Hello, this is attorney Sang-yoon Eom of Cheongchul Law Firm.

In subcontracting transactions, work is sometimes started first to meet delivery dates or project schedules, with the contract being drawn up afterwards. It is also not uncommon for a prime contractor, citing a long-standing relationship, to simply pass along the order details or to keep using an old contract and unit-price agreement as a matter of routine. However, the mere fact that both parties knew the terms of the transaction and that payment was actually made does not mean the duty to issue a written contract under the Fair Transactions in Subcontracting Act (하도급법) has been fulfilled.

The Subcontracting Act sets requirements on when the written contract must be issued, what it must contain, and how it must be signed or sealed, so that the subcontractor can clearly confirm the terms of the transaction before starting work. Even where a contract was drawn up, a violation may arise if it was issued late or if the required contents and signatures are missing.

Three enforcement cases announced by the Korea Fair Trade Commission (KFTC) in 2026 show how these obligations are applied in actual transactions. Below, we examine the key issues in each case and explain what companies should check when concluding contracts and placing orders.

When and with what content must the written contract be issued?

Under Article 3(1) of the Fair Transactions in Subcontracting Act (하도급법 제3조 제1항), a prime contractor that entrusts manufacturing, repair, construction, or services must issue the subcontractor a written document containing the matters prescribed by law. For manufacturing entrustment, the deadline is before the subcontractor begins work for delivery of the goods; for service entrustment, it is before the subcontractor begins performing the services. In principle, the same obligation applies to additional or modified entrustments after the initial contract.

The contents of the written contract are equally important. Under Article 3(2) of the Act and Article 3 of its Enforcement Decree (하도급법 제3조 제2항, 시행령 제3조), the document must clearly state the date of entrustment, the subject matter, the time and place of delivery, the method and timing of inspection, the subcontract price and payment method, and the payment date. It must also set out the requirements, method, and procedure for adjusting the subcontract price, and the matters relating to subcontract price indexation that apply to the transaction must be confirmed as well. The signatures or names and seals of both parties are also required.

These provisions are designed to fix in advance the work the subcontractor will perform and the consideration it will receive, and to make the terms verifiable if a dispute over them later arises. Accordingly, when checking compliance, it is not enough to confirm that a contract exists; one must also examine when it was actually issued, whether the required terms are stated, and whether the parties' intent is confirmed by proper signatures or seals.

That said, the terms of the transaction need not all be contained in a single document. The statutory particulars may be confirmed through a combination of a master agreement and individual purchase orders, so it is necessary to review how the documents actually in use connect with one another. Conversely, the existence of a master agreement alone should not be taken to mean that the items, quantities, and unit prices of each individual transaction, or the scope of additional work, have all been determined.

Contracts missing mandatory particulars

Company A, an automotive parts manufacturer, entrusted the manufacture of 120 molds for automotive parts to 16 subcontractors between June 2020 and May 2023. For 45 of these, it issued no written contract at all; for the remaining 75, it issued contracts that omitted mandatory particulars such as the requirements, method, and procedure for adjusting the subcontract price. Of those 75, 6 were issued only after work had begun, with delays ranging from a minimum of 1 day to a maximum of 328 days.

For the violation of the duty to issue written contracts, the KFTC imposed a corrective order prohibiting recurrence and a surcharge of KRW 120 million. The case shows that even a transaction for which a contract exists may be subject to sanctions if the contract's contents fall short of what the law requires or if it is issued late.

In this case, violations relating to the contract terms and the payment process were also found. Among the issues were special clauses that prevented the subcontractor from objecting to inspection results, or that required the subcontractor to follow the prime contractor's wishes if no agreement on an amended contract was reached. The failure to notify inspection results in writing and the non-payment of KRW 68.41 million in interest for late payment and KRW 10.31 million in fees for bill-substitute payment instruments were also uncovered.

The KFTC issued corrective orders prohibiting recurrence for the unfair special clauses and the failure to notify inspection results, and a corrective order together with a surcharge of KRW 24 million for the non-payment of late-payment interest and fees. The total surcharge therefore came to KRW 144 million. These were sanctions imposed together for breaches of different obligations, and it is difficult to say that the surcharge for the written-contract violation was uniformly increased merely because other violations existed.

In light of this case, both the form and the substance of contracts need to be reviewed together. In addition to filling in the mandatory particulars, companies should check whether their inspection, amendment, and termination clauses contain provisions that unfairly restrict the subcontractor's rights. Issuing the written contract on time and ensuring that its terms are lawful are separate matters.

The illegality of issuing contracts after work has begun

Company B, which provides information system development and maintenance services, entrusted 652 service projects to 394 subcontractors between January 2022 and June 2024, issuing the contracts between 1 and 58 days after the services had already begun. For this late issuance of written contracts, the KFTC imposed a corrective order prohibiting recurrence and a surcharge of KRW 211 million.

