Atlas Legal successfully defended a purchaser against a KRW 500 million claim by establishing that sale proceeds in a joint reconstruction project constitute co-owned (hapyu) property under Korean Civil Code, rendering the contractor’s unilateral assignment void.
Case Overview
In a reconstruction project in the Seoul metropolitan area, a contractor and reconstruction association jointly executed a sale contract with the defendant purchaser in 2014 for KRW 500 million. In 2022, the contractor unilaterally assigned the sale proceeds claim to a third party without the association’s consent, and the assignee filed suit against the purchaser. Atlas Legal represented the defendant, arguing the assignment was void — and the court dismissed the plaintiff’s claim in full.
Key Issue: Was the Contract a Partnership or a Construction Contract?
The central question was whether the implementation-construction contract between the contractor and association constituted a simple construction (dogeup) contract or a partnership (johap) agreement under Korean Civil Code. Under a construction contract, sale proceeds belong solely to the association. Under a partnership, they become co-owned (hapyu) property of both parties. The court found that the parties had mutually contributed land and capital, shared profits, and executed sale contracts under joint names — all hallmarks of a partnership under Article 703 of the Korean Civil Code (see Supreme Court Decision 2009Da47432).
Hapyu Property and Article 272 of the Korean Civil Code
Article 272 of the Korean Civil Code requires unanimous consent of all co-owners to dispose of or modify co-owned (hapyu) property. Article 273(1) further prohibits any individual co-owner from disposing of their share without unanimous consent. Since the sale contract listed both the contractor and the association as joint sellers, the sale proceeds claim belonged to the partnership entity. The contractor’s unilateral assignment — made without the association’s approval — was therefore an unauthorized disposal and void ab initio.
Court Ruling and Significance
The Daejeon District Court dismissed the plaintiff’s claim entirely, confirming three key findings: (1) the implementation-construction contract had the nature of a partnership agreement; (2) the sale proceeds claim constituted hapyu property belonging to the partnership entity; and (3) the assignment made without the association’s consent was void. This ruling reinforces that all co-implementers’ unanimous consent is a mandatory prerequisite when disposing of sale proceeds claims in joint reconstruction projects in South Korea.
Practical Takeaways
Claim assignees must verify whether the sale contract lists joint sellers before executing any assignment, and must obtain written consent from all co-implementers in joint implementation structures. Purchasers who pay out based on a one-sided assignment notice risk double payment liability to the true creditor. Proactive legal review before any claim disposal is essential to avoid costly disputes in South Korea’s reconstruction sector.
Legal Expertise
Atlas Legal has an established track record in reconstruction and redevelopment disputes, construction law, and corporate litigation in South Korea. Our strength lies in precisely analyzing project structures and applying complex doctrines — such as hapyu co-ownership — as effective litigation strategy. If you face a dispute involving sale proceeds claims or reconstruction project legal issues, our team is ready to assist.