2017.05.27 Shinya YOSHIDA<\/p>\n\n\n\n
TEL +81-(0)6-6130-8285<\/p>\n\n\n\n
On\nFriday, 26 May 2017, a bill to amend the portions of Japan’s Civil Code relating\nto claims passed the National Diet. This is the first major change to this area\nof the Code in approximately 120 years, since it was first enacted in 1896. Naturally,\nthere are many aspects of current society that are not dealt with in the current\nCode, such as Internet shopping and mobile phone contracts. Therefore, the aim\nof this large-scale revision is to update the code for modern society. There\nare more than 200 revisions which have been made to the Code and the new\nprovisions will take effect sometime between autumn 2019 and spring 2020. However,\ndespite the large number of revisions, most merely codify principles that have\nalready been confirmed in judicial precedents and academic writing.<\/p>\n\n\n\n
People\ninvolved in the transportation (particularly marine) and shipbuilding\nindustries may already be familiar with a separate bill to revise the\nCommercial Code that is also before the National Diet. But it is necessary to also\nbe aware of the revisions to the Civil Code, as they will also have a large\nimpact on various aspects of business within these industries. For example, regarding\nbills of lading used in the transport industry, the revisions to the Civil Code\nwill have a major effect not only upon domestic transport contracts but\ninternational transport also. Despite this, there seems to be a lack of\ncommentary regarding the newly enacted revisions of the Civil Code aimed at\nthose in the maritime, shipbuilding and transportation industries. I would therefore\nlike to take this opportunity to introduce the 10 points that I consider\nespecially important. Of course, many of these points will also apply to other\nindustries, so I hope the following is of sufficient benefit for all readers.<\/p>\n\n\n\n
The top 10 revisions you should be familiar with<\/strong><\/p>\n\n\n\n The 10 major revisions within the new\nCivil Code that all readers should be familiar with are in the areas of (1)\nterms and conditions forms, (2) extinctive prescription periods, (3) statutory\ninterest rates and damages for late payment, (4) cancellation of contracts, (5)\nset-off of property damage claims, (6) guarantees, (7) contracts for work, e.g.\nconstruction, (8) sales contracts, (9) mistakes in contracts, and (10) leases.<\/p>\n\n\n\n There are no provisions in the current\nCivil Code that deal with standard terms and conditions, yet such standard\nforms that define the terms and conditions of contracts have become important\nin many industries. As provisions relating to terms and conditions forms have\nnow been inserted into the Code, it is important for businesses to consider\nintroducing such forms or revising the forms already in use before the new law\ncomes into force.<\/p>\n\n\n\n A new provision specifies that when\nparties agree to conduct a standard transaction, they will be deemed to have\nagreed to each of the individual terms contained in the standard terms and\nconditions form. Specifically, this will occur when (1) there is an agreement\nthat the terms and conditions form will apply to the contract, or (2) the party\nwhich prepared the terms and conditions form indicates to the other party in\nadvance that the terms and conditions will apply.<\/p>\n\n\n\n However, there are some circumstances\nwhen this deemed agreement will not apply. The first is when the terms and\nconditions limit the rights or increase the obligations of the other party in\nviolation of the principle of good faith. The second is when the other party\nhas not previously been provided with a copy of the terms and conditions and\nthey request the terms and conditions prior to entering the standard\ntransaction, but that request is refused. <\/p>\n\n\n\n The revised Civil Code provisions also\nallow changes to be made to the terms and conditions in certain circumstances. Until\nnow, unilateral changes to the terms of conditions were permitted if the change\nbenefited the other party, but raised a difficult problem if the change\ndisadvantaged the other party. Under the revised provisions of the Code, if the\nterms and conditions themselves contain a provision stating that they are\nsubject to change, then a change will be permitted if the contents of the\nchange are reasonable, even when the other party is disadvantaged by the\nchange. When making such a change to the terms and conditions, it is necessary\nto set a date that the change will come into effect and notify the relevant\nparties using the Internet or other appropriate methods of (a) that a change is\nbeing made, (b) the details of the change, and (c) the date the change will\ncome into effect. <\/p>\n\n\n\n In the shipping and transportation\nindustries, a particularly high number of transactions are conducted using\nstandard terms and conditions. The revisions to the Code provide a good\nopportunity to make effective use of standard terms and conditions, including\nin your business relationships with existing consignees and customers. <\/p>\n\n\n\n Although the current Civil Code\ndefines a basic extinctive prescription period of 10 years, there are a variety\nof specific provisions applicable to claims for payments owed to hotels,\nrestaurants, doctors, lawyers, etc. that define shorter periods of 1, 2 or 3\nyears. On top of this, claims related to commercial transactions between\nbusinesses are subject to a 5-year extinctive prescription period pursuant to\nthe Commercial Code. Under the revised Civil Code, the extinctive prescription\nperiods have been rearranged into the following two categories, and the shorter\nperiods have been repealed.