Construction Companies Demand More Construction Costs for Jungnang Water Reclamation Center, File 23 Billion Won Lawsuit and Lose

Seoul Central District Court, Seocho-gu, Seoul. / Photo by Honam Moon munonam@

[Asia Economy Reporter Kim Daehyun] Four construction companies including GS Construction filed a lawsuit against the Seoul Metropolitan Government demanding additional payment for the 'Jungnang Water Reclamation Center Advanced Treatment and Facility Modernization' project, but lost all claims in the first trial.

According to the legal community on the 9th, the Civil Division 19 of the Seoul Central District Court (Presiding Judge Minsoo Lee) recently dismissed all claims by GS Construction, Hallasan Industrial Development, Donga Construction Industry, and Samjin Elecs in a lawsuit against the Seoul Metropolitan Government demanding approximately 23 billion KRW in construction payments.

Previously, since 2009, Seoul had been carrying out a project to demolish part of the sewage treatment facility, underground it, and create a park on the surface. GS Construction and others formed a joint consortium to win the bid, signing a master contract for the construction period from 2009 to 2014 with a contract amount of about 26 billion KRW. Subsequently, several change contracts were signed according to the construction situation.

GS Construction requested extensions of the construction period about six times and requested adjustments to the contract amount accordingly. However, Seoul notified them that "the construction contract is a long-term continuous construction contract executed by separate contracts for each phase. We guided that if indirect construction costs occur during the phased construction, claims should be made before the contract period ends. Since no claims were made thereafter, contract amount adjustments cannot be accepted."

In response, the construction companies filed a lawsuit claiming that "Seoul has an obligation to pay indirect construction costs due to the extension of the total construction period under the master contract." They also argued that "even if not, since phase contracts were signed after the originally scheduled total construction period, there is an obligation to pay indirect construction costs corresponding to the contract period of the phase contracts."

However, the court dismissed all claims by the construction companies. It ruled that adjustments to the contract price cannot be requested solely due to the extension of the total construction period, and that indirect costs incurred due to the longer construction period should be reflected when signing each annual contract.

The court stated, "When the project year passes and the total construction period is extended, additional annual contracts are signed, and the total contract amount and total construction period written therein are changed accordingly," adding, "There is no separate contract that changes the contents of the master contract apart from the annual contracts."

Furthermore, the court added, "The specific details of the obligations to be performed by the counterparty, the scope of construction payments to be made, and the performance period are all concretely determined through the annual contracts," and "The master contract does not have binding effect here."

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