Court “Non-payment of goods… Joint guarantor must pay together”

Changwon District Court cites the plaintiff’s claim in full

The court ruled that if the contractor had entered into a joint guarantee with the contractor at the time of signing the construction contract, the contractor must jointly repay the amount that the contractor failed to pay to the supplier. The purpose is that the contract takes effect for repayment and creates a joint obligation.

On the 9th of last month, the Changwon District Court ruled in favor of the plaintiff, as in the original trial, in the appeal trial of a lawsuit filed by company A, a ready-mix concrete supply partner, against two companies, including company B, the construction project owner.

Previously, Company A signed a contract with a construction company in July 2022 to supply ready-mixed concrete worth about 120 million won. In this process, Company A requested a joint guarantee from the construction company. Accordingly, Company B, the ordering company, promised to guarantee the debt for ready-mix concrete.

However, a conflict began when the construction company did not pay 82 million won in construction costs to Company A. Accordingly, Company A filed a lawsuit against Company B, which provided joint guarantee with the construction company. It was argued that if the construction company cannot afford to repay the debt, Company B, a joint guarantor, should also be held responsible.

However, Company B countered that it was not responsible. All construction costs have already been paid to the construction company. Company B emphasized, “Company A was aware of the construction company’s inability to pay, but did not notify them of this situation,” and added, “Therefore, we cannot be held jointly liable.”

The first trial court upheld all of Company A’s payment claims. The court ruled, "The ready-mix concrete price was paid in part on two occasions. As the defendant claims, there is no basis for admitting that the plaintiff knew in advance about the construction company's financial deterioration situation. Therefore, we do not accept the defendant's claim."

Company B, which was dissatisfied with the first trial ruling, immediately appealed, but the appellate court also sided with Company A.

“According to Article 436-2 of the Civil Act, if the main debtor fails to fulfill its obligations for more than three months after signing the guarantee contract, the creditor must notify it without delay,” said attorney Jong-Hoon Han of Daeryun Law Firm, which represented Company A. “However, in this case, the construction company partially paid the ready-mixed concrete price on two occasions, which resulted in a change in the notification obligation period.”

He continued, “Company B claimed Company A’s negligence in its obligation to notify, but since there is no data to determine when funds deteriorated, the period of obligation to notify cannot be specified, so the defendant’s claim is groundless.” He continued, “Company B, the joint guarantor, is still responsible because the unpaid amount from the construction company remains. Both the first and second trials saw no change in joint liability, and the lawsuit was able to conclude with the plaintiff’s victory.”

Digital Content Team

[View full article]
Court: “Price for goods not paid… Joint guarantor must pay together” (Shortcut)