Japanese Law and Government/Obligation Law
Obligations (saiken from the perspective of the obligee, saimu from the perspective of the obligor) are one of the key components of Japanese civil law. Unlike property rights, the content of obligations may be freely determined by the parties. The Civil Code is primarily concerned with setting default rules which apply when the parties have not chosen particular rules between themselves.
Performance (bensai) of an obligation generally extinguishes the obligation. Substitute performance (daibutsu bensai) is also possible.
Performance must generally be actual performance of the stipulated obligation, but there are two circumstances in which preparation for performance followed by oral notice of performance is adequate (Article 493):
- When the obligee has previously refused to accept performance
- When the cooperation of the obligee is necessary to effect performance
The location of performance, unless otherwise agreed, is:
- for obligations regarding delivery of a particular object, the location of that object at the time the obligation commenced;
- for other obligations, the domicile of the obligor (Article 484).
The cost of performance is generally borne by the obligor; however, obligees must bear any additional cost required by virtue of the obligee changing domiciles (Article 485).
Upon performance, the performing party may demand a certificate of receipt from the recipient (Article 486) or the return of any certificate evidencing the obligation (Article 487).
When a creditor or victim is harmed by the negligence of an obligor, a court may factor the creditor/victim's own negligence into determination of the amount of damages. In the payment of money claims, negligence on the part of the creditor may waive the obligor's liability entirely (Article 418). This rule does not apply to tort claims (see below).
Termination and cancellation
Termination of a contract (kaiyaku) has the effect of cancelling its effectiveness on a forward-looking basis only. Cancellation (kaijo) cancels the contract's effectiveness retrospectively. In other words, cancellation causes the contract to have never existed for legal purposes, while termination causes the contract to cease to exist but maintains the validity of obligations which existed prior to termination.
Stipulated penalties for terminating a contract are generally treated as minimum expected compensatory damages and cannot be lowered by a court (Article 420).
The Civil Code also creates several categories of contracts and specifies default rules applicable to each. These rules may generally be superseded by the express agreement of the parties.
A gift (贈与 zōyo) contract is formed when one party offers its property to the other for no compensation, and the other party accepts the offer (Article 549). Written gift contracts are binding upon the parties. Oral gift contracts may be revoked by either party at any time prior to performance (Article 550).
The donor is not liable for any defects in the gift, or for the nonexistence of any part of the gift, unless such fact was known to the donor and not transmitted to the recipient (Article 551).
A purchase (売買 baibai) is the transfer of property from one party to another in exchange for a payment (Article 555).
An undertaking (請負 ukeoi) is a contract wherein one party completes a specified task, and the other pays them compensation for completing that task. Undertakings differ from mandates (see below) in that they expire once the task is completed and the payment is made.
The general rules applicable to mandates are as follows:
- Compensation must be paid upon delivery of the product of the task, or at the completion of the task if no delivery is required (Article 633).
- If there is a defect in the product, the orderor may demand that the worker repair the defect within an appropriate period of time, unless the defect is not major and the repair would require disproportionate cost. The orderor may also demand damages (Article 634). A defect in the product is also grounds for termination if the defect prevents the purpose of the contract from being achieved (Article 635). These rights lapse if not exercised within one year of delivery (or completion if no delivery is required) (Article 637). For land and buildings, the period is extended to ten years if the defective structure is made of stone, brick, concrete or metal, or five years if made of other materials (Article 638). Liability for known but unannounced defects may not be waived by contract (Article 640).
- While the work is in progress, the orderor may terminate the contract at any time upon payment of any applicable damages to the worker (Article 641).
- If the orderor enters bankruptcy, the worker or the bankruptcy administration may terminate the contract, in which case any due compensation and/or damages will be paid out of the bankruptcy estate (Article 642).
A mandate (委任 inin) is established when one party delegates the disposition of certain matters to another, and the other accepts the delegation. Unlike an undertaking, a mandate does not require the completion of any particular task.
The general rules applicable to mandates are as follows:
- Mandates do not inherently require any compensation (Article 648).
- The mandatee must perform their mandated duties with the care of a good manager (Article 644).
- The mandatee must report to the mandator at the mandator's demand(Article 645).
- The mandatee has a duty to deliver items received and to transfer rights mandated for transfer by the mandator (Article 646).
- The mandator has a duty to pay any necessary expenses in advance (Article 649), and if expenses are paid after the fact, to pay legal interest on such expenses, which may be set off against items payable from the mandatee to the mandator (Article 650).
- The mandator must also compensate the mandatee for any harm incurred non-negligently while performing their mandate duties (Article 650.3).
- Mandates may be terminated by either party at any time, but if the timing of the termination is disadvantageous to the counterparty, the terminating party must compensate them for any loss (Article 651). Mandates also end automatically upon the death, bankruptcy or entrance into guardianship of either party (Article 653).
Strictly speaking, a pure "mandate" is only granted to perform legal acts such as signing contracts. Other types of mandate are called "quasi-mandates," but the applicable rules are generally the same rules applicable to pure mandates.
The negligence of the plaintiff may be factored into the amount of liability but is not a basis for denying liability (Article 722).