In determining the surcharge, the KFTC stated that it took into account that approximately 85.4% of the subcontractors Company B dealt with were affected, and that the practice of entrusting services without issuing written contracts had continued for more than two years. What weighed in the sanction decision was that this went beyond a one-off mistake in some transactions: the practice of issuing contracts after the fact was repeated across many transactions over a long period.

From a practical standpoint, the point to watch is the gap between the internal approval date and the date work actually starts. Even if a contract is ultimately on file, late issuance may be an issue if personnel were deployed or development or production began before the contract was issued. The same violation is especially likely to recur where the operating department instructs the work and the purchasing or contracts department belatedly puts the paperwork in order. To prevent this, the ordering and contracting procedures should be linked so that work is instructed only after confirming that a lawful written contract has been issued to the subcontractor. Rather than managing only the date on the document, it is advisable to also keep records that can verify that the contract was actually issued and when.

Unit-price agreements missing signatures or seals

Company C, a manufacturer of household heating appliances, entrusted the manufacture of parts to 98 subcontractors between June 2021 and June 2024 and omitted signatures or names and seals on 436 unit-price agreements. Some documents lacked the corporate seal in the signature field, and in some cases a staff member with no authority to represent the company signed in their own name and sent the document out. There were also forms that provided a signature field only for the subcontractor and none for the prime contractor.

The KFTC treated this as a violation of the duty to issue written contracts under Article 3 of the Subcontracting Act (하도급법 제3조) and imposed a corrective order prohibiting recurrence and a surcharge of KRW 52 million. The reasoning is that a unit-price agreement sets the delivery price, which is a core term of the subcontracting transaction, and must therefore be delivered bearing the signatures or names and seals of the parties.

This case shows that contract management must not be confined to the master agreement. Even where the master agreement has been properly signed and sealed, the required elements may be missing from separate documents that set individual unit prices or amended terms. Contract managers should therefore also check the unit-price agreements and amendment agreements that set the actual terms of the transaction. Signing authority also needs to be verified. The fact that a staff member signed does not in itself always make the document unlawful, but it must be confirmed that the signature was based on authority to represent the company or on a lawful delegation. It is necessary to clarify internal contracting authority and the scope of delegation, and to put document forms and approval procedures in order so that the signatures or seals of both parties are never omitted.

However, the fact that a missing signature or seal is treated as a violation of the written-contract duty under the Subcontracting Act must be distinguished from whether the contract between the parties is valid under civil law. This case cannot be taken as grounds for concluding that every contract lacking a signature is automatically void.

Contract forms and actual ordering procedures must be reviewed together

The violations in the three cases took different forms, but all arose from a gap in management between contract execution and the performance of the work. To narrow this gap, companies need to go beyond preparing a standard contract and examine how that contract is actually drafted, approved, and issued in real transactions.

First, the master agreement, individual purchase orders, unit-price agreements, and amendment agreements should be reviewed together to confirm that all statutory particulars are covered. It is also necessary to check whether unit prices or payment terms are stated inconsistently across documents, and whether the content and price of additional work have been reflected in writing.

Next, contracting authority and responsibility for issuance should be clearly assigned. Procedures should ensure that work instructions from the operating department do not precede the issuance of the written contract by the contracts department, and even where electronic contracting is used, it should be possible to confirm that signing has been completed and that the document has been issued to the counterparty. Adopting a system does not by itself guarantee compliance, so it is advisable to also operate a procedure for identifying incomplete contracts and alerting the persons responsible.

Care is also needed not to postpone the issuance of the written contract altogether on the ground that the terms have not been finalized. The Act allows a written contract omitting certain matters to be issued where, for justifiable reasons, those matters are difficult to determine at the time of entrustment, provided that the reason and the expected date of determination are stated and that a written document reflecting the matters is issued without delay once they are determined. Companies should therefore consider whether this exception can apply, but the practice of starting work without any written contract merely because unit-price negotiations or internal approvals are still in progress cannot be justified.

Subcontractors, too, should check whether the order details and scope of work are confirmed in writing. If the written contract is missing or differs from the actual instructions, they should request that it be corrected, and it is advisable to keep materials such as order e-mails, work instructions, quotation discussions, and requests for additional work. These help establish the course of the transaction if a dispute over the scope of work or payment later arises.

The duty to issue written contracts under the Subcontracting Act is a basic mechanism for protecting subcontractors and preventing disputes by making the terms of the transaction clear in advance. Companies should not stop at the fact that a contract is on file; they must confirm that a written document containing the required contents and bearing proper signatures or seals is actually being issued before work begins. When such checks become part of routine ordering procedures, repeated violations can be reduced and the predictability of the business relationship enhanced.