With the construction industry recognizing the Middle East war situation as force majeure, a path has opened for builders to extend deadlines for guaranteed completion.
The Ministry of Land, Infrastructure and Transport and the Financial Services Commission said on the 13th that, as a follow-up to a joint meeting of the construction and finance sectors on the 8th, they issued an authoritative interpretation recognizing the Middle East war situation as force majeure, which will allow extensions of guaranteed completion deadlines.
A guaranteed completion commitment is a legal promise by the contractor to finish construction within a set period, and if the work is delayed, the contractor must bear all related debt.
The government interpreted the current Middle East war situation as a force majeure event under Article 17 of the Standard Contract for Private Construction Works. The Standard Contract for Private Construction Works is the standard contractual content and conditions announced by the Ministry of Land, Infrastructure and Transport (MOLIT) under Article 22 of the Framework Act on the Construction Industry so that contracting parties can enter into contracts fairly on an equal footing.
The Financial Services Commission (FSC) said that, reflecting this authoritative interpretation, the Middle East war situation can be recognized as grounds for extending guaranteed completion under the Model Guidelines for Handling Loans Related to Guaranteed-Completion Project Financing (PF).
Accordingly, with extensions of guaranteed completion deadlines becoming possible, construction companies' financial burdens are also expected to ease.
Kim Seok-gi, director general for construction policy at the Ministry of Land, Infrastructure and Transport (MOLIT), said, "Through this authoritative interpretation, we expect consultations such as schedule extensions and contract price adjustments at construction sites facing difficulties due to the Middle East war situation to proceed smoothly," adding, "We will continue to support responses to the Middle East situation in the construction industry in cooperation with relevant ministries."
Jeon Yo-seop, director general for financial policy at the Financial Services Commission (FSC), said, "As this is the first case of recognizing grounds for extending guaranteed completion under the model guidelines through an authoritative interpretation, we will work with related institutions, including financial associations, to support the construction industry's financial difficulties."