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When construction runs past the agreed completion date, the contractor often has to pay liquidated damages for delay (지체상금) set out in the construction contract. However, a delay does not automatically mean you owe the full penalty. The outcome depends on who caused the delay and whether the amount is reasonable.

[Table of Contents]

1. Delay Penalties Depend on the Cause of Delay

2. You Can Contest Delays Caused by the Client

3. Excessive Penalties May Be Reduced

4. Can a Subcontractor Claim Payment Directly From the Owner?

5. If You Face a Delay Penalty or Payment Dispute

Delay Penalties Depend on the Cause of Delay

Liquidated damages for delay apply when the contractor fails to complete the work within the agreed period. The key question is who is responsible for the delay. If the delay results from the contractor's fault (failure to secure materials, poor workforce management, etc.), the agreed penalty generally applies in full.

You Can Contest Delays Caused by the Client

Conversely, if the delay stems from the client's side, you can contest all or part of the penalty. Typical client-side causes include:

• Design changes

• Delayed approval of materials or progress payments

• Changes to the scope of work

• Delays in preceding processes

• Delay in handing over the site

For periods extended by causes beyond the contractor's control, you can argue that those days should be excluded from the penalty. It is therefore important to document the cause and responsibility with objective records (official letters, meeting minutes, supervision logs).

Excessive Penalties May Be Reduced

Delay penalties are generally treated as liquidated damages (Civil Code Article 398, 민법 제398조). Where the predetermined amount is unfairly excessive, a court may reduce it. A large amount alone does not guarantee a reduction; courts weigh factors such as:

• The ratio of the penalty to the contract price

• The actual length of the delay

• The cause of the delay

• The actual loss suffered by the client

• The parties' positions, how the contract was formed, and trade practice

So even with a penalty clause, if the amount is far greater than the actual loss, you may seek a reduction.

Can a Subcontractor Claim Payment Directly From the Owner?

If a subcontractor is not paid by the prime contractor, it may — under certain conditions — claim the subcontract payment directly from the project owner. The Framework Act on the Construction Industry (건설산업기본법) sets out cases where the owner may or must pay the subcontractor directly, such as:

• A direct-payment agreement among owner, prime contractor, and subcontractor

• The subcontractor has obtained a final and binding judgment on the payment

• The prime contractor delays payment twice or more and the subcontractor requests direct payment

In short, a prime contractor's non-payment does not leave you without options; direct claims against the owner may be available once the requirements are met.

If You Face a Delay Penalty or Payment Dispute

In delay-penalty disputes, the amount you owe can change dramatically depending on how you prove the cause and responsibility for the delay. Because arguments for reduction, defenses based on client-side causes, and direct subcontract claims all turn on early evidence and legal analysis, professional help is advisable.

If you are dealing with a construction dispute, consult the construction law attorneys at Cheongchul Law Firm.

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This post is for informational purposes only and does not constitute legal advice. Please consult a qualified attorney for your specific situation.