CONTENTS
- 1. Construction Payment Litigation: The Client Who Requested Assistance
- 2. Establishing a Construction Payment Litigation Response Strategy
- - Reorganizing the Standard for Determining Construction Defects
- - Pointing Out the Limits of the Appraisal Process and Result
- - Rebutting the Calculation of the Construction Delay and Liquidated Damages for Delay
- 3. The Result of the Construction Payment Litigation Response: ‘A Substantial Reduction in Liability’
- 4. What Is a Construction Payment Litigation
- - Frequently Asked Questions for the Attorney Specializing in Construction
- - If You Require Assistance
1. Construction Payment Litigation: The Client Who Requested Assistance
The client in the construction payment litigation was a business operator specializing in waterproofing work and was the contractor who had been awarded and performed waterproofing work on the rooftop and penthouse of an apartment complex and on some of its units.
After performing the work in accordance with the terms of the contract, the client took the view that the work had been completed at a certain point and requested payment of the balance.
However, the party that had commissioned the work refused to pay the balance on the ground that waterproofing defects existed and that the work had not been fully completed.
Accordingly, the client filed suit to recover the unpaid construction payment, but the other party instead filed a counterclaim seeking a larger amount on the grounds of the cost of repairing the defects and a prolonged delay in the work.
In other words, the client, who had been in the position of being owed the construction payment, instead came to face a situation in which he had to pay damages.
In this case, the client lost at the first instance and subsequently came to Daeryun for a consultation with an attorney specializing in construction in order to contest the determination on appeal.
During the consultation, the client felt a great burden because the outcome was difficult to predict, given the determination of the defects and the resulting excessive imposition of liability.
2. Establishing a Construction Payment Litigation Response Strategy
On appeal in the construction payment litigation, the client established a response strategy whose key objective was to correct the portion of the first-instance judgment in which the determination of defects and the scope of damages had been recognized excessively.
On appeal, the focus was on explaining, step by step, that the first-instance determination was difficult to maintain as it stood, centering on the following issues.
▶ The problems revealed in the appraisal procedure
▶ Who bore responsibility for the delay in the work
Reorganizing the Standard for Determining Construction Defects
The attorney specializing in construction emphasized that, in determining defects in waterproofing work, consideration should be given not only to whether the construction standards were met but also to whether functional problems such as water leakage actually occurred in the course of actual use.
In particular, on the basis that no water leakage or problem in use had arisen for a considerable period after the completion of the work, the attorney persuasively presented the point that it was excessive to determine, on the ground of a partial failure to meet construction standards, that all of the existing waterproofing should be removed and reconstructed.
In addition, explaining that waterproofing work is, by its structural nature, a type of work for which repair or reconstruction is anticipated at regular intervals, the attorney organized as a principal line of argument on appeal the point that a cost calculation premised on full reconstruction without taking this into account was not reasonable.
Pointing Out the Limits of the Appraisal Process and Result
Because the first-instance judgment in this case was rendered in heavy reliance on the appraisal result, pointing out the appraisal process and its limits was one of the key issues on appeal.
The attorney specializing in construction raised the issue centering on the point that the appraisal result adopted at the first instance did not sufficiently reflect the characteristics of waterproofing work and the actual construction circumstances.
Pointing out that, although the coating thickness was measured in only some sections during the appraisal process, that result was applied as it stood to the entire construction area, the attorney emphasized that it was difficult to conclude the scope of defects for the entire project on the basis of partial measurement results alone.
The attorney also pointed out that whether water leakage actually occurred and the management and inspection process at the time of construction had not been sufficiently considered in the appraisal process, and argued that caution was required in calculating the scope of damages on the premise of the appraisal result as it stood.
Rebutting the Calculation of the Construction Delay and Liquidated Damages for Delay
With respect to the liquidated damages for delay, the response centered on the point that the determination of the time of completion of the work was erroneous.
Because liquidated damages for delay are an amount that accumulates on a daily basis where the work is determined to have been delayed, the time of completion was an issue on which the scale of liability varied greatly.
Accordingly, the attorney specializing in construction explained that the principal work had been completed at a particular point and that the work carried out thereafter was no more than supplementary work.
