[1] The method of determining who is a contracting party and the method of interpreting a juristic act in a case where there is a conflict of opinion on the interpretation of a juristic act between the parties and the interpretation of the parties.

[2] Whether a franchisor becomes a party to a supply transaction or bears the responsibility for a supply transaction merely because a franchisor under the Fair Transactions in Franchise Business Act forces a franchise store to trade raw materials or supplementary materials with a specific counterpart (negative), and whether the franchisor can readily conclude that the franchisor and each material supplier are a party to a supply transaction solely on the sole ground that the franchisor designated an intermediate supplier and decided that the supplier be supplied with materials only from the designated company in order to maintain the quality standards when the franchisor supplied materials from the supplier of each material and let the supplier trade with the franchise store (negative)

[3] In a case where Gap corporation, a franchisor under the Fair Transactions in Franchise Business Act, directly received orders from Eul corporation's branch offices or franchise stores, Eul corporation received food materials from Byung corporation's subsidiary offices or franchise stores, and transported the goods to Eul corporation's branch offices or franchise stores, and Eul corporation entered into a contract with Eul corporation's branch offices or franchise stores on its own responsibility to pay Gap corporation a certain ratio of sales gains after collecting food materials from Eul corporation's branch offices or franchise stores, and Byung corporation supplied food materials to Eul corporation's branch offices or franchise stores through Eul corporation's performance assistant, and sought payment for unpaid goods, the case holding that the court below erred by misapprehending legal principles, which held that Gap corporation is liable to pay Eul corporation unpaid goods.

[1] Generally, who is a party to a contract constitutes a matter of interpretation of the intent of the party involved in the contract. If there is any difference in the interpretation of a juristic act between the parties, the parties’ intent should be reasonably interpreted in accordance with logical and empirical rules by comprehensively examining the contents of the juristic act, the motive and background of such juristic act, the purpose to be achieved by the juristic act, the party’

[2] Article 12(1)2 and (2) of the Franchise Business Act (hereinafter “Franchising Business Act”) permits a franchisor to trade with a specific trading partner (including a franchisor) in certain circumstances, taking into account the unique characteristics of the franchise business (hereinafter “Franchising Business Act”) (Article 12(1)2 and (2) of the Franchising Business Act, and Article 13(1) [Attachment 2] [Attachment 2](2) Item (b) of the Enforcement Decree of the Fair Transactions in Franchise Business Act) of the Enforcement Decree of the Franchising Business Act does not necessarily require the franchisor to become a party to the relevant supply transaction or to bear any responsibility for the supply transaction itself. Furthermore, the franchisor’s designation of a supplier for each raw material or subsidiary material and allowing the supplier to trade with a franchise store. In such cases, it is difficult to readily conclude that the franchisor is a supplier for each material supplier merely because the franchisor was designated as an intermediate supplier for the purpose of maintaining the quality standard.

[3] In a case where Gap corporation, a franchisor under the Fair Transactions in Franchise Business Act, received orders from Eul corporation's branch offices or franchise stores, Eul corporation directly received food materials from Byung corporation's branch offices or franchise stores and transported them to Gap corporation's branch offices or franchise stores, Eul corporation directly collected food materials from Eul corporation's branch offices or franchise stores's own responsibility and entered into a contract with Eul corporation to pay Gap corporation a certain ratio of sales profit as fees, and Byung corporation supplied food materials to Eul corporation's branch offices or franchise stores through Eul corporation's performance assistant, and sought payment for unpaid goods against Eul, the case holding that Eul corporation was not merely a party to the above contract, but a party to the contract with Eul corporation's interim supplier company's interim supply contract with Eul company's intent to directly enter into a supply contract with Byung corporation's branch offices or franchise stores, and the court below erred in the misapprehension of legal principles as to Gap corporation's sales profit, since Eul corporation supplied food materials to Eul corporation's branch offices or franchise stores through Eul corporation's performance assistant.

