Supreme Court, Office of Court Administration

[Ruling] (Exclusive) Korea, loses KRW 18.9 billion due to additional wording added only to English Contract

Supreme Court ruled that, “it failed to meet the requirement for confiscation of deposit”

Reporter Park, Mi-young mypark@lawtimes.co.kr  May 13, 2021 9:14AM

As the Korean government pushed for projects related to improving the performance of fighter jets with the United States,

it will not receive a penalty of KRW 18.9 billion due to phrases added only to the English contract.

The Supreme Court affirmed the ruling against the plaintiff in a penalty lawsuit (2018Da275017) filed by the Republic of Korea against Raytheon, a U.S. military contractor. The problem here is that the memorandum of agreement was written in two versions, Korean and English, and the contents of some of the provisions in question are different. Immediately before the memorandum of agreement was completed, Raytheon requested that the English wording that is not in the Korean version be added to the English version, and the Defense Acquisition Program Administration (Plaintiff) accepted it, since then, they failed to agree on which version shall the priority be given.

However, the Defense Acquisition Program Administration and the U.S. government failed to reach an agreement on the total project cost and the contract was terminated. Since then, the Korean government has filed a lawsuit, stating, “According to the memorandum of agreement, Raytheon is obligated to pay KRW 18.9 billion in bid deposit countervailed against other bonds."

In the first and second instances, the court ruled in favor of Raytheon, saying, "The requirements for confiscation of bidding deposits for Raytheon have been met," and the Supreme Court's ruling was the same. The Supreme Court said, "In general, when interpreting contracts, we should not be bound by formal phrases, but explore what the parties' true intentions are," adding, "This law may apply even if the contract is written in two languages."

Accordingly, if the two language texts do not match, if the parties agree to follow either of them, it shall be followed,

and if not, the contents shall be confirmed in accordance with the aforementioned interpretation method."

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Attachment : SUPREME COURT JUDGMENT, 2018Da275017 (written in Korean)