damage caused by an unlawful conduct, and if a trade relationship is recognized whether it is possible to recognize an unlawful act contrary to the trade practices. Dissatisfied with the unclear determination on this issue, the respondents filed an administrative lawsuit to the court.
2. Meaning of trading relationship
From a perspective of general contract law, a trading relationship means a contractual relationship arising from execution of a contract with an intention of the parties concerned. In this aspect, a trading relationship has a narrow meaning of a “legal relationship formed with the intention of the parties concerned”. On the other hand, it can be broadly defined as a “general means for business activities or trading order”, not limited to exchange of goods or services based on the intention of the parties. In the case, the respondents and the Seoul High Court interpreted it with a narrow meaning while the KFTC and the Supreme Court adopted a broader meaning. The position of the High Court and the Supreme Court each will be discussed in this section.
1) The Seoul High Court’s position
The Seoul High Court viewed that trade had a narrow meaning of contractual relationship. Since the expression of intention is a precondition for the term “trade”, it is reasonable to consider that a legal conduct and the ensuing conduct are included in trade while an unlawful conduct and the ensuing conduct are not.
The grounds for this point of view are as follows. ① The term “trade” has been widely used in daily lives, not as a term with a specific legal meaning. Considering the definition of “trade” in dictionary as an activity of “exchanging” or “buying and selling” goods or services, or the examples of its general usage, such as “open a trade” and “trade is active”, the term “trade” seems to have as a prerequisite the intention of the parties who try to do a conduct for the purpose of producing a certain legal effect. ② Large-scale intra-group transaction is defined in Article 11-2(1) of the MRFTA as (a) an act of channeling or trading funds, such as suspense payments and loans, (b) an act of offering or trading securities, such as stocks and company bonds, (c) an act of offering or trading assets, such as real estate or intangible property rights, (d) an act of offering or trading goods or services to or for an affiliate as prescribed by the Presidential Decree in consideration of the stockholder constituent, and one type of unfair trade practice is defined in Article 23(1) subparagraph 7 as (e) an act of assisting a person with special interest or other companies by providing advanced payment, loans, manpower, real estate, stocks and bonds, goods and services, intangible assets and such, or by transacting under substantially favorable terms. Under the MRFTA, “provision” of goods or services seems to be included in trade. Considering such stipulation, the term “provision” means a conduct of giving something without a benefit in return while “trade” is an act of giving something in exchange for a benefit. However, the term “provision” also seems to have as a prerequisite the intention of the parties who try to do an act for the purpose of producing a certain legal effect. ③ Under the Civil Act, on the premise that
“expression of intention” is defined as an intention of a person who tries to do an act in order to produce a certain legal effect, a “legal act” requiring the expression of intention is separated from an “illegal act” not requiring the expression of intention. ④ Article 24 of the
Commercial Act stipulates that “a person who has allowed another person to carry on business using his or her name or trade name shall be liable jointly and severally with such other person to perform any obligation arising from a transaction with a third person who has effected such transaction in the belief that such other person was the proprietor of the business.” Interpreting that the liability of the name lender set forth in this Article 23 aims to protect the third person, who misunderstood that the name lender is a true counterpart to the transaction and believed in the lender’s credit and name, with respect to the obligation arising from such transaction, the Supreme Court ruled that, even though the victim mistook the name lender as the business owner, there was no causal relation between the misunderstanding and the occurrence of damage in the case of an illegal act. The High Court stated that such ruling of the Supreme Court was based on the premise that an illegal act was not included in an act of trade.
2) The Supreme Court’s position
The Supreme Court adopts a wider meaning of trade as a means for business activities or trade order. Considering the provisions on unfair trade practices as well as their purpose, the meaning of “trade” is not confined to an individual contract, for example, of buying and selling. Accordingly, even though the victims’ right to claim compensation for damage directly to the insurers is arising from an illegal act of the insured, the insurance contract is executed between the insurers and the insured to prepare for such case. The appearance of the victim in an accident is expected from the beginning, though it is not possible to determine the victim in advance at the time of signing an insurance policy due to the nature of the insurance. Thus, the liability of the insurers to compensate the victims for the damage to their cars is based on the insurance policy (the insurers assume the liability of the insured to compensate for damages. See the Supreme Court Judgment 2003Da6774 delivered on October 7, 2005). Therefore, on the grounds that it is highly likely that unfair trade practices of the obligor may occur in the process of performing the liability for damage compensation associated with an illegal act (for example, the insurers may not provide the compensation for car repair costs immediately in a lump sum and, instead, make the payment either in installment for a long time or after a long time), it is appropriate to view that there is a trading relationship between the plaintiffs and the victims which is formed through the insured.
3) Definition of “trade” through interpretation of the legal provisions
A) Literal interpretation: general meaning and legal concept
As pointed out by the Seoul High Court, the term “trade” has been generally used in phrases, such as “open a trade” and “trade is active”, and is defined in the dictionary as an act of “giving and taking” and “selling and buying” goods or services. It is appropriate, of course, to begin with the general meaning of a word being used in everyday life in order to interpret its meaning in legal provisions. However, it is also true that the same word can have a different meaning when it is used in the legal provisions, depending on the status and purpose of such provisions. Thus, even if the term “trade” has a narrow meaning in its daily usage, it is not necessarily interpreted in the same way as a legal term. In particular, the provisions relevant to this case provide a detailed definition and specific examples for this word. Therefore, it is reasonable to define its meaning consistently with such definition and examples. A wider interpretation of the meaning of trade, as the Supreme Court did, cannot be seen as going beyond the literal interpretation.
B) Systematic interpretation: position of the regulation and illustrative provisions