[Consultation] Subcontract Service Contract Legal Consultation
Article posted in 2022-08-23 13:39:38 | VEAT
Law firm Veat provided legal advice regarding the “Act on Fair Trade in Subcontracting Transactions” (Subcontracting Act) concerning IT service construction contracts.
IT service consulting company A inquired about whether, if a contract included 1) “the absence of reflection of price increases and labor cost increases in subcontract payment, and 2) a discrepancy in payment schedules between the principal and the subcontractor, the subcontractor’s payment deadline would follow the principal’s payment schedule.
Based on the Subcontracting Act and the opinions of the Fair Trade Commission, Law firm Veat comprehensively reviewed the contents of this construction contract. Specifically, considering examples of corrective measures related to unfair terms of the Fair Trade Commission, we carefully examined whether this construction contract’s terms posed a risk of being considered an unfair term.
The Subcontracting Act aims to prevent the subcontractor from being unilaterally disadvantaged due to the economic disparity between the principal and the subcontractor in subcontract transactions.
If a violation of Article 3(4) of the Subcontracting Act’s “prohibition of unfair terms” occurs, corrective measures may be recommended or mandated, and a fine may be imposed, not exceeding twice the subcontract payment amount. Furthermore, because the principal violating the duty to prohibit unfair terms may be penalized with a fine equivalent to twice the subcontract payment, it is advisable to obtain a legal review by an expert prior to proceeding with the contract, particularly regarding whether an unfair term applies (Articles 25 and 25(3) of the Subcontracting Act).
Law firm Veat offers advice to ensure compliance with the Subcontracting Act based on various consulting cases related to the Subcontracting Act and construction contracts. If you need legal advice regarding the Subcontracting Act and construction contracts, please contact Law firm Veat.
Thank you. Law firm Veat