Supreme Court clarifies direct payment rules for construction subcontractors

The Supreme Court ruled on April 16 that project owners in the construction industry bear a direct responsibility to pay subcontractors, provided such payments fall within the scope of their outstanding debts to primary contractors.

In a judgment delivered April 16, the high court overturned a lower court ruling and remanded the case involving material rental fees back for re-examination. The bench determined that under the Framework Act on the Construction Industry, an owner's obligation to make direct payments to a subcontractor is generally affirmative when specific legal conditions are met.

The court specified that the amount an owner must pay directly to a subcontractor is calculated by taking the total subcontracting fees due and deducting any progress payments the owner has already made to the primary contractor for that specific portion of the work. This standard applies equally whether the claim arises under the Fair Transactions in Subcontracting Act or the broader construction framework legislation, as the court found the scope of liability identical under both statutes.

Existing regulations require primary contractors to cooperate in confirming the specific construction segments involved to facilitate these direct transactions.

The case, docket number 2025Da220034, highlighted the necessity of aligning direct payment mandates with the actual financial exposure of the project owner.