high carbon ingredients compared to the instant products.

C. On October 15, 2010, the Plaintiff submitted a production/purchase plan and a statement of securing raw materials to the Army Headquarters. The said statement of securing raw materials stated “KSB 3007-1” as “KB 3007-1”, which corresponds to the Korean Standard Industrial Standards for the Plocket Nos. 3007 for the instant goods.

D. On January 11, 201 and the 13th of the same month, the Plaintiff supplied all the instant contractual goods, including the instant goods. As a result, in the Army unit that was supplied and used the instant goods, there were defects such as displaying the goods, the Army Headquarters requested on September 19, 201 to the Korea Army Maintenance and Development Institute for the component analysis of the samples of the instant goods and the procured goods. On September 21, 201, the said Research Institute for the analysis of the components of the instant goods is as follows.

A person shall be appointed.

G. The Army Headquarters demanded the Plaintiff to repair the defects of the instant goods, and on October 11, 201, the Plaintiff rejected the performance of the repair of defects by notifying the Defendant of the following answers:

○ us have produced and completed the goods “(f) Hand hand” through legitimate procedures when manufacturing them.

○ us had supplied goods after passing an inspection (approval) with the test report requested by the inspector without any fact that the material quality and shape of the supplied goods are attributable to them.

○ us inform us that it is not possible to accept the request for user's complaint settlement.

H. The number of the instant goods supplied by the Plaintiff is 6,365, and the amount is 25,886,455 won (=6,365 items x 4,067 won per unit price, and 43.64% of the total amount).

I. On the other hand, around November 2, 2011, the Defendant sent a payment notice stating that KRW 33,652,400, calculated pursuant to Article 10(4) of the Special Conditions of the instant contract shall be paid to the Plaintiff by November 16, 201, and the said payment notice reached the Plaintiff on November 3, 2011.

[Based on recognition] Each entry, film, and video set forth in Gap evidence Nos. 1 through 8, 13, Eul evidence Nos. 1 through 4, 6, 7, 9 through 11, 15 through 20 (including each number), and the purport of the whole pleadings

2. The parties' assertion

A. The plaintiff's assertion

The plaintiff is entirely responsible to the non-party 1 of the Army Headquarters's inspector who issued the pass decision in the sampling inspection to explain the purpose of use mistakenly and the quality of sample products of this case. The defendant cannot be held liable to the plaintiff for defect liability for the contract goods of this case. Thus, the defendant is not liable to the defendant for damages under the contract of this case.

B. Defendant’s assertion

The defendant asserts that the plaintiff is liable to compensate for the amount equivalent to 130% of the contract price for the goods of this case in accordance with Article 10 (4) of the special terms of the contract of this case, since the plaintiff produced and supplied the goods of this case differently from the samples of this case and rejected the repair of defects.

3. Determination

A. Determination on the main claim

(1) Subject matter of the instant contract

In light of the above facts, since the contract of this case aims to provide certain samples and to supply goods with the same specifications, materials, etc., the contract of this case is an object of the contract of this case, which is composed of carbon steel materials, such as the sample of this case provided to the plaintiff.

(2) Whether the instant contract was implemented

As to whether the Plaintiff performed the instant contract on the instant product, it is reasonable to view that the following circumstances were revealed by the facts acknowledged by the aforementioned evidence, namely, ① the instant product accounts for any one of the 110 items, but its quantity and amount, and thus, it is deemed necessary to implement prudent contract compared to other products. ② Although the contents of Article 9(1) of the Special Conditions for the instant contract and the specifications for the instant product were not provided, the quality of the instant product can be specified by the provision of samples, and the Plaintiff is not obliged to deliver products that correspond to the requirements (materials and intensity) for the instant product. In light of Article 3(1), (2), and (6) of the Special Conditions for the instant contract, the Plaintiff did not have a duty to identify the instant product as the supply of samples of the instant product, and thus, it is reasonable to view that the Plaintiff was not liable for the analysis of the raw material of the instant product to obtain the specifications of the instant product from Nonparty 1, 200, using the Korean Industrial Standards No. 6 sample No. Hand No.

