Hello, this is Attorney Park Jong-han from Cheongchul Law Firm.
If a cooperative has incurred debts as a result of activities that qualify as commercial transactions for all members, then according to Article 57 of the Commercial Act, the members are jointly liable. However, since the provisions of the Commercial Act mentioned above are permissive, it is possible for the parties to the contract to agree on terms different from those of the Commercial Act.
Joint ventures also fundamentally have the nature of a civil law partnership, so if a joint venture enters into a subcontract with a subcontractor, it is necessary to examine how the members' responsibilities will be defined, and whether it is possible to have individual members, rather than the joint venture itself, bear the debts directly to the subcontractor according to their share ratio.
[Question]
Responsibilities towards subcontractors when a joint venture has given a subcontract
[Answer]
If a cooperative has incurred debts as a result of activities that qualify as commercial transactions for all members, then Article 57, Paragraph 1 of the Commercial Act applies, and the joint liability of the members is recognized (refer to Supreme Court Decision 92Da30405, pronounced on November 27, 1992).
Likewise, a joint venture in a joint performance format fundamentally possesses the nature of a civil law partnership, and if the debts of the cooperative are incurred as a result of activities that qualify as commercial transactions for all members, then the members are generally responsible jointly according to Article 57, Paragraph 1 of the Commercial Act (refer to Supreme Court Decision 2011Da97898, pronounced on March 28, 2013).
Therefore, when a joint venture enters into a subcontract with a subcontractor, if that act is a commercial transaction for all members, the members will be jointly liable to the subcontractor.
However, if a joint venture has an agreement that allows individual members, rather than the joint venture itself, to bear the debts directly to the subcontractor according to their share ratio, then, depending on the content of the subcontract, the debts incurred by the individual members may be allocated separately according to their respective share ratios (refer to Supreme Court Decision 2011Da97898, pronounced on March 28, 2013).
This is because Article 57, Paragraph 1 of the Commercial Act is a permissive provision, allowing for different terms to be agreed upon between the parties involved in the contract.
In this way, we briefly examined the responsibilities of a joint venture towards subcontractors when giving subcontractors work. In matters related to national contracts and public procurement, the applicable laws are very complex and frequently revised, requiring knowledge and experience in this area, and it is also essential to be well-versed in not only the court's decisions but also the administrative agency's authoritative interpretations and case rulings. Therefore, I strongly recommend seeking the assistance of Attorney Park Jong-han, who possesses expertise in national contract laws and has experience in resolving various national contract and procurement disputes.
Cheongchul Law Firm is made up of attorneys from major law firms in Korea, including Kim & Chang, Gwangjang, Tae-pyeongyang, Sejong, and Yulchon, as well as legal teams from large corporations, and is structured so that specialized attorneys in the relevant fields collaborate on cases rather than relying on just one attorney. Cheongchul provides comprehensive solutions that go beyond resolving specific issues, focusing on achieving the clients' ultimate goals through legal consulting. If you need assistance in achieving your goals, please feel free to contact Cheongchul.
