[edit] Supreme Court Decision 99Da66564, 66571 delivered on August 23, 2002 [Eviction, etc.·Contract price for Construction]

【Main Issues】

[1] Where the performance of a contract benefited a third party as well as the other party to the contract, whether it is possible for the party who performed the contract to claim return of unjust enrichment from the third party concerning the benefit accrued apart from claiming the counter-performance of the contracting party (negative)

[2] Where a contractor took possession of a property belonging to a third party pursuant to a contract to repair it and the value of the property is increased as a result of the contractor's repair work, whether the contractor, in addition to the party who placed the order, can claim reimbursement of expenses from the owner of the property as the one who incurred expenses under the Civil Code, Article 203 (negative)

【Summary of Decision】

[1]Where the performance of a contract benefited not only the contracting party but also a third party, if the party who performed the contract is entitled, apart from claiming the counter-performance of the contracting party, to claim return of unjust enrichment directly from that third party concerning the benefit accrued, it would have the effect of shifting the risk of the transaction to the third party. In general, since the contract parties ought to take the risk upon themselves, allowing return of unjust enrichment from a third party concerning the contractual performance would violate the basic principles of contract law. To hold otherwise would amount to allowing a preferential claim for the party who carried out such contractual performance compared to other general creditors of the other party to the contract. Moreover, if the claim for return of unjust enrichment from the third party is allowed, the third party may be deprived of the defence which he would have been able to plead against the other party to the contract. Therefore, the party who performed the contract should not be allowed to claim return of unjust enrichment from the third party who benefited from the contractual performance.

[2] Where a contractor took hold of a property of a third party pursuant to a contract to repair it and the value of the property is increased as a result of the contractor's repair work, the party who gave the contract for the repair work is nevertheless deemed to possess the property indirectly through the contractor and manage the incurring and payment of expenses for the repair work on his account. Therefore, the party who gave the contract is the one who can claim a reimbursement of repair expenses from the owner of the property under the Civil Code, Article 203. The contractor, on the other hand, is not to be regarded as the one who incurred expenses on behalf of the owner of the property.

【Reference Provisions】 [1] The Civil Code, Article 741 / [2] The Civil Code, Article 194, 203, 664

【Plaintiff (Defendant in the counter-claim), Appellant】 Kim Hee-jin

【Defendant (Plaintiff in the counter-claim), Appellee】 Kim Hwa-won

【Court of First Instance】 Daejon District Court Judgment 96Gahap9342 delivered on June 26, 1997

【Court of Second Instance】 Daejon High Court Judgment 97Na4515, 98Na1568 delivered on October 21, 1999

【Disposition】 The part of judgment of the court below against the claim of the plaintiff (defendant of the counter-claim) shall be reversed. The corresponding part of the case shall be remanded to Daejon High Court.

【Reasoning】 1. The court below found that the building in question was jointly owned by the plaintiff (the defendant of the counter-claim, hereinafter 'the plaintiff') who had 1/2 share of the building, and by Jeong Gi-seob and Jeong Chan-hwa who had individually 1/4 share of the building; on May 10, 1994, without the plaintiff's consent, Jeong Gi-seob entered into a contract with the defendant (the plaintiff of the counter-claim, hereinafter 'the defendant') who agreed to install windows on the first and second floors of the building at the contract price of 250 million won; although the defendant completed the work within the agreed time period, Jeong Gi-seob did not pay the contract price for the work; and the value of the building has increased by 149,779,696 won as a result of the work done by the defendant. The court below then held that the plaintiff is liable to pay the defendant 74,889,848 won, which is 1/2 of the increased value of the building - corresponding to the plaintiff's share of the ownership of the building - on the ground either of unjust enrichment or of the owner's duty to reimburse useful expenses spent on his behalf.

2. Where the performance of a contract benefited not only the contracting party but also a third party, if the party who performed the contract is entitled, apart from claiming the counter-performance of the contracting party, to claim return of unjust enrichment from that third party concerning the benefit accrued, it would have the effect of shifting the risk of the transaction to the third party. In general, since the contract parties ought to take the risk upon themselves, allowing return of unjust enrichment from a third party concerning the contractual performance would violate the basic principles of contract law. To hold otherwise would amount to allowing a preferential claim for the party who carried out such contractual performance compared to other general creditors of the other party to the contract. Moreover, if the claim for return of unjust enrichment from the third party is allowed, the third party may be deprived of the defence which he would have been able to plead against the other party to the contract. Therefore, the party who performed the contract should not be allowed to claim return of unjust enrichment from the third party who benefited from the contractual performance.

Furthermore, where a contractor took hold of a property of a third party pursuant to a contract to repair it and the value of the property is increased as a result of the contractor's repair work, the party who gave the contract for the repair work is nevertheless deemed to possess the property indirectly through the contractor and manage the incurring and payment of expenses for the repair work on his account. Therefore, the party who gave the contract is the one who can claim a reimbursement of useful expenses from the owner of the property under the Civil Code, Article 203. The contractor, on the other hand, is not to be regarded as the one who incurred expenses on behalf of the owner of the property.

In the light of the foregoing, the defendant who contracted with Jeong Gi-seob and completed the building work in fulfillment of his contractual duty should not be allowed to claim return of unjust enrichment on the ground of unjust enrichment from the plaintiff who is one of the co-owners of the property.

The defendant is not in the position to claim a reimbursement of useful expenses from the plaintiff either. The court below made a reversible error by misunderstanding the legal principles pertaining to the return of unjust enrichment and reimbursement of useful expenses. The ground for appeal on these points is justified.

3. This is sufficient to allow the appeal and it is unnecessary to consider the remaining points of the appellant's argument. The part of the judgment of the court below against the plaintiff is hereby reversed and the corresponding part of the case shall be remanded to the court below for retrial and determination. This judgment is delivered with the assent of all Justices who reviewed the appeal.

It is so decided as per Disposition.

Justices Yoo Ji-dam (Presiding Justice)

Cho Moo-jeh

Kang Shin-wook

Son Ji-yol (Justice in charge)

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