<\/p>\n\n\n\n Despite these changes, there has been\nno change to the basic principles that a claim can still be made after the\nextinctive prescription period has expired until such time that the debtor\ninvokes the prescription, and that a debtor who acknowledges a debt without\ninvoking extinctive prescription becomes unable to invoke it later. In other\nwords, a debtor has the option to invoke the extinctive prescription and refuse\nto pay, or they can pay the debt without invoking the extinctive prescription.\nThe ability to set off one debt against a claim that has already passed the\nextinctive prescription deadline has not been addressed in the revision, so the\nability continues to exist.<\/p>\n\n\n\n Under the revised Article 166, a claim\nwill be subject to one of the two following extinctive prescription periods:<\/p>\n\n\n\n (i)\nSubjective starting point: 5 years from the time that the person entitled to\nmake the claim (obligee) became aware that they could exercise the right.<\/p>\n\n\n\n (ii) Objective starting\npoint: 10 years from the time that the right become exercisable<\/p>\n\n\n\n However, it should be noted that claims\nfor compensation due to death or personal injury are subject to a 20-year\nperiod, as well as property rights other than claims and ownership rights. It\nis also important to note that these periods are prescription periods, not\nexclusion periods. It is possible to prevent the extinguishment of a claim by\ntaking the measures described below within the defined period in order to\nsuspend the completion of the prescription.<\/p>\n\n\n\n In conjunction with the revisions to\nthe Civil Code, the 5-year extinctive prescription period that applied to\nregular commercial transactions (Article 522 of the Commercial Code) has been\nrepealed and the provisions of the revised Civil Code will apply in the future.\nHowever, it is necessary to be aware that other specific provisions on\nextinctive prescription within the Commercial Code will continue to be valid.\nFor example, Articles 566, 567 and 589 will continue to apply; they define a\n1-year extinctive prescription period that applies to a freight forwarder or\ncarrier’s claim against a consignor or consignee, as well as claims against a\ncarrier for compensation concerning loss or damage of cargo transported by land\nor domestic sea. There is also a 1-year period that generally applies to a\nwarehousing company’s liability for loss or damage (Article 626).<\/p>\n\n\n\n Further, the bill to amend the\nCommercial Code that is currently before the National Diet will change the limitation\nperiod that applies to compensation claims arising from domestic transportation\nfrom an extinctive prescription period to a 1-year exclusion period, which\nmatches the current provisions for international sea transportation (but there\nwill be no revisions to the provisions concerning warehousing). On this point,\nit is important to note that prescription can by suspended\n(“interrupted” under the current Civil Code) for 6 months via a\nwritten demand letter that evidences the details of the claim, but an exclusion\nperiod cannot be interrupted. Therefore, it is necessary to file an application\nwithin the period. Another difference is that prescription must be invoked, but\nexclusion automatically applies once the period has lapsed.<\/p>\n\n\n\n The extinctive prescription period has\nbeen revised for tort claims, for example in the case of an accident at sea or personal\ninjury. A claim for damages in tort will be extinguished after the expiry of either\n3 years from becoming aware of the damage and the person who caused it (5 years\nin the case of a claim for personal injury compensation) (new Article 724-2),\nor 20 years from the time of the tortious act (new Article 724 (2)). The\n20-year period that applies under the current Code is an exclusion period that\ndoes not require invocation and cannot be interrupted by a letter of demand,\nbut following the revision it will be a “prescription period” that\ndoes require invocation and can be suspended. <\/p>\n\n\n\n The current Civil Code defines methods\nto “interrupt” prescription, which resets the prescription period to\nzero, and also methods to “suspend” prescription, which temporarily\npauses the progress of the prescription period (Articles 158-161). Under the\nrevised Code, the terminology used has been changed from “interrupt”\nto “renew”, and from “suspend” to “suspend\ncompletion”.