How to Claim Additional Construction Payment in South Korea?

1. When Can You Claim Additional Construction Payment?

Key Answer

When work exceeding the original contract scope occurs due to the employer’s request or design changes after the construction contract is signed, the subcontractor can claim additional payment. The critical factor is proving that the additional work was performed under the employer’s instructions or consent.

Requirements for Additional Payment Claims

Courts examine the following requirements to approve additional payment claims. First, the scope of the original construction contract must be established. Second, the existence and scope of additional work performed must be specified. Third, it must be proven that the additional work was performed with the employer’s explicit or implied consent. In this case, it was confirmed through appraisal that excavation exceeded the 10.32m depth specified in the standard subcontract agreement, reaching 13.5m. Witness testimony also proved that the employer directly requested the additional excavation.

2. Are Verbal Contracts Legally Valid in South Korea?

Key Answer

Yes, they are valid. Construction contracts are not formal contracts under Korean law, so they do not need to be in writing. Verbal agreements alone create binding contracts, and both parties bear rights and obligations according to the contract terms.

How to Prove Verbal Contracts

The biggest challenge with verbal contracts is proving their contents. In this case, the original contract was a verbal agreement for 4m excavation and temporary facility work for KRW 87 million. Later, a written amended contract set the price at KRW 138 million. The issue was whether another verbal agreement existed to expand the work scope and increase payment after the written amended contract. The court recognized the existence and contents of this verbal contract based on witness testimony and the overall context of the proceedings.

Evidence Available for Verbal Contract Disputes

In practice, evidence that can be used to prove verbal contracts includes witness testimony, text messages and KakaoTalk conversations between parties, emails, recordings, bank transfer records, quotations, and work logs. In this case, handwriting analysis of the standard subcontract agreement was also used as crucial evidence.

3. Who Should You Claim Against When the Contractor and Building Owner Differ?

Key Answer

In principle, claims should be made against the contracting party (the contractor). However, if the building owner substantially acted as the employer by directing construction and participating in payment, joint and several liability can be imposed on the building owner as well.

Grounds for Joint Liability in This Case

In this case, Contractor A not only concluded the verbal contract with the plaintiff but also signed the amended contract under Building Owner B’s name. Building Owner B, who was Contractor A’s son, was not only the building owner but was also listed as the employer in the amended contract. The project owner’s side directed the plaintiff regarding construction and additional work through the site manager and shared payment of construction costs and additional costs with the plaintiff.

Legal Effects of Joint and Several Liability

Considering these circumstances, the court determined that the project owner’s side agreed to jointly pay construction costs and additional costs to the plaintiff. When joint and several liability is recognized, the creditor (subcontractor) can demand full payment from any of the joint debtors, which is advantageous for debt recovery.

4. How is Additional Construction Payment Calculated?

Key Answer

Additional construction payment is primarily determined by agreement between the parties. If there is no agreement or the amount is disputed, the court appoints an appraiser to calculate the appropriate amount using standard cost estimation or actual cost accounting methods. In this case, the appraiser’s findings were key evidence for calculating additional payment.

Payment Calculation Process in This Case

The calculation process first established the work scope under the amended contract: 10.32m excavation with a contract price of KRW 138 million (including VAT). The additional work scope was then specified. The plaintiff was requested by the project owner’s side to change excavation from 12.5m to 13.5m and perform corresponding temporary facility work, which was completed.

Additional Payment Confirmed Through Appraisal

According to the court appraisal, the additional cost for changing from 4m to 12.5m excavation was KRW 283,738,908, and for changing from 4m to 10.32m excavation was KRW 230,278,764. Additionally, the cost for changing from 12.5m to 13.5m excavation was calculated at KRW 24,523,000. Consequently, the additional construction payment after the amended contract was confirmed at KRW 77,983,144 (KRW 53,460,144 + KRW 24,523,000).

5. What are the Key Issues in Additional Payment Litigation?

Key Answer

Key issues in additional construction payment litigation are threefold: first, the existence and scope of additional work; second, whether the employer instructed or consented to it; third, calculation of appropriate payment. In this case, the plaintiff prevailed on all three issues.

Defendant’s Main Arguments and Court’s Judgment

The project owner’s side raised several defenses. First, they disputed the amended contract itself, but the court recognized its existence based on handwriting analysis and witness testimony. Second, they argued that the plaintiff had suspended work under the amended contract and completion was only 40-50%. However, the court found that the design drawings attached to the amended contract did not include the parking ramp section, and that the project owner’s side directly performed excavation and temporary work for the parking ramp, concluding that the plaintiff had completed work under the amended contract.

Deduction of Payments Made and Amounts to Be Returned

Important for calculating the final award is deducting payments made and amounts to be returned. The plaintiff’s total claim for construction and additional work was KRW 215,983,144 (KRW 138,000,000 + KRW 77,983,144). After deducting KRW 103,000,000 already paid, this left KRW 112,983,144. Meanwhile, the project owner’s side invested KRW 40,644,263 in rebar, H-beams, and ready-mixed concrete on the plaintiff’s behalf and spent KRW 20,000,000 on septic tank repairs. After deducting KRW 1,000,000 from H-beam sales, the plaintiff owed KRW 59,644,263 to the building owner. The final judgment ordered the project owner’s side to jointly pay the plaintiff KRW 53,338,881 (KRW 112,983,144 – KRW 59,644,263) plus delay damages.

6. FAQ

Atlas Legal has extensive experience winning construction payment disputes in South Korea. As demonstrated in this case, we systematically analyze complex legal issues such as proving verbal contracts, specifying the scope of additional work, and establishing joint liability to protect our clients’ rights.

※ This case is based on a judgment from the Incheon District Court handled by Atlas Legal. Some facts have been modified for clarity, and client information has been protected.