Corporate Construction Advisory

The reasons corporate construction advisory may be needed are as follows.

Construction projects involve various types of contracts, such as contract agreements, subcontract agreements, consignment agreements, and private development project agreements.

The terms and special clauses of a contract determine the construction period, payment conditions, design changes, defect warranties, liquidated damages for delay, and grounds for termination, and these become the central points of dispute.

In particular, ambiguity in design change or payment adjustment clauses is a major cause of disputes, so a legal review of the contract and adjustment of risk through legal advice may be needed before the contract is concluded.

▶Scope in which advisory services may be needed

Various permits and approvals are required, such as building permits, development activity permits, road occupancy permits, cultural heritage surface surveys, and environmental impact assessments. When permits are incomplete or procedural defects arise, a project suspension, a construction stoppage order, an administrative disposition, or an administrative fine may be imposed.

Because the regulations differ by local government and by statute, a legal review at each stage of the permit process is required.

▶Scope in which advisory services may be needed

When unfair trade practices under the Fair Transactions in Subcontracting Act and the Monopoly Regulation and Fair Trade Act are detected, administrative and criminal disadvantages arise, such as penalty surcharges, accusations, accumulation of demerit points, and bidding restrictions.

In particular, in transactions between a large-company prime contractor and a small or medium-sized subcontractor, the main types of violations are failure to issue a written contract, unfair reduction of payment, unfair return of goods, requests for technical data, and retaliatory measures.

▶Scope in which advisory services may be needed

At a construction site, many workers and subcontractors are deployed, and labor risks frequently arise, such as unpaid wages, industrial accidents, failure to enroll in the four major insurances, and failure to prepare employment contracts.

There is also liability under the Occupational Safety and Health Act and the possibility that the Serious Accidents Punishment Act may apply, so management of on-site legal risk is necessary.

▶Scope in which advisory services may be needed

In the process of private development, reconstruction, redevelopment, association establishment, and project implementation approval, disputes may arise, such as disputes among association members, expropriation rulings, cancellation of sale contracts, nonpayment of construction payment, and real estate trust agreement risks.

This is also an area with a high possibility of disputes related to the designation of development zones, floor area ratios, the donation of infrastructure, and the fulfillment of agreement conditions.

▶Scope in which advisory services may be needed

Liability for defect repairs after the completion of a building frequently leads to disputes depending on the construction period, the defect warranty period, and the party legally responsible.

Depending on the type of defect, the legal response differs based on damages under the Civil Act, defect warranty liability under the Framework Act on the Construction Industry, or the defect repair guarantee under the Housing Act.

▶Scope in which advisory services may be needed

The level of punishment for violating the Framework Act on the Construction Industry is as follows.

▶Operating a construction business without registration or after registering by improper means : imprisonment of up to 5 years or a fine of up to 50 million won

▶Bid rigging in a construction bidding process : imprisonment of up to 5 years or a fine of up to 200 million won

▶Where serious structural damage occurs to a major part of a facility during the defect warranty period because construction was performed in violation of the statutes on construction safety
: imprisonment of up to 10 years where a public danger arises, and life imprisonment or imprisonment of at least 3 years where a death or injury accident occurs

The level of punishment for violating the Fair Transactions in Subcontracting Act is as follows.

▶Failure to prepare a subcontract agreement : a fine of up to an amount equivalent to twice the subcontract payment

▶Retaliatory measures against the reporting of a violation of the Fair Transactions in Subcontracting Act : a fine of up to 300 million won

▶Violation of a court confidentiality protection order : imprisonment of up to 2 years or a fine of up to 20 million won

The level of punishment for violating the Occupational Safety and Health Act and the Serious Accidents Punishment Act is as follows.

▶Death of a worker due to a violation of industrial accident prevention provisions : imprisonment of up to 7 years or a fine of up to 100 million won

In such cases, the corporation and the responsible manager may be subject to a higher level of punishment, so caution is required.

If you are considering whether to receive corporate construction advisory, please use the checklist below to confirm whether there are any areas your company has not yet addressed.

✅Whether advice has been received on permits, development activities, and environmental impact assessments

✅Advance review of subcontract agreements and confirmation of payment conditions

✅A system for responding to construction payment, delinquency, and settlement disputes

✅Review of defect warranty liability, defect repair plans, and completion inspection certificates

✅Establishment of an industrial safety management plan and examination under the Serious Accidents Punishment Act

✅A strategy for responding to land compensation procedures, appraisals, and objections to rulings

✅Advice on the protection of intellectual property rights in design drawings, patents, trademarks, and technical data

✅Enrollment in the construction guarantee cooperative and management of collateral capacity

✅Compliance with environmental regulations and diagnosis of administrative disposition risk