2) Critical Notes Undue discounts u

2) Critical Notes
Undue discounts under Article 13 of the Subcontract Act mean to unduly discount ‘the
subcontract payment set at the time of commission’. An undue discount is deemed to have
occurred when undue discount was actually made, notwithstanding any later compensations.
Therefore, as long as a plaintiff decides not to pay for a portion of cancelled products, that
practice can constitute undue discount. Even if the plaintiff received such cancelled products
after a withdrawal plan to discontinue mobile phone production, the loss arising from an
undue discount cannot be cured retroactively. Although this is not stipulated in the decision,
the decision is based on such reasoning Therefore, according to Paragraph 1, Article 11 (Prohibition of Unreasonable Reduction of
Price) of the Subcontract Act, recently amended on March 11, 2011, ‘a contractor shall not
reduce the subcontract payment agreed-upon at the time of commission. However, if the
contractor proves justifiable reasons, the payment can be reduced’. According to such
provision, a contractor takes the burden to prove such justifiable reasons in order to prove a
legitimate amendment (along the lines of the legal scheme of unreasonable price discounts).