CONTENTS
- 1. Violation of the Fair Transactions in Subcontracting Act, a Case Concerning the Grounds for Violation of the Obligation to Issue a Written Document
- - Lawsuit Concerning the Violation of the Fair Transactions in Subcontracting Act, the Lower Court's Determination
- 2. Lawsuit Concerning the Violation of the Fair Transactions in Subcontracting Act, the Supreme Court's Determination
- 3. Violation of the Fair Transactions in Subcontracting Act, Daeryun's Strategy?
1. Violation of the Fair Transactions in Subcontracting Act, a Case Concerning the Grounds for Violation of the Obligation to Issue a Written Document
This is a case in which the standard for determining whether there was a justifiable ground for a violation of the obligation to issue a written document, as well as the allocation of the burden of proof, was at issue in a lawsuit concerning a violation of the Fair Transactions in Subcontracting Act.
The plaintiff is a principal contractor that entrusts subcontractors with the manufacture of components for ships or offshore plants.
The defendant, the Fair Trade Commission, issued the plaintiff a corrective order, a publication order, and an order to pay a penalty surcharge, and decided to refer the plaintiff to an investigative agency by accusation, on the grounds that the plaintiff had not issued in advance the written documents relating to the subcontracting agreements and had set the subcontract payments for the modification and additional works lower than those for the main works.
In response, the plaintiff filed a claim against the defendant seeking revocation of those orders.
Lawsuit Concerning the Violation of the Fair Transactions in Subcontracting Act, the Lower Court's Determination
As to the violation of the Fair Transactions in Subcontracting Act, the lower court found that the plaintiff had violated the obligation to issue a written document with respect to the main works, but held that there was a justifiable ground for not issuing a written document with respect to the modification and additional works, for the following reasons.
The lower court accepted the ground that, given the nature of shipbuilding and offshore plant construction, modification and additional works occur frequently and there is a need to handle them promptly, so that it was not possible to issue a written document on each occasion.
The lower court also determined that, because the contracting parties cannot precisely know whether modification and additional works will arise or what their contents will be, omitting the issuance of a written document was unavoidable, and that a justifiable ground was therefore recognized.
As to the violation of the Fair Transactions in Subcontracting Act, the lower court found that, although the plaintiff had violated the obligation to issue a written document with respect to the main works, there was a justifiable ground, for the reasons stated above, for not issuing contracts in advance for all of the modification and additional works.
Accordingly, the lower court revoked the order to pay the penalty surcharge. In addition, on the ground that comparing the subcontract payments for the modification and additional works with the level of those for the main works was difficult because the two sets of works could hardly be regarded as appropriate comparable transactions, the lower court found it difficult to recognize that the subcontract payments had been set at a low unit price, and revoked this portion of the disposition as well.
2. Lawsuit Concerning the Violation of the Fair Transactions in Subcontracting Act, the Supreme Court's Determination
As to the lawsuit concerning the violation of the Fair Transactions in Subcontracting Act, the Supreme Court, while accepting the legal principles of the lower court, applied a legal principle that strictly assesses the plaintiff's violation of the obligation to issue a written document with respect to the modification and additional works.
Article 3 of the former Fair Transactions in Subcontracting Act, as amended in January 2010, imposes the obligation to issue a written document in principle, regardless of whether a justifiable ground exists.
In the lawsuit concerning the violation of the Fair Transactions in Subcontracting Act, the Supreme Court held that, since the obligation to issue a written document itself is not exempted even where emergency restoration works are required due to a disaster or accident, not issuing a written document at all on the sole basis that modification and additional works frequently occur and prompt measures are needed cannot be regarded as a justifiable ground.
The Court further determined that not issuing a written document on the sole basis claimed by the plaintiff, namely that the precise scope or contents of the modification and additional works had not been determined, cannot be regarded as a justifiable ground.
However, the Court held that a justifiable ground may be recognized only in the exceptional case where, despite the plaintiff having made the efforts necessary to comply with the obligation to issue a written document, the subcontractor voluntarily commenced the work before the written document was issued.
In the lawsuit concerning the violation of the Fair Transactions in Subcontracting Act, the Supreme Court, stating that although the lower court had erred by misapprehending the legal principles regarding the justifiable ground for a violation of the obligation to issue a written document, the defendant's grounds for the disposition could not be recognized with respect to some of the works, found that the lower court's conclusion revoking the order to pay the penalty surcharge was justified, and accordingly dismissed the final appeal.
3. Violation of the Fair Transactions in Subcontracting Act, Daeryun's Strategy?
The key issues in this lawsuit concerning the violation of the Fair Transactions in Subcontracting Act were the standard for determining whether there was a justifiable ground for a violation of the obligation to issue a written document under the Fair Transactions in Subcontracting Act and the allocation of the burden of proof.
Where a person violates an administrative statute, that person may not be subjected to a sanction if there is a justifiable reason for the failure to perform the obligation.
In this regard, the burden of proving that a justifiable ground exists under the general principles of administrative law rests with the plaintiff.
Because subcontracting agreements involve complex legal provisions, specialized legal advice may be necessary.
This is because matters such as the legal complexity, whether a violation of the Fair Transactions in Subcontracting Act occurred, and whether a justifiable ground is recognized must be examined as various legal issues.
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