Fair Trade Commission: "NS Construction Unilaterally Terminated Contract Due to Construction Delay... Corrective Order and 250 Million KRW Fine"

Advance Payments and Delay Interest Also Unpaid to Subcontractors

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission announced on the 31st that it imposed a corrective order and a fine of 250 million KRW on NS Construction Co., Ltd. for arbitrarily canceling the subcontract for reinforced concrete work after entrusting it to a subcontractor. In addition, NS Construction was issued a corrective order for failing to pay the advance payment and the delayed interest on the advance payment to the subcontractor, despite having received the advance payment from the client.

According to the Fair Trade Commission, NS Construction, a general construction company located in Gwangju Metropolitan City, won the contract for the construction of an urban-type residential building with 2 basement floors and 16 above-ground floors. On December 26, 2017, it signed a subcontract agreement with a specialized construction company, A Construction, to entrust the reinforced concrete work portion for 2.057 billion KRW.

Subsequently, on June 22, 2018, NS Construction terminated the contract with A Construction, which was carrying out the subcontracted work, citing that the construction progress rate was only 18%. The parties involved are currently engaged in a civil lawsuit in court, where the progress rate was appraised at over 30% in both the first and second trials.

A Fair Trade Commission official stated, "According to the contract in this case, to terminate the contract, a written notice must be given with a period of at least one month to demand performance, and if the subcontractor fails to comply, the contract may be terminated. However, NS Construction did not follow this notification procedure." The official added, "Such conduct violates the Subcontracting Act, which prohibits the principal contractor from arbitrarily canceling the subcontract (including rescission or termination) without reasons attributable to the subcontractor after entrusting construction work."

Furthermore, NS Construction received an advance payment from the client but failed to pay A Construction the advance payment of 102.85 million KRW and delayed interest of 1.98 million KRW. The Subcontracting Act stipulates that when the principal contractor receives an advance payment from the client, it must pay the subcontractor within 15 days, and if payment is delayed beyond 15 days, delayed interest must be paid for the excess period.

Accordingly, the Fair Trade Commission imposed a corrective order (future prohibition order) and a fine of 250 million KRW on NS Construction to prevent unfair cancellation of subcontracting without the subcontractor’s fault. For violations related to non-payment of advance payment and delayed interest, a corrective order (future prohibition order) was issued, and NS Construction was ordered to pay the unpaid delayed interest of 1.98 million KRW.

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