The Supreme Court rendered the 107-Tai-Shang-1610 Civil Decision of December 5, 2018 (hereinafter, the “Decision”), holding that if it has been impossible for a contractor to construct the project pursuant to the contract and the project owner has failed to fulfill the obligation to collaborate by failing to provide an explanation or change the design after being notified by the contractor to provide an explanation or design change or applying for construction suspension for several times, the contractor can certainly rescind the contract and claim damages.
According to the facts underlying this Decision, the Appellee alleged that both parties had entered into a contract (hereinafter, the “Contract at Issue”) on November 2, 2010 to have the Appellee serve as a contractor for the project at issue, and a performance bond had been paid. After reporting the commencement of construction, the Appellee found that the bedrock depth for the foundation is not consistent with the design conditions in the Contract at Issue. Therefore, the Appellee, according to the covenant on the drawings of the Contract at Issue, issued a letter to the Appellant and the supervisory unit of the project for an interpretation and requested that this communication period should not be included in the period of construction. After an onsite survey was jointly conducted by the Appellee and the supervisory unit, it was found that the average bedrock depth met the conditions for prohibition against construction under the Contract at Issue in order to wait for an interpretation or change of the design criteria. After the Appellee proposed the need for an interpretation or design change during a construction meeting and sent letters requesting such interpretation or design change on December 7, 2010 and January 4, 20 and 28 of 2011 to the Appellant, no response was provided. The Appellant, as an owner, obviously failed to perform its collaboration obligation to the extent that the Appellee’s work could not be completed. Therefore, the Appellee notified the Appellant to rescind the Contract at Issue in accordance with Article 507 of the Civil Code on March 4, 2011. Since the Contract at Issue was lawfully rescinded, the Appellant should compensate the Appellee for the losses caused by the rescission of the Contract at Issue and return the performance bond which had been paid.
In response to the Appellee’s allegations, the Appellant held that since the Contract at Issue had stipulated the terms of rescission, the Appellee could not cite Article 507 of the Civil Code as the basis for rescinding the contract any more. In addition, the Appellee only completed the survey of the bedrock depth for 8 pillars, and the Appellant did not violate the collaboration obligation before the Appellee submitted the geological survey and analysis of the drilled holes for the remaining pillars. Since the project issue could not proceed due to the Appellee’s refusal to provide the geological survey and analytical report on the remaining pillar positions and this was attributable to the Appellee, the Appellant issued a letter to terminate the Contract at Issue on April 13, 2011. There was no reason attributable to the Appellant, who was not liable for compensation. The Appellee could not request a return of the performance bond, either. The original decision reversed the portion of the first instance decision against the Appellee and found, instead, in favor of the Appellee. Dissatisfied, the Appellant appealed.
According to the Decision, if a task cannot be completed without a project owner’s action and the project owner fails to act, the contractor may rescind the contract if the project owner still fails to act within the period set forth in the contractor’s notice and claim compensation for the rescission of the contract, as specifically indicated in Article 507 of the Civil Code.
It was further pointed out in this Decision that the original trial court had lawfully found, based the exercise of its authority in the finding of facts and citation of evidence as well as all relevant facts and evidences, that the bedrock depths for the foundation in the project at issue were inconsistent with the original design in the Contract at Issue. According to the covenant on the drawings of the Contract at Issue, the Appellee could no longer construct the project pursuant to the Contract at Issue. After notifying the Appellant to provide an explanation or design change or applying for construction suspension for several times, the Appellant did not provide an explanation or design change and thus failed to perform its collaboration obligation. The Appellee could certainly rescind the Contract at Issue and claim damages in accordance with Article 507 of the Civil Code. Therefore, the Decision held that since the unfavorable decision rendered by the original trial court against the Appellant was not legally erroneous, this appeal was groundless and the Appellant’s appeal was dismissed.