Hello, this is Attorney Park Jong-han from Law Firm Cheongchul.
The National Contract Act recognizes changes in contract amount due to inflation, design changes, and other changes in contract terms, and typically, construction contracts also include these reasons as grounds for adjusting the contract amount.
However, unlike the clear reasons such as inflation or design changes, the reason for changes in contract terms is not clearly defined, so it is necessary to examine this reason.
[Question]
Cases where the adjustment of the contract amount due to changes in other contract terms is recognized
[Answer]
Article 19 of the Laws on Contracts to which the State is a Party (hereinafter referred to as “National Contract Act”) states, "The heads of central administrative agencies or contracting officials shall, after entering into contracts for construction, manufacturing, service, or any other contract burdening the national treasury, adjust the contract amount as required by inflation, design changes, and other changes in contract terms (including cases due to force majeure such as natural disasters, wars, etc.) in accordance with the provisions prescribed by Presidential Decree when there is a need for adjustment."
The Standard Construction Contract for Private Construction provided by the Ministry of Land, Infrastructure and Transport also has a provision for “adjustment of the contract amount due to other changes in contract terms,” stipulating that in cases such as changes in contract terms (Item 1), extension of the construction period due to force majeure (Item 2), or amendments to laws affecting construction costs and periods (Item 3), the contract amount may be adjusted if necessary.
Judicial precedents vary in recognizing cases where changes in other contract terms are necessary, especially regarding force majeure. The Seoul High Court judgment on April 19, 2023, in cases 2020Na2035289 and 2021Na2004602, stated that force majeure refers to situations such as typhoons, floods, or other inclement weather, wars or incidents, earthquakes, fires, infectious diseases, riots, or other occurrences that are not attributable to either party and beyond their control.
In lower courts, adjustments to contract amounts due to delays in construction caused by COVID-19 and additional costs such as quarantine and airfare (Seoul Central District Court judgment on April 17, 2024, in case 2021Gahap597965) and indirect construction costs due to extensions of the construction period caused by summer rains (Suwon District Court Ansan Branch decision on September 5, 2024, in case 2022Gahap9061) were recognized as adjustments recognized due to force majeure.
On the other hand, lower courts did not recognize force majeure in cases where the accident was due to the fault of the contracting party (structural damage due to arbitrary changes in construction order) (Seoul High Court judgment on April 19, 2023, in cases 2020Na2035289 and 2021Na2004602) and in cases of usual construction stoppages due to climatic conditions (winter, etc.) (Suwon District Court Ansan Branch ruling on November 16, 2023, in case 2021Gahap13353).
So far, we have briefly examined the cases where adjustments to the contract amount due to changes in other contract terms are recognized. In disputes related to national contracts and public procurement, the relevant laws are very complex and frequently revised, which requires understanding and experience, as well as familiarity with administrative interpretations and disposition cases, not just court rulings. Therefore, it is recommended to seek the assistance of Attorney Park Jong-han, who has expertise in national contract laws and experience in resolving various national contracts and procurement disputes.
Law Firm Cheongchul is composed only of attorneys from major law firms such as Kim & Chang, Bae, Kim & Lee, Lee & Ko, and Yulchon, as well as lawyers from corporate legal teams. A team of specialized lawyers in the relevant field responds to issues rather than a single lawyer handling the case. Cheongchul provides comprehensive solutions covering the overall business rather than just resolving specific issues, ultimately focusing on achieving what the client desires. If you need help achieving your goals, please do not hesitate to contact Cheongchul.
