Court: "Unfair to Shift Additional Costs from Construction Delays onto Contractor"

Extension Due to Design Changes and Onsite Conditions
Partial Victory for POSCO E&C in Court Ruling

A court has ruled that if additional costs arise due to a project owner's responsibility for extending the construction period, those costs cannot be passed on to the contractor. This decision is seen as a precedent that puts the brakes on a structure in which the contractor is forced to shoulder extra expenses for project delays, regardless of who is responsible.

According to the legal community on September 11, the 34th Civil Division of the Seoul Central District Court (Presiding Judge Kim Changmo) ruled partly in favor of the plaintiff on September 4 in a construction payment lawsuit filed by POSCO E&C against Incheon International Airport Corporation. Out of approximately 6.5 billion won that POSCO E&C claimed, the court recognized about 4.66 billion won.

POSCO E&C Headquarters. The Asia Business Daily DB

The project at issue involved the construction of the greywater facility at Terminal 2 (T2) of Incheon International Airport. In December 2019, POSCO E&C, as part of a consortium, signed a contract worth 68.3 billion won with Incheon International Airport Corporation. The project was originally scheduled for completion in March 2022, but was postponed until February 2024 due to design changes and onsite conditions. POSCO E&C demanded that the contract amount be increased to 73.78 billion won, reflecting additional costs, but when this request was denied, the company filed a lawsuit.

POSCO E&C argued that the extended construction period incurred extra expenses for site manpower, office operations, and safety and quality management, and that the company was required to carry out work not included in the original design. Incheon International Airport Corporation countered that not all delays were the client's responsibility and that not all additional costs were eligible for reimbursement.

In particular, Incheon International Airport Corporation insisted that during periods when construction was suspended or only trial operations took place, only the minimum manpower required to maintain the site should be recognized as a cost. However, the court rejected this argument. The panel stated, "It seems realistically impossible or extremely difficult to withdraw all staff except minimal management personnel when construction is suspended, and then redeploy them when work resumes."

The court also ruled in favor of POSCO E&C regarding the assessment of additional construction costs arising from delays and design changes. It found that any portion of the extra indirect construction costs caused by the project owner's responsibility for the extended construction period must be borne by Incheon International Airport Corporation. The court further acknowledged that construction expenses for additional work not included in the original contract, but required due to design changes, should also be compensated. The panel stated, "If the client does not admit the necessity of design changes, it is difficult for the contractor to follow the normal contract amendment procedures. Imposing additional construction costs on the contractor on top of requiring project completion by the agreed deadline is unfair."

This ruling is expected to impact similar public construction disputes. In practice, conflicts between project owners and contractors over the costs of construction period extensions are recurring issues at worksites. In 2024, the Korea Construction Association also pointed out—through an industry survey—that such disputes are frequent, calling for improvements to the system.

This content was produced with the assistance of AI translation services.