One Law Partners, LLC represented the project owner in a dispute arising from the termination of an interior construction contract and the settlement of construction costs relating to the renovation of a corporate headquarters building. The firm successfully established the contractor’s contractual breaches, secured a judgment ordering the return of approximately KRW 750 million in settlement funds, and fully defended against the contractor’s KRW 430 million counterclaim for damages. The appellate court subsequently dismissed all of the contractor’s appeals and upheld the first-instance judgment in its entirety.


1. Overview of the Case

The client entered into an interior construction contract valued at approximately KRW 1.94 billion with a contractor in connection with the relocation of its corporate headquarters. Under the contract, the contractor was responsible for both design and construction and was obligated to complete the project within the agreed construction period.

During the course of the project, however, the contractor proceeded with construction without properly providing the detailed design documents and specifications required under the contract and demanded an increase in the contract price of approximately 25% to 30% above the originally agreed amount. The client requested detailed design documents and quantity calculation data in order to verify the legitimacy of the proposed increase, but the contractor failed to provide the necessary materials.

Moreover, even after approximately two-thirds of the agreed construction period had elapsed, the actual completion rate of the project remained at only 20%, making completion within the contractual deadline highly unlikely.

Accordingly, the client terminated the contract on the grounds that the contractor had failed to provide required design documentation and had caused significant delays in construction and sought reimbursement of the portion of the construction payments already made that exceeded the value of the work actually performed.

The contractor, on the other hand, claimed that the termination was the result of the client’s mere change of mind and filed a counterclaim seeking approximately KRW 430 million in lost profits allegedly caused by the termination.


2. Key Issues

First, the dispute concerned the contractor’s obligation to prepare and provide design documents under an integrated design-build contract.

The contractor argued that, given the nature of a contract involving both design and construction services, it was normal for design documentation not to be finalized at the commencement of construction and that certain detailed drawings and specifications did not fall within its contractual responsibilities.

Accordingly, a key issue was whether the contractor had a contractual obligation to prepare and provide detailed construction design documents and whether its failure to do so constituted grounds for termination.

Second, the parties disputed responsibility for the requested increase in construction costs and the resulting project delays.

The contractor alleged that delays were caused by the client’s delayed decision-making and requests for design modifications. The client, however, argued that the contractor had failed to provide a reasonable basis for the increased costs and had not fulfilled its obligation to supply design documentation, thereby disrupting the progress of the project.

Third, the dispute concerned the validity of the contract termination and the resulting settlement of construction costs and damages claims.

The central issue was whether the client’s termination constituted a lawful termination based on the contractor’s breach of contract, or merely a discretionary termination by the project owner under Article 673 of the Korean Civil Act. The answer to this question would determine both the scope of reimbursement of previously paid construction costs and the contractor’s ability to seek damages.


3. Key Response Strategy

One Law Partners, LLC conducted a detailed review of the construction contract, the project’s progress, the submission history of design documents, and the grounds advanced for increasing the construction price, focusing on establishing the contractor’s contractual breaches.

The firm first emphasized that, although the contractor claimed the agreement was an integrated design-build contract, it simultaneously denied responsibility for preparing the detailed drawings and specifications necessary for construction. Relying on the contractor’s own interior design schedule and the contract documents, the firm demonstrated that the preparation and provision of detailed design drawings and specification books formed part of the contractor’s contractual obligations.

The firm further highlighted that the materials provided by the contractor consisted only of limited materials such as floor plans and design proposals and did not include the detailed design documentation necessary to verify the appropriateness of actual construction work or construction cost calculations. The firm argued that this deficiency was not a minor procedural issue but a failure to perform a fundamental contractual obligation.

With respect to responsibility for project delays, the firm relied heavily on expert findings showing that only 20% of the project had been completed despite approximately 65% of the contractual construction period having elapsed. The firm additionally presented testimony from construction management experts and project records demonstrating that the contractor had proceeded without adequate design documentation and that its attempts to shift responsibility for the delays to the client were unfounded.

In particular, regarding the contractor’s demand for increased construction costs, the firm emphasized that the contractor sought an increase equal to approximately 25% to 30% of the original contract price while failing to provide detailed design documentation capable of objectively substantiating the proposed increase.

The firm further argued that the client's termination was not a discretionary termination resulting from a mere change of mind but rather a lawful contractual termination based on the contractor’s breach of its contractual obligations. Consequently, the contractor’s claim for lost-profit damages and its set-off defense based on Article 673 of the Civil Act could not succeed.

The court accepted these arguments and found that the contractor had committed multiple breaches of contract, including failure to provide design documentation, unjustified demands for increased construction costs, and significant delays in project performance. The court therefore held that the client’s termination of the contract was lawful.


4. Result and Significance of the Case

The court concluded that the construction contract had been lawfully terminated due to causes attributable to the contractor and entered judgment ordering the contractor to pay approximately KRW 750 million in settlement funds sought by the client. The court also dismissed in its entirety the contractor’s counterclaim seeking approximately KRW 430 million in damages.

The contractor appealed the judgment, but the appellate court determined that the first-instance court’s findings were correct and dismissed all appeals relating to both the principal action and the counterclaim.

This case confirms that, even under a design-build construction contract, a contractor remains obligated to provide contractually required design documentation in a timely manner, to present reasonable supporting grounds for any claimed increase in construction costs, and to comply with agreed construction schedules.

The decision is particularly significant because it demonstrates that a contractor cannot avoid liability for failing to provide design documentation by relying on the nature of an integrated design-build contract, nor can it readily shift responsibility for project delays to the project owner based on alleged delays in decision-making. Rather, responsibility must be determined by reference to the contract terms and objective evidence concerning project progress.

Through a systematic analysis of the contractual documents and construction records, effective use of expert findings and testimony from industry professionals, and a litigation strategy grounded in established legal principles, One Law Partners, LLC succeeded in securing full recovery of approximately KRW 750 million in settlement payments for the client while completely defeating the opposing party’s approximately KRW 430 million damages claim.

The case represents a significant achievement in protecting the client’s financial interests in a complex dispute involving contract termination and construction progress settlements and provides meaningful guidance for similar construction, real estate, and contractual disputes.

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Young-Ju Lee, Attorney | yjlee2@onelawpartners.com
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Public Relations Team, One Law Partners, LLC | pr@onelawpartners.com