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Newsletter | May 2014, Issue 2 |
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REAL ESTATE |
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Amendments to Framework Act on Construction Industry |
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Certain amendments to the Framework Act on the Construction Industry (“Amendments”) became effective on February 7, 2014, which (i) introduces a payment guarantee system to secure payment of construction prices in private construction projects where there is a lack of security measures to ensure payment, (ii) invalidates contract provision markedly unfair to only one of the parties to the contract and (iii) requires the relevant parties to participate in meditation applied in connection with a dispute related to construction. |
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According to the Amendments, |
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For private construction projects, in case the contractor has provided a performance guarantee to the project owner, the contractor may also demand that the project owner provides a guarantee or collateral for the payment of the construction price. If the project owner refuses, the contractor may suspend the construction or terminate the construction contract by giving notice. |
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The provisions of a contract which are markedly unfair to only one of the parties thereto are void. Some examples of such provisions are:
- ‒ Provisions that do not allow any change in the contract price or contract period without any justifiable reason or that require only one of the parties to be responsible for such change;
- ‒ Provisions unreasonably reducing or increasing only one of the parties’ liability for damage compensation for a breach of contract; and
- ‒ Provisions taking away or restricting only one of the parties’ rights recognized under the relevant laws without any justifiable reason.
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In case one party applies to the Construction Dispute Mediation Commission for mediation, the other party must attend the mediation. Failure to attend will result in an administrative fine of up to KRW 5 million. |
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