<\/p>\n\n\n\n The first substantive change to note\nis that provisional seizure and provisional disposition, which are reasons for\ninterruption under the current Civil Code (Article 147 (2)), become reasons to\ntemporarily suspend completion in the revised Code (revised Article 149).\nFurther, the current law does not specifically define the parties agreeing to\nnegotiate as a method to prevent the completion of prescription. Conversely, the\ncurrent Act on International Carriage of\nGoods by Sea <\/em>defines a 1-year exclusion period, but it can be extended via agreement\nbetween the parties. A similar system concerning prescription has been\nestablished in the revised Civil Code. The new provisions define that when\nthere is a written agreement between the parties to enter negotiations\nregarding a claim, prescription will not be completed until the earliest of the\nfollowing periods:<\/p>\n\n\n\n (i) An agreed negotiation period that\nis less than 1 year<\/p>\n\n\n\n (ii) 1 year from the time of making\nthe agreement<\/p>\n\n\n\n (iii) 6 months from the\ntime that one party informs the other party in writing that they will not\ncontinue the negotiations<\/p>\n\n\n\n A further agreement made while\ncompletion of prescription is suspended will also have the effect of suspending\ncompletion of prescription, but the total period of suspension cannot exceed 5\nyears from the original prescription date. It is necessary to note that the\nabove time periods do not apply if there is a further demand (new Article\n150-2) or agreement (new Article 151-3) while completion of prescription is\nsuspended due to a demand letter, or a demand letter is issued while\nprescription is suspended per an agreement (new Article 151-3).<\/p>\n\n\n\n Under the current Civil Code, the\nstatutory interest rate is 5%, while under the Commercial Code it is 6% (the\n“commercial statutory interest rate”). The revised Civil Code lowers\nthe statutory interest rate to 3%. Afterwards, a floating rate system will be\nadopted where the rate will be subject to review every 3 years and will consider\nfactors such as changes in market rates. On the other hand, the commercial\nstatutory interest rate of 6% that currently applies to commercial transactions\nbetween businesses (Article 514 of the Commercial Code) will be repealed with the\nrevision of the Civil Code.<\/p>\n\n\n\n This change to the statutory interest\nrate will have a large effect on the amount of damages claimed by plaintiffs in\npersonal injury cases. In cases such as traffic and workplace accidents,\ninterest on the amount of compensation can be claimed from the date of the\naccident, but this will be reduced from the current 5% down to 3%, which means\nthat amount of compensation payable will decrease. On the other hand, the amount\nof compensation for the plaintiff\u2019s loss of future income due to death or\npermanent injury will be increased.<\/p>\n\n\n\n Something to take note of regarding this point is in the case where a company makes a claim for compensation for the loss of benefit (profits). For example, if a charterparty contract is terminated early due to the fault of the charterer and the shipowner makes a claim for the loss of future profits, there is a possibility that the future interest will be deducted based on the above-mentioned statutory interest rate. Until now, there have been no published court decisions that make a ruling on this point, and the thinking has been that the English law\u2019s method of calculation, where the difference in the market charter rates is multiplied by the outstanding period of the charterparty, is generally applied even when the governing law is Japanese law. However, in the future there is a possibility that statutory interest will be deducted. It is therefore necessary to be aware that the amount of compensation will be subject to greater deductions as the period remaining on the contract increases.<\/p>\n\n\n\n The principle regarding cancellation of\na contract with notice has been revised, and there are also major revisions to\nthe provisions regarding cancellation without notice. The situations where a\ncontract can be cancelled without notice have been increased and rearranged, as\nwell as new provisions concerning some contracts that can be cancelled without\nnotice. As contract cancellation has an effect on the annulment of contracts\nand claims for compensation, these revisions are very important.<\/p>\n\n\n\n Unlike the current Civil Code, the\nrevised code does not contain prerequisites for cancellation when the obligor\nis at fault. Accordingly, cancellation becomes possible even in situations\nwhere performance of a contract is delayed because of a natural disaster. Also,\nthe provisions state that a contract cannot be cancelled due to the fault of\nthe obligee.