(3) Whether the defect repair has not been performed

Although the Plaintiff asserted that he had tried to repair defects by raising the content of carbon through sediment treatment of the instant goods, it cannot be readily concluded that the entries in Gap evidence Nos. 21 and 23 (including the paper number) alone can enhance the content of carbon to a certain extent through sediment treatment. As seen earlier, the Plaintiff expressed his intent that he cannot perform the defect repair. Furthermore, according to Article 10(1) of the Special Conditions for the instant contract, the Plaintiff refused to repair or exchange the goods supplied for 2 years, even though he was responsible for guaranteeing the quality of the goods supplied for 2 years under Article 10(1) of the Special Conditions for the instant contract, so the Plaintiff did not perform its duty to repair the goods in this case.

(4) The theory of lawsuit

Therefore, the Plaintiff did not perform the instant contract without any justifiable reason and did not perform the obligation to repair the defects of the instant goods. Therefore, the Plaintiff’s assertion that there is no liability to compensate the Defendant for damages under the instant contract is rejected.

B. Determination on the counterclaim

(1) Occurrence of damages liability

However, as seen earlier, there were defects in the instant goods supplied by the Plaintiff, and the Plaintiff refused to repair defects despite the demand for the repair of defects or replacement of the Army Headquarters, barring any special circumstance, the Plaintiff is obligated to pay to the Defendant the amount equivalent to 13,652,391 won (=4,067 won) equivalent to 130% of the contractual unit price for the instant goods pursuant to Article 10(4) of the Special Conditions of the instant contract, barring any special circumstance.

In regard to this, the Plaintiff asserted that Article 10(4) of the Special Conditions of the instant contract was unfairly excessive as the estimated amount of damages. However, in light of the aforementioned facts, the Plaintiff’s assertion is rejected, given the economic status of the parties to the instant contract, including the Plaintiff and the Defendant, such as the Plaintiff and the Defendant, in light of the purpose and content of the contract, the scheduled amount of damages, transaction practices, and other circumstances, it cannot be deemed that the payment of such estimated amount would result in the Plaintiff’s loss of fairness by imposing unfair pressure on the Plaintiff, an obligor, who is in the position of the economically weak (see, e.g., Supreme Court Decision 2011Da832

(2) Limitation of liability (Contributory negligence)

In full view of the overall purport of the arguments, Gap evidence 2 and Eul evidence 5, the plaintiff requested six finished products to the Army Headquarters on December 23, 2010, including the goods of this case. The inspector of the Army Headquarters 1 did not closely examine the inventory number and standard name on the specifications of raw materials, although the inventory number and standard name are different from the goods of this case. On December 30, 2010, the article of this case is deemed to be consistent with the standard values, and it is reasonable to determine that the plaintiff delivered the goods of this case. Accordingly, according to the above acknowledged facts, since non-party 1 of the Army Headquarters 1 was negligent in inspecting the goods of this case, it is reasonable to consider the purpose and contents of the contract of this case as the plaintiff's duty of care due to non-party 1's negligence in examining the goods of this case.

(3) As to the assertion of offsetting profit and loss

The plaintiff asserts that the defendant owned the goods of this case, unless the contract of this case is invalidated, cancelled, or terminated due to the defect in the goods of this case, and that the defendant should deduct the amount of damages incurred by the defect in the goods of this case from the amount of damages equivalent to the market price of the goods of this case. However, there is no evidence to recognize the market price of the goods of this case, and that the goods of this case should be returned to the plaintiff after the defendant took measures not to use the goods of this case as military marks and munitions. Thus, the plaintiff's assertion on the above part shall not be accepted.

3. Conclusion

Therefore, the plaintiff is liable to pay damages to the defendant at the rate of 23,56,673 won as damages (the amount of damages 3,652,391 won under Article 10 (4) of the Special Conditions for the Contract of this case x 70% x 70% ) and damages for delay calculated at the rate of 5% per annum under the Civil Act from November 17, 2011 to November 19, 2013, which is the date of the ruling of the court of first instance where it is deemed reasonable to dispute as to the existence or scope of the plaintiff's obligation to pay damages, and 20% per annum from the next day to the date of full payment. Thus, the plaintiff's claim for the counterclaim of this case is dismissed as there is no reason to accept the defendant's claim for counterclaim of this case within the scope of recognition, and the remaining part of the judgment of the court of first instance as to the plaintiff's counterclaim of this case is dismissed, and it is just to dismiss the part of the plaintiff's appeal as above.

Judges Kim Il-tae (Presiding Judge)