The client in this case, a housing redevelopment and maintenance project association (hereinafter referred to as the “Association”), selected a company (plaintiff) as the contractor through a negotiated contract after issuing a tender notice for a housing redevelopment project. Upon selecting the contractor, the Association and the company entered into a preliminary construction contract, which outlined key matters such as contract costs, adjustments to the contract price due to inflation, the loan of project expenses, and the future conclusion of the main contract. 

Approximately three years after the signing of the preliminary contract, the Association received business implementation approval and a management disposition plan approval from the city. However, due to frequent conflicts with the plaintiff company, such as delays in loan payments, the demand for a change of contractor began to emerge among the members of the Association. As a result, the main contract proposal presented by the company was not even brought to the Association’s general meeting. In the months that followed, discussions continued regarding changes to the contract terms based on the demands of the association, and the company agreed to these changes. However, after a vote at the general meeting, the Association ultimately notified the company of the termination of the contractor's position and the cancellation of the preliminary construction contract. 

In response, the company filed a damages lawsuit against the Association, claiming that the association failed to fulfill the obligation to sign the main contract, as stipulated in the preliminary construction contract, without justifiable reason, and is therefore liable to compensate for the expected construction profits (approximately KRW 40 billion) that would have been realized if the main contract had been signed. 

The main issue of this case was determining which of the conditions — [① preliminary contract, ② main contract (proposal), or ③ the final agreed terms] — should be used as the basis for the appraisal of expected performance interests. Through appropriate arguments, we were able to obtain a highly favorable appraisal result for the association. However, the court awarded only KRW 3 billion, corresponding to 7.5% of the KRW 40 billion claimed by the company, as damages. The court reached this conclusion, considering that it was unlikely the company would have continued the project at a loss as indicated by the appraisal results, and acknowledging that the company had not performed any construction work prior to the termination of the contract. 

As such, we represented a redevelopment association, which was on the verge of facing a large damage claim following the change of contractor, and obtained a favorable ruling. This case serves as a significant precedent that may be cited in future disputes, providing associations with a potential advantage.