Background
Our client is a farmer living in a rural area. She allowed her son, who ran a food wholesale business, to use a business registration and bank account in her name, but she took no part in running the business.
An agricultural wholesaler supplied produce to the business until May 2025. After the son passed away in July 2025, the wholesaler sued our client as the registered owner for unpaid goods of KRW 243,178,400 plus 12% annual delay damages. It argued that she was the contracting party or, alternatively, liable as a name lender under Article 24 of the Commercial Act (Korea's corporate statute).
What Was at Stake
The Commercial Act makes a name lender liable to third parties who reasonably believed the name lender was the real business owner. That liability does not apply if the counterparty knew of the arrangement or failed to notice it through gross negligence. The court had to decide who the real contracting party was and whether the wholesaler was grossly negligent.
How Changchun Helped
Law Firm Changchun argued that the son was the real party and that the wholesaler should have known it. The court accepted these points:
The son was the contracting party: Our client only permitted use of her name and account, never ran the business, and the wholesaler never contacted her during the relationship. The wholesaler's own brief admitted the son was the actual operator.
Gross negligence: Over years of dealings the wholesaler never contacted our client directly and never demanded payment from her before the son's death, so name-lender liability did not apply.
Outcome
In May 2026 the first-instance court dismissed the claim in full and ordered the wholesaler to bear the litigation costs.
Lending a business name to a family member is common, but it can expose the named owner to suppliers' claims. Objective evidence of who actually ran the business and of the supplier's dealings is key to the defense. (Outcomes depend on the facts of each case.)