2015Da24639 Construction Price

Korea Electric Power Corporation

Korea Central Development Co., Ltd.

Daejeon District Court Decision 2015Na102086 Decided October 16, 2015

May 12, 2016

The judgment of the court below is reversed, and the case is remanded to Daejeon District Court Panel Division.

The grounds of appeal are examined.

1. In the interpretation of a juristic act, where the objective meaning is not clearly revealed by the language and text expressed by the parties, the content of the contract and the motive and background leading up to the conclusion of the contract, the purpose and genuine intent to be achieved by the parties through the contract, transaction practices, etc. shall be comprehensively considered, and the contents of the contract shall be reasonably interpreted in accordance with logical and empirical rules, social common common sense and transaction norms so as to conform to the ideology of social justice and equity (see, e.g., Supreme Court Decisions 2000Da72572, May 24, 2002; 2008Da44368, Jun. 24, 2011).

2. According to the reasoning of the judgment below, the court below found that the plaintiff was a public institution designated as a market-type public corporation under Articles 4 and 5 of the Act on the Management of Public Institutions, and that the plaintiff and the defendant entered into four execution contracts with respect to the connection facilities for transmission of the Bochip Headquarters (hereinafter referred to as "the contract in this case", and "each construction works which became the object of the contract in this case" is "the construction in this case"). The contract in this case generally calculates the costs of the customer's burden for transmission connection facilities as the design amount according to the plaintiff's design standards and accounting rules, and the construction cost is determined at the final settlement after the completion of the construction, and the costs of the construction are included in the plaintiff's own execution plan and construction supervision cost. The plaintiff settled the cost of the construction and received the construction cost from the defendant after the completion of the construction work. On September 2013, the court below found that the plaintiff erred by omitting the general management expenses for the private capital materials directly purchased by the plaintiff from internal audits and claimed the construction cost.

Furthermore, the court below, on the ground that general management expenses for private-use materials were omitted in settlement, based on the Act on Contracts to Which the State is a Party (hereinafter referred to as the "State Contract Act") and the criteria for preparing estimated price enacted pursuant thereto, provided that ① the contract in this case only provides for the "Rules on the Use of Electric Transmission and Distribution Installations" as the basis of the contract in this case, and the "Rules on the Use of Electric Transmission and Distribution Facilities" does not provide for the application of the State Contracts Act, ② the transmission connection expenses including the alternative construction expenses are borne by the customer, but the customer bears the expenses, and as a principle provides for the Plaintiff’s construction and substitute construction of the connection facilities. Thus, even if the Plaintiff was designated as a market-type public corporation, it is difficult to view that the State Contracts Act to regulate the contract to be concluded between the equal parties is immediately applicable to the contract in this case. ③ Unlike the general construction contract or the contract, the contract in this case requires the Plaintiff to construct the connection facilities at its own expense, and the Plaintiff, the contractor, as a contractor, cannot be seen as the contract in this case.

3. However, we cannot accept the judgment of the court below for the following reasons.

According to the reasoning of the judgment below and the evidence duly admitted by the court below, the contract of this case provides that the construction cost for the customer's charge of connection facilities exclusively for transmission shall be calculated as the design amount according to the plaintiff's design standards and accounting rules, and the confirmation of the construction cost shall be determined at the time of final settlement after the completion of the construction, and it does not provide any objective criteria to calculate the construction cost differently, and this is also the same as the "Rules on the Use of Electric Transmission and Distribution Installations, which is the basis of the contract of this case." Thus, in order to calculate the construction cost of this case, the design standard and accounting rules of the plaintiff shall be first determined.

Article 39 of the Act on the Management of Public Institutions provides that matters necessary for the accounting principles, etc. of public corporations and quasi-governmental institutions shall be determined by Ordinance of the Ministry of Strategy and Finance, and Article 2 (1) of the Rules on the Contract Affairs of Public Corporations and Quasi-Governmental Institutions, which is the Ordinance of the Ministry of Strategy and Finance, provides that "(c) shall apply mutatis mutandis to the settlement of contracts by public corporations and quasi-governmental institutions, except as otherwise expressly provided for in other Acts and subordinate statutes, and Article 2 (5) provides that "the Act on Contracts to Which the State Is a Party shall apply mutatis mutandis to matters not provided for in these Rules concerning contracts by public corporations and quasi-governmental institutions." Article 9 (4) of the Enforcement Decree of the Act on Contracts to which the State is a Party shall prescribe necessary matters

In addition, in light of such circumstances, since the Plaintiff, a public corporation, entered into the contract in exclusive status and determines the construction cost to be calculated and confirmed in accordance with the Plaintiff’s design standards and accounting regulations, the standards for calculating the construction cost must be objective and fair that can ensure fairness in the contract. The Plaintiff’s standards for preparing the State Contracts Act and the Decree of the Budget Act are the grounds for calculating the construction cost in this case. There are no other design standards and accounting regulations concerning the calculation of the construction cost, and there are no data to deem that there is any other standards for calculating the construction cost, and there are errors in the Plaintiff’s internal audit in claiming the construction cost without complying with the standards for preparing the State Contracts Act or the estimated price, it is reasonable to deem that the criteria for preparing the “budget price” under the State Contracts Act and the Decree thereof fall

Meanwhile, according to Article 2 subparags. 1 and 2, Article 7 subparag. 1, and Article 8(2) of the Enforcement Decree of the Act on Contracts to Which the State Is a Party, the Defendant asserts that the government-funded materials correspond to the private-funded materials in this case. Thus, even if the “standards for preparing the estimated price” are met, the Plaintiff cannot claim general management expenses for the government-funded materials. However, the above provision excludes the government-funded materials directly purchased by the public-owned enterprise from the estimated price in that there is no reason to pay the price to the other party for the government-funded materials that they directly purchased by the public-owned enterprise. Thus, the above provision does not apply to this case where the Plaintiff directly supplied the materials to execute construction and received the construction cost

Nevertheless, without examining what the “Plaintiff’s design standards and accounting regulations” stipulated in the instant contract, the lower court determined that the State Contracts Act cannot be deemed to apply to the instant contract solely on the ground that the Plaintiff did not state that the State Contracts Act would apply to the instant contract and constitutes a public institution. In so doing, the lower court’s judgment erred by misapprehending the legal doctrine on interpretation of the contract, or by exceeding the bounds of the principle of free evaluation of evidence in violation

4. Conclusion

The lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Jae-soo

Justices Kim Yong-deok

Justices Kim In-young

Justices Lee Dong-won