The attorney also organized the point that various external factors affecting the work schedule had existed during the construction, such as changes in the circumstances of the ordering party, constraints relating to the delivery of materials, and requests for additional work not included in the contract, and emphasized that it was not reasonable to recognize the lengthy number of days of delay as it stood.
Through this, the attorney made clear on appeal that it was difficult to attribute responsibility for the construction delay solely to the client.
3. The Result of the Construction Payment Litigation Response: ‘A Substantial Reduction in Liability’
On appeal in the construction payment litigation, the court took the view that the first-instance calculation of the defect repair cost and the liquidated damages for delay was excessive.
▶ The Court's Determination
ㆍ The point that the appraisal result was skewed toward partial measurement in calculating the total defect cost was reflected on a limited basis
ㆍ It is difficult to regard the cause of the construction delay as attributable solely to the contractor
As a result, a substantial portion of the other party's counterclaim was not accepted, and the amount the client had to bear was greatly reduced compared with the first instance, which was the result of reorganizing the standards for the scope of defects and the calculation of liquidated damages for delay.
The client expressed his relief, saying that he had been able to receive a realistic determination on appeal and to reduce his burden.
4. What Is a Construction Payment Litigation
A claim for construction payment is a claim arising on the basis of a contract for work, and it refers to the right of a contractor who has completed the agreed work to claim payment of consideration from the party that commissioned the work.
Article 664 of the Civil Act defines a contract for work as ‘a contract that is established when one party undertakes to complete a certain work and the other party undertakes to pay remuneration for the result of that work’.
Accordingly, in a construction payment litigation as well, the completion of the work is, in principle, the standard for the arising of the right to claim construction payment.
The most significant characteristic of a contract for work is that the contractor has independence in the course of performing the work but ultimately bears responsibility for the result of ‘the completion of the work’.
For this reason, in a construction payment litigation, the main factors for determination are whether the agreed work was completed in conformity with the purpose of the contract and whether a serious defect exists in the result.
In addition, even where a defect is at issue, the full construction payment is not denied; rather, the construction payment may be adjusted on a limited basis only within a reasonable scope necessary for repairing the defect, depending on its scope and degree.
Because of this legal structure, a construction payment litigation involves a comprehensive review of whether the work was completed, the substantial impact of the defect, and the reasonableness of the scope of repair.
Frequently Asked Questions for the Attorney Specializing in Construction
Q. What requirements are necessary to recover construction payment in a construction payment litigation?
For construction payment to be recognized, the key questions are broadly ① whether there was a construction contract, ② whether the work was completed as contracted, and ③ whether the agreed payment was left unpaid.
A written contract is the clearest material, but even without a contract, the fact that a contract was concluded can be proved through an estimate, a purchase order, or text messages or emails.
In addition, even where a completion inspection has not been carried out, a claim for construction payment may be possible in some cases if the work is actually in use or is in effect completed.
Q. What materials should be prepared in a construction payment litigation?
In a construction payment litigation, materials that can confirm the contents of the contract, the fact that the work proceeded, and whether the payment was left unpaid are important.
Primarily, a contract for work, drawings, specifications, a statement of particulars, materials related to completion or interim progress, and a construction payment invoice and payment records are used.
If photographs of the construction site or records of the construction progress and materials concerning consultations on additional and modified work are organized together with these, the scope and degree of completion of the work can be explained more clearly.
If You Require Assistance
A construction payment litigation is a dispute in which various factors operate in combination, such as the standard for determining defects, the credibility of the appraisal result, and the attribution of responsibility for the construction delay
As in this case, there are not a few instances in which the scope of defects is expanded excessively or the appraisal result leads directly to the calculation of liability.
To draw out a substantial result in a construction payment litigation, the assertions and evidence must be connected organically, with an understanding not only of the contents of the contract but also of the site circumstances and the characteristics of the work.
In construction payment disputes, this firm provides assistance through the following step-by-step strategy so that excessive liability is not confirmed as it stands.
ㆍSetting the direction of the response to the appraisal result
ㆍLegal review of the structure for calculating the amount of damages
ㆍReorganization of the issues at the appellate stage
In addition, with a substantial number of attorneys specializing in construction registered with the Korean Bar Association, the firm provides a tailored response strategy suited to the nature of the case and the client's situation.
If you require legal assistance in a situation similar to that described above, please at any time 🔗Legal Consultation Reservation and prepare a response strategy.
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