On June 3, the Fair Trade Commission announced that it had issued a corrective order to Sehwa Academy for not paying 26.4 million won to the subcontractor as required under a direct payment agreement.
In 2021, Sehwa Academy commissioned a construction project to reinforce a hazardous area at Sehwa High School in Pohang to a primary contractor, Company A. Company A then subcontracted the earthworks to subcontractor Company B, and all parties reached a tripartite agreement for Sehwa Academy to pay Company B directly for the earthworks.
While Sehwa Academy had made payments according to the agreement, it withheld the final payment of 26.4 million won, citing construction defects.
However, during a meeting attended by Sehwa Academy, the primary contractor, the subcontractor, and the supervisor, it was confirmed that the remaining payment for the earthworks was indeed 26.4 million won. Investigations revealed that the defects raised by Sehwa Academy were related to landscaping work performed by another company, not the earthworks.
The Fair Trade Commission determined that Sehwa Academy's failure to pay the subcontractor without just cause constituted a violation of subcontracting law.
Considering that the primary contractor is currently pursuing a civil lawsuit against Sehwa Academy for the payment, the Commission opted not to issue a separate payment order but instead imposed only a corrective order.
This decision is significant as it reaffirms that even parties not directly involved in a subcontracting agreement, such as the contractor, have payment obligations under the subcontracting law when they agree to direct payments.
A Fair Trade Commission official stated, "We will continue to monitor violations of payment obligations by contractors and take strict action when violations are confirmed to protect the integrity of subcontracting transactions."
* This article has been translated by AI.
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