Background
Our client is the developer of a new apartment project in Gyeonggi Province. In January 2022, it hired an interior contractor to build penthouse and rooftop sample units for KRW 2,596,000,000 over 15 weeks. After a previous contractor had pulled out, the contract covered both design and construction under a new concept.
After starting work and making several design changes, the contractor demanded in May 2022 that the price be raised to KRW 4,301,000,000. It rejected our client's counterproposal and stopped work. Our client gave notice of termination in August 2022 and finished the project with another firm. The contractor then sued for KRW 548.7 million in construction fees and KRW 150 million in design fees, a total of KRW 698.7 million. Our client counterclaimed KRW 1 billion.
What Was at Stake
The court had to decide (1) whether design work was within the contract, (2) who was responsible for its termination, (3) whether the contractor should be paid for the work it had done, and (4) how much our client could recover in penalties and liquidated damages for delay.
How Changchun Helped
The court accepted the following arguments made on the developer's behalf by Law Firm Changchun.
Design was already included. Given the contract history and the court-appointed expert's findings, no separate design fee was owed.
The contract ended through the contractor's refusal to perform. Walking off the site when its price increase was refused amounted to a refusal to perform.
The completed work brought no benefit. Progress was only around 5%, and the successor firm had to redesign and tear out the earlier work.
Outcome
In January 2026, the first-instance court dismissed the contractor's claim in full. On the counterclaim, it treated the KRW 259.6 million performance guarantee as a penalty but reduced it by 50% to KRW 129.8 million, and added KRW 316,712,000 in liquidated damages for 122 days of delay, for a total of KRW 446,512,000 plus interest. Claims for maintenance fees and property tax were denied as covered by the delay damages. The contractor bears the costs of its own claim, and the costs of the counterclaim are split equally.
A contractor that halts work because a price increase was refused may end up owing penalties and delay damages rather than collecting fees. Documenting the contract scope and the circumstances of a stoppage is the starting point for protecting a project owner. (Outcomes depend on the facts of each case.)