Government Loses 500 Million Won Weather Equipment Payment Lawsuit Against German Company

[Asia Economy Reporter Baek Kyunghwan] The government ended up paying 500 million KRW after unilaterally postponing the delivery date while receiving weather equipment from a German company and refusing to pay the additional costs incurred.

On the 28th, the Supreme Court's 2nd Division (Presiding Justice Ahn Cheolsang) announced that it upheld the appellate court's ruling in favor of the plaintiff in the final appeal trial of a payment claim lawsuit filed by German weather equipment manufacturer Company A against the Korean government.

Company A signed two contracts with the government in 2009 and 2010 to supply a rainfall radar system and agreed to deliver the equipment. The rainfall radar is a device that accurately observes short-term rainfall conditions to forecast sudden floods.

However, the government repeatedly changed the equipment delivery dates, delaying the first contract's delivery period from 2011 to 2014 and the second contract's delivery period from 2013 to 2017. Company A supplied the system on the rescheduled dates as requested by the government and demanded payment for additional costs incurred, such as the contract performance bond fees, insurance interest costs, and warehouse fees.

The first trial interpreted the clause cited by the government as a reason for refusal to pay?that "additional costs must be requested before the contract period expires"?as applicable only when the schedule changes at Company A's request. The second trial also recognized the government's responsibility, similar to the first trial. However, it ruled that the government must pay Company A 394,000 euros (approximately 550 million KRW), including insurance interest costs and service fees, which were added to the amount recognized in the first trial.

Based on the Enforcement Decree of the State Contract Act, the court ruled in favor of Company A, stating, "If the effect of individual agreements contrary to regulations is recognized, as in this case, the contracting party must extend the contract period indefinitely according to the state's unilateral demands, while being unable to claim additional payments from the state, resulting in a significantly unjust outcome." Article 4 of the Enforcement Decree of the State Contract Act stipulates that "Contracting officers shall not establish special agreements or conditions that unjustly restrict the contractual benefits of the contracting party as prescribed by relevant laws."

The government appealed, claiming no obligation to pay additional costs and that Company A should pay more for the bond extension costs, but the Supreme Court dismissed all appeals.

This content was produced with the assistance of AI translation services.