[1] Article 105 of the Civil Act / [2] Article 12 (1) 2 and (2) of the Fair Transactions in Franchise Business Act, Article 13 (1) [Attachment Table 2] and (2) Item (b) of the Enforcement Decree of the Fair Transactions in Franchise Business Act / [3] Article 105 of the Civil Act, Article 12 (1) 2 and (2) of the Fair Transactions in Franchise Business Act, Article 13 (1) [Attachment Table 2] Item (b) of the Enforcement Decree of the Fair Transactions in Franchise Business Act

[1] Supreme Court Decision 2009Da92487 Decided May 13, 2010 (Gong2010Sang, 1105) Supreme Court Decision 2013Da69804 Decided October 29, 2015

Maritime EmpifS Co., Ltd. (formerly: Madi Food Co., Ltd.) (Attorneys Ansan-gu et al., Counsel for the plaintiff-appellant)

O2S Co., Ltd. (Attorneys Lee Chang-sik et al., Counsel for the plaintiff-appellant)

Busan High Court Decision 2015Na22826 decided July 7, 2016

The judgment below is reversed, and the case is remanded to Busan High Court.

The grounds of appeal are examined.

1. Generally, who is a party to a contract constitutes a matter of interpretation of the intent of the party involved in the contract. In the event of a conflict of opinion on the interpretation of a juristic act between the parties, the parties’ interpretation should be reasonably interpreted in accordance with logical and empirical rules by comprehensively examining the contents of the juristic act, the motive and background leading up to such juristic act, the purpose to be achieved by the juristic act, the parties’ genuine intent, etc. (see, e.g., Supreme Court Decisions 2009Da92487, May 13, 2010; 2013Da69804, Oct. 29, 2015).

According to the reasoning of the judgment below, the defendant is a person who has run a window-only franchise business using the business mark "○○" (hereinafter "franchise Business Act"), a person who has entered into a contract with the defendant for the payment of goods distribution and business management fees (hereinafter "logistics fees") with the defendant, and supplied food materials, etc. to the defendant's franchise store; and the plaintiff is a manufacturer and seller of food materials, who supplies food materials, etc. to the defendant's franchise store.

In this case, the Plaintiff sought payment of the cost of food materials from the Defendant on the ground that the Plaintiff entered into a food supply contract with the Defendant on net stand and supplied the food materials to the Defendant’s franchise store through floor distribution. Accordingly, the Defendant asserted that the floor distribution was directly purchased from the Plaintiff and supplied the food materials to the Defendant’s franchise store, and the parties who entered into the supply contract with the Plaintiff are not the Defendant but the Defendant’s floor distribution.

Therefore, the issue of this case is whether the party who entered into a food materials supply contract with the Plaintiff is the party's floor distribution.

2. A. The lower court determined as follows on the grounds indicated in its reasoning. In other words, the Plaintiff and the Defendant were to deliver food materials, such as net stand, to be used by the Defendant’s franchise store, to the Defendant according to the terms and conditions of the contract, such as the supply price determined by the Plaintiff in consultation with the Defendant, but the specific supply quantity can be deemed to have concluded a basic contract for food materials supply, stating that “The floor distribution, which is the exclusive logistics delivery company of the Defendant, shall be determined by collecting the order volume of the franchise store and delivering it to the Plaintiff.” According to such contract, the Plaintiff supplied the Defendant with food materials, such as net stand, by delivering the order volume of the franchise store

B. However, in light of the aforementioned legal principles and records, the above determination by the court below is difficult to accept. The reasons are as follows.

(1) The instant logistics contract entered into between the Defendant and the ridge distribution is a structure that directly receives orders from the Defendant’s branch offices or franchise stores (hereinafter “Defendant’s branch offices and franchise stores, etc.”) and transports the Defendant’s franchise stores, etc. after receiving food materials from the Defendant’s manufacturers and manufacturers of the food materials selected by the Defendant. The floor distribution directly collects the cost of the goods from the Defendant’s franchise stores, etc. and pays the Defendant a certain percentage of the sales profit (the amount calculated by settling the cost of the food materials to be paid to the supplier from the cost of the goods collected from the Defendant’s franchise stores, etc.) as the fee to the Defendant. Moreover, the selection of the purchasing places and quality specifications of the food materials except the food materials (such as sugar) and the designation of the purchase price and the sales price are the Defendant’s inherent authority.

