Subcontract Transactions: The "Contract Formation Presumption System" Created by 15 Days of No Response

-Legal Column by Attorney Son Gye-jun of Daeryun LLC (Limited)

In industrial-field subcontracting transactions, verbal instructions or work orders via messenger are more common than written contracts. The practice of first proceeding with the work and organizing the terms later makes transactions swift, but causes fatal risks when legal disputes arise. In particular, because of the gap in bargaining power between prime contractors and subcontractors, if the contract terms are not clearly recorded, the burden of proof falls entirely on the subcontractor when unfair acts such as non-payment or unit-price reductions occur. To resolve this structural imbalance, the Subcontracting Act has provided a powerful device called the "contract formation presumption system."

The contract formation presumption system is a mechanism that dramatically shifts the direction of the burden of proof when a dispute arises. Previously, the subcontractor had to directly prove the existence of the contract, but by using this system, if the prime contractor does not separately refute it, the contract can be recognized as formed according to the subcontractor's assertion. The way it works is clear. The starting point is for the subcontractor to notify the prime contractor of a document stating the key terms—such as work content, payment amount, and payment method—and request confirmation. If the prime contractor that received the notice does not raise an objection in writing within 15 days, the contract is presumed to have been concluded exactly as stated in the content the subcontractor sent.

This becomes a solid means of protecting the subcontractor's rights even without a formal written contract. If a subcontractor completes delivery based on verbal instructions but the prime contractor delays payment or unilaterally puts forward a unit price never previously agreed upon, the subcontractor can assert the contract's formation on the basis of the written notice sent in advance and the other party's non-response. Conversely, from the prime contractor's standpoint, delaying a reply on grounds of a staff member's absence or internal communication delays leads directly to legal risk, so caution is required. This is because the law regards 15 days of silence as legal consent.

Therefore, companies participating in subcontracting transactions must clearly recognize the characteristics of this system. Subcontractors should develop the habit of organizing transaction details before and after commencing work and leaving objective evidence such as content-certified mail or emails. Prime contractors, too, must build an internal process capable of responding promptly to subcontractors' notification documents, and a risk-management system that raises objections in writing within 15 days for unclear terms is essential.

When there is no clear standard such as a written contract, subcontracting disputes become even more acute. To block the spark of a dispute early and respond effectively to a crisis, one must design a favorable evidentiary structure with professional legal assistance from the early stage of the case. To protect a company's legitimate rights and interests, a strategic approach that preemptively utilizes and responds through the systems the law provides is needed now more than ever.

Reporter Lee Dong-o (canon35@mt.co.kr)

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