Hello, this is Attorney Park Jong-han from Cheongchul Law Firm.

There are cases where a joint venture enters into subcontracting agreements for parts of the work they are performing. However, since the legal nature of a joint venture corresponds to a partnership under civil law, if the members who are part of the partnership incur debt as a result of actions that are deemed commercial, all members are jointly liable for that debt according to Article 57, Paragraph 1 of the Commercial Act.

Therefore, when a joint venture enters into a subcontracting agreement, it is necessary to examine whose name should be used for the party involved in the agreement, and whether the responsibility also extends to all members if one of the members unilaterally enters into a subcontracting agreement.

[Question]

The name of the contracting party and the scope of responsibility when a joint venture enters into a subcontracting agreement

[Answer]

Article 7 of the Standard Agreement for Joint Ventures (Joint Performance Method) states, “Members of the joint venture cannot subcontract part of the work without the consent of the other members.” Therefore, when a joint venture enters into a subcontracting agreement with a subcontractor, it is the principle that the agreement should be made in the name of all members of the joint venture, and if some members wish to enter into a subcontracting agreement alone, they must obtain the consent of all other members.

Article 114, Paragraph 1 of the Civil Act stipulates that "a declaration of intent by an agent within the scope of their authority shall take effect directly against the principal when it indicates that it is for the principal." Therefore, as a principle, an act of agency must indicate that it is for the principal in order for it to take effect directly against the principal. In the case of a partnership under the civil law, since it does not have legal personality, the partnership itself cannot be the principal. Thus, in the case of partnership agency, it must indicate that it is for all the members that correspond to the principal. However, it is not necessary to present the names of all members; it is sufficient to specify the partnership to the extent that the other party can recognize it.

Similarly, when some members of a joint venture represent or act on behalf of other members to enter into a subcontracting agreement, they must indicate that it is for all members. However, it is not necessary to present the names of all members; it is sufficient to indicate the joint venture to the extent that the other party can recognize it.

Furthermore, Article 48 of the Commercial Act states, "An agent's act does not require the principal to indicate that it is for them; the act shall take effect against the principal. However, if the other party is not aware it is for the principal, they can claim performance against the agent." Therefore, in the case of partnership agency, if the legal act is deemed a commercial action for the partnership, even if it is not indicated that it is for the partnership, the effect of the legal act should be deemed to apply to all members who are the principal (see Supreme Court Judgment 2009. 1. 30, 2008Da79340).

In other words, when some members of a joint venture enter into a subcontracting agreement that constitutes a commercial action for the entire joint venture, even if the member does not indicate that it is for the joint venture, the effect of the subcontracting agreement will extend to all members of the joint venture (see Supreme Court Judgment 2009. 10. 29, 2009Da46750).

Thus, we have briefly examined the name of the contracting party and the scope of responsibility with respect to subcontracting agreements entered into by joint ventures. In disputes related to national contracts and public procurement, the relevant laws and regulations are very complex and subject to frequent amendments, making it essential to be familiar with them and to have experience. Additionally, one should be well-versed in the court's rulings, as well as the administrative authority's interpretations and case decisions. Therefore, it is recommended to seek the assistance of Attorney Park Jong-han, who possesses expertise in national contract laws and has experience in resolving various disputes related to national contracts and procurement.

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