<\/p>\n\n\n\n While it is not expressly contained in\nthe current Civil Code, case law says that a contract cannot be cancelled due\nto a minor breach. The revision clarifies that a contract cannot be cancelled\nif the degree of non-performance is minor in light of the details of the contract\nand business norms. In practice, there are not many cases where deciding\nwhether a breach is minor is a problem. But since this issue will now be\nspecified in the Code, it seems the number of cases that dispute whether a\nbreach was serious enough to allow cancellation will increase. <\/p>\n\n\n\n In principle, if one party has not\nperformed their obligations under a contract, the other party can make a demand\nfor performance within a reasonable period, then cancel the contract if there\nis no performance during the specified period.<\/p>\n\n\n\n The revised Code specifies that an\nentire contract can be cancelled without prior demand if:<\/p>\n\n\n\n The revised Code has also clarified the ability to cancel part of a contract without demand when performance of part of the obligation is impossible or the obligor has manifested an intention to refuse to perform part of their obligation.<\/p>\n\n\n\n Setting off competing property damage claims,\nin other words, calculating the amount of damage suffered by each party and the\nparty suffering more damage making a claim for the difference between the two,\nis not permitted under the current Civil Code unless both parties agree. Therefore,\nit is often the case that when both parties suffer damage and one party\ncommences litigation, then it is necessary for the other party to commence a separate\nclaim for their own damage. It has been identified that this invites unfair\nresults, such as the situation where, after both parties obtain court orders\nfor the payment of compensation to each other, one party fails to pay or\nbecomes bankrupt before making the payment. In this case, the non-bankrupt party\nmust pay what they owe, but will be unable to receive the full value of their\nclaim (if anything at all).<\/p>\n\n\n\n The revisions to the Civil Code allow a\nset-off of opposing amounts of damage and a claim for the difference between\nthe amounts in cases concerning property damage, even if the parties have not\nreached an agreement concerning such a set-off. This revision differs from\nprevious court precedents, which have maintained the position of denying such\nset-offs. However, set-off is prohibited when it is done in bad faith. It also\nremains the case that setting off claims involving personal injury by the\nperson that caused the injury will not be permitted unless the person who\nsuffered the injury agrees.<\/p>\n\n\n\n The main revision\nconcerning guarantees addresses placing limits on the maximum amount of the\nprincipal, interest, penalty and damages that a guarantor is to be liable for\nunder a guarantee that relates to unspecified debts within a specified range\n(“revolving guarantees”) where the guarantor is not a corporation\n(i.e. “personal revolving guarantees”). The current Civil Code defines that a\n“revolving loan guarantee” (a revolving guarantee where the main\nobligation includes a monetary debt) is invalid if it does not define a maximum\namount (current Article 465-2). The revision expands the scope of the article\nbeyond revolving loan guarantees to include all personal revolving guarantees\n(for example, revolving guarantees for business contracts between enterprises\nand building lease contracts) (revised Article 465-2).<\/p>\n\n\n\n The second major revision concerning\nguarantees is that, when a guarantor other than a corporation either (1)\nguarantees a loan that is acquired for the conduct of business, or (2) provides\na revolving guarantee that includes loans acquired for the conduct of business\nwithin the scope of the guarantee, the guarantee will be invalid unless the\nguarantor manifests an intention to guarantee the performance via a\n“notarial deed prepared within one month prior to the contract being\nconcluded” (new Article 465-6 (1)). The following formal requirements\napply to the preparation of this notarial deed (new Article 465-6 (2)).\nHowever, a personal guarantee by a person substantially involved in the\nbusiness of the principal obligor is exempt from the above formal requirements\n(new Article 456-9). <\/p>\n\n\n\n The principal obligor of an obligation\ntaken in the course of business has the duty to provide to an individual (i.e. excluding\na corporation) entrusted by the principal obligor to be the guarantor certain\ninformation regarding the credit of the principal obligor, so that the\nguarantor can determine for themselves the possibility of having to perform the\nguaranteed obligation. Failure to meet this duty is grounds for rescinding the\nguarantee contract. Specifically, the principal obligor must provide the following\ninformation:<\/p>\n\n\n\n (i) Details of their assets,\nearnings and expenditure <\/p>\n\n\n\n (ii) the existence of other\ndebts besides the principal obligation, their value and repayment status<\/p>\n\n\n\n (iii) the details of any\nproperty that has or will be provided as security for the principal obligation.\n<\/p>\n\n\n\n If the guarantor enters a guarantee\ncontract on the basis of a mistaken understanding of (i) to (iii) due to the\nprincipal obligor either not providing an explanation or there being factual inaccuracies\nin the explanation, and the creditor is aware that the principal obligor has either\nnot provided the explanation or that there are factual inaccuracies, then the\nguarantor can rescind the guarantee contract.<\/p>\n\n\n\n When requested by the guarantor, the\ncreditor must, without delay, provide information regarding the principal\nobligation and all obligations that are secondary to the principal obligation,\nsuch as interest, penalties, damages, etc., as well as any amounts that are due\nor overdue.<\/p>\n\n\n\n If a guarantor is unaware that the principal\nobligor has failed to perform their obligation, it can result in severe\nconsequences for the guarantor if they are subsequently required to perform the\nguarantee after a large amount of interest or penalties have been accrued due\nto the delay. Therefore, where the guarantor is an individual (i.e. not a\ncorporation) and the prinicpal obligor loses the benefit of time, the creditor\nmust notify the guarantor within 2 months of becoming aware of the principal\nobligor\u2019s breach. If notice is not given during this period, the creditor\ncannot make a claim against the guarantor for any damages for delay that accrue\nduring the period from when the principal obligor lost the benefit of time\nuntil the guarantor received notice (excluding any amounts that would have\naccrued even if the benefit of time had not been lost). <\/p>\n\n\n\n The revised Civil Code contains major\nchanges to interpretations and several major revisions to the law concerning\nsales contracts. The main feature is that under the revised Code, if there is a\nproblem with the type, quality or quantity of the subject matter (the term\n“defect” has been changed), the buyer\u2019s options are not limited to\ncompensation for damages or cancellation, but claims can also be made for\nreduction of the purchase price or \u201csubsequent completion\u201d (i.e. repair or\ndelivery of a replacement), regardless of whether the subject matter is an\n\u201cidentified good\u201d or \u201cunidentified good\u201d.<\/p>\n\n\n\n Sales contracts\nare currently divided into contracts for “identified goods”, where\nthe contract deals with a specific item (e.g. real estate, second hand goods),\nand “unidentified goods” that are generic, substitutable items. The\nCivil Code’s warranty against defects applies to hidden defects in identified\ngoods, but it is only applied to unidentified goods in exceptional\ncircumstances. Therefore, in the case of unidentified goods, the buyer\u2019s\noptions are generally cancellation of the contract or a claim for compensation,\nwhere the scope of compensation is limited to an amount that corresponds to a reduction\nof the purchase price. In regard to identified goods, a claim for delivery of a\nreplacement item cannot be made due to the major premise that identified goods\ncannot be substituted, and claims for repair cannot be made either. Also,\nclaims for a reduction of the purchase price will only be recognised when there\nis a shortage in the quantity.<\/p>\n\n\n\n Under the\nrevised Civil Code, the buyer has four types of claim that will be recognised\nif there is a problem with the type, quality or quantity of the subject matter,\nregardless of whether the subject matter is an identified or unidentified good.\nThe first type to consider is a claim for \u201csubsequent completion\u201d (revised\nArticle 562), which is a claim for the repair of the subject item, delivery of\na substitute item, or delivery of the deficient portion if there is a shortage\nin quantity. It should be noted that the seller can perform subsequent\ncompletion in a manner that is different from the buyer’s claim if it does not\nunreasonably burden the buyer. <\/p>\n\n\n\n The second type\nof claim is a reduction of the purchase price (revised Article 563). In\nprinciple, it is necessary for the buyer to submit a demand to the seller for\nsubsequent completion to be performed with a reasonable period; if the seller\ndoes not respond to the demand then the buyer can make a claim for a reduction\nof the purchase price that corresponds to the level of nonconformity with the\ncontract. As an exception, a claim for reduction of the purchase price can be\nmade without a demand in the following circumstances:<\/p>\n\n\n\n (a) when subsequent\nperformance is impossible<\/p>\n\n\n\n (b)\nwhen the seller has indicated their intention to refuse to perform subsequent\nperformance<\/p>\n\n\n\n (c) when the nature of\nthe contract requires performance to be carried out at a specific time and date\nor within a certain period, and that specific time or certain period lapses\nwithout the seller performing the obligation<\/p>\n\n\n\n (d)\nwhen it is clear that the buyer is unlikely to receive subsequent performance\neven if they make a demand <\/p>\n\n\n\n The last two\nclaims are for cancellation of the contract and compensation for damages\n(revised Article 564). The scope of the right to compensation for damages has\nbeen expanded to include the benefit of performance, as is the case for general\nclaims for compensation. Each of\nthese types of claim require the buyer to give notice to the seller within 1\nyear of the buyer becoming aware of the nonconformity in the subject matter. The\ntime limit itself has not been changed, but it has been revised so that notice\nto the seller is sufficient, where under the current Code the buyer must submit\na claim. However, this time limit will not apply if the seller was aware of the\nnonconformity at the time of delivery or was unaware due to gross negligence.<\/p>\n\n\n\n It is necessary to be aware that Article 526 of the Commercial\nCode will apply to commercial transactions subject to the Commercial Code. In a\nsales transaction between merchants under the Commercial Code, the buyer must\ninspect the item without delay after receiving delivery of it and immediately\nnotify the seller if they discover any defects or shortage in quantity. However, if the nature of a\ndefect in the delivered item means it cannot be identified immediately, it is necessary\nto notify the seller within 6 months of receipt of the item. If this inspection\nand notification is not performed, the defect will not be able to give rise to\na claim for cancellation of the contract, compensation for loss or a reduction\nof the purchase price. The applicability of this Commercial Code provision is\nvery easy to overlook so caution is required.<\/p>\n\n\n\n The transfer of risk refers to the issue of which party should be\nresponsible for the risk of loss or damage to the subject matter that may occur through no fault of either party.\nUnder the revised Civil Code, risk transfers to the buyer upon delivery of the\nsubject matter. In principle, a buyer cannot make a claim (for subsequent performance,\nreduction of purchase price, compensation or cancellation) based on loss or\ndamage if the loss or damage occurs after delivery of the subject matter.\nHowever, there is an exception if the loss or damage is the seller’s fault. This\nprinciple also applies if the buyer does not accept delivery of the goods\nprovided by the seller.<\/p>\n\n\n\n Unless there is a prior agreement to\nthe contrary, payment under a contract for work is made after the work has been\ncompleted (contracts for large projects such as shipbuilding may provide for\npayment in installments, but even then, the final payment after delivery is\nnormally the largest amount). The nature of this contract for work is that,\ntheoretically, the contractor has no claim for remuneration if the contract is\nterminated before the work is completed, but court decisions have recognised\nclaims in some situations. Under the revised Civil Code, when a contract for\nwork cannot be completed through no fault of the party that ordered the work,\nor the contract is cancelled before the work is completed, the contractor can\nclaim remuneration for the proportion of the contract that has been completed\nif the party that ordered the work can receive a benefit from the completed\nportion.<\/p>\n\n\n\n The contractor’s warranty against\ndefects is currently defined as being for 1 year after delivery, but in order\nto achieve balance with sales contracts, it has been changed to 1 year\n“from the time that the ordering party became aware of the nonconformity”\nunder the revised Civil Code, with the word “defect” being replaced\nwith “nonconformity”. If the ordering party does not give notice\nduring this period, they cannot use the nonconformity as a reason to claim for\nsubsequent performance, a reduction of the remuneration, compensation for loss\nor cancellation of the contract. \nHowever, this provision does not apply if the contractor was aware of\nthe nonconformity at the time of delivery to the ordering party (or upon\ncompletion of the work if delivery is not required), or they were unaware due\nto gross negligence. <\/p>\n\n\n\n The revised Civil Code does not change\nthe contractor’s and bankruptcy administrator’s ability to cancel the contract\nif the ordering party enters bankruptcy. However, the revised Code specifies\nthat the contractor cannot cancel the contract after the work has been\ncompleted. Cancellation of a contract for work in the case of bankruptcy\ndiffers to that of civil rehabilitation or corporate reorganisation, so caution\nis required.<\/p>\n\n\n\n Under the current Civil Code, a\nmistake in an element of a contract makes the contract invalid, and there are\nno time limits placed upon being able to assert the invalidity of a contract.\nHowever, under the revised provisions, a mistake in an element of a contract will\nmake the contract subject to rescission, similar to cases of fraud or coercion.\nAs a result, if the right to rescind is not exercised within 5 years, the\nability to rescind will be lost. Further, the Civil Code provisions concerning\nstatutory ratification will apply