On September 20, 2024, EJE LAW (Attorneys Mun Sung Kim, Doh Hyoung Rim, and Won Gu Kim), representing the contractor bearing the obligation of completion by a specified date (hereinafter, the “Contractor”), successfully obtained a provisional injunction against the trustee and senior lenders from the Seoul Central District Court (Case No. 2024Kahap21342, dated September 20, 2024), suspending the effect of the assumption of debt pursuant to a completion guarantee.

Under the loan agreement and trust agreement entered into among the developer, the lenders, and the trustee, the Contractor bore a completion guarantee obligation to obtain the use approval for the building by the guaranteed completion date. Although the Contractor completed the construction, submitted the application for use approval, and provided supplementary materials within the agreed timeframe, the use approval for the building was granted one day after the guaranteed completion date due to administrative delays beyond the Contractor’s control. Following this, the lenders and the trustee asserted that the Contractor had breached its completion guarantee obligation by failing to meet the guaranteed completion date and, accordingly, was jointly and severally liable for the developer’s loan obligations in the amount of approximately KRW 83 billion.

EJE LAW argued that the effect of the assumption of obligation should be suspended on several grounds: that the Contractor completed construction and submitted the application for use approval (approximately 20 days) prior to the guaranteed completion date; that the delay in obtaining the use approval was due to circumstances attributable to the administrative authority and involved a significantly longer period than is customarily required, constituting a force majeure event under the completion guarantee obligation; that recognizing a breach of the completion guarantee obligation and enforcing the assumption of KRW 83 billion in debt based on a mere one-day delay would violate the principle of good faith; and that recognizing the assumption of obligation would result in irreparable and substantial harm to the Contractor. The court granted injunctive relief in favor of the Contractor, finding that there was sufficient ground to consider the enforcement of the assumption of obligation by the Contractor, based on a one-day delay in fulfilling the completion guarantee obligation, as potentially contrary to the principle of good faith. In its reasoning, the court noted that the use approval process took significantly longer than usual due to administrative circumstances; that, absent the public holidays during that period, the use approval likely would have been granted within the guaranteed completion period; and that imposing a KRW 83 billion debt on the Contractor due to a one-day delay would result in severe consequences, including a potential chain of defaults and insolvency. Based on these considerations, the court acknowledged the necessity of suspending the effect of the assumed obligation and granted the injunctive relief.

This case holds substantial significance in that, amid the recent trend of imposing all responsibilities and losses related to the guaranteed completion obligations upon contractors—resulting in systemic insolvency risks across the construction industry—the court refrained from adopting a strictly literal interpretation of the language in the guaranteed completion undertaking. Instead, the court rendered an interpretation that comprehensively considers the Contractor’s performance status, the balancing of interests between the parties, and the relevant surrounding circumstances. Accordingly, the decision rendered by the court represents a meaningful precedent, as it departs from a rigid textual interpretation and recognizes the necessity of a more equitable and context-sensitive approach. It is expected that this ruling will be widely referenced in future construction-related disputes concerning firm completion obligations. For further details, please refer to the article provided in the link below.  

■ Related Article 1: https://www.lawtimes.co.kr/news/201834
■ Related Article 2: https://www.fnnews.com/news/202410011822572684