In light of the contents of the instant logistics and commission agreement, the Defendant’s franchise store, etc., as well as the suppliers of materials, and the subjects that receive food materials from the manufacturers and manufacturers of food materials such as the Plaintiff are also premised on the distribution of the floor. In other words, the instant agreement is a content that the Defendant, a franchisor, designates the floor distribution as an intermediate supplier.

In light of the characteristics of franchise business, the Franchise Business Act permits a franchisor to compel a franchise store to make a transaction with a specific counterpart (including a franchisor) (Article 12(1)2 and (2) of the Franchise Business Act, Article 13(1) [Attachment 2] [Attachment 2](b) of the Enforcement Decree of the Fair Transactions in Franchise Business Act). Such circumstance alone does not lead the franchisor to either become a party to the supply transaction or to bear any responsibility for the supply transaction itself. Furthermore, inasmuch as it can be inefficient for a franchisor to designate a supplier for each raw material or subsidiary material to make a direct transaction with a franchise store, the franchisor may designate an intermediate supplier to have the supplier receive materials from the supplier for each material and make the supplier deal with the franchise store. In such cases, the franchisor may determine materials only from the company designated by the franchisor to maintain the quality standard, and even if the franchisor participated in the designation of each supplier, it is difficult to readily conclude that each supplier is a party to the supply sheet.

(2) In fact, in accordance with the instant logistics and commission agreement, the floor distribution was ordered by the Defendant’s franchise store, etc., the Defendant received food materials from the manufacturers and manufacturers of food materials selected by the Defendant, and kept them in the warehouse of the Defendant’s logistics center. The Defendant supplied the goods to the Defendant’s franchise store, etc. and paid the Defendant the price from the direct franchise store, etc., and then paid the Defendant a certain ratio of sales profit as commission to the Defendant. In addition, upon termination of the instant logistics and commission agreement on November 22, 2013, the floor distribution and the Defendant agreed to the effect that the Defendant would take over the inventory materials, etc., which were stored in the said logistics center on the basis of the purchase price.

(3) The Plaintiff selected as a food supply business entity, such as net stand, through the Defendant’s quality inspection, has supplied food materials, such as net stand, to the distribution center of the floor, and received food materials from distribution of the floor, and in connection with this, a tax invoice has been issued in the name of the floor distribution. “△△△ Food” is the trade name before the floor distribution is established, and the Plaintiff is indicated as “○○ (△△△ Food)” or “○○ (Distribution),” which was prepared by the Plaintiff from January 1, 2010 to December 31, 2013. There is no evidence to deem that the Plaintiff received food materials from the Defendant or issued a tax invoice to the Defendant in relation to the supply of food materials, and there is no evidence to deem that the Plaintiff demanded the Defendant to pay the unpaid food materials prior to the filing of the instant lawsuit.

Meanwhile, from November 2012, the accounting company, which had been in charge of the Defendant’s accounting, kept an OTP card in the name of floor distribution, and participated in the payment of food materials to the food materials supplier in the floor distribution. However, in the event that the floor distribution of food materials does not pay the food materials to the food materials supplier and the fee to the Defendant, it is only a certain degree of involvement in the intermediary supplier of the franchiser with the consent of floor distribution for the stabilization and normalization of the franchise business.

(4) In full view of the contents and purport of the instant logistics and commission agreement, the Defendants, the floor distribution, and the actual forms of transactions between the Plaintiff, not merely performed delivery and collection business by the Defendant, but also the Defendant’s intermediate suppliers, a franchisor, with the intent of concluding a direct supply contract with the Plaintiff, such as the net counter, etc. selected by the Defendant, with the intent of concluding a supply contract with the Plaintiff, which is a manufacturer and producer, the Plaintiff received the instant food materials, such as net counter, and received the tax invoice in its name, and the Plaintiff also perceived the other party to the supply contract as the floor distribution.

C. Nevertheless, the lower court, solely based on its stated reasoning, determined that the party who entered into a food materials supply contract with the Plaintiff is the Defendant, and thus, determined that the Defendant is liable to pay the unpaid goods to the Plaintiff. In so doing, the lower court erred by misapprehending the legal doctrine on the confirmation of the parties or the interpretation of legal acts, thereby adversely affecting the conclusion of

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ko Young-han (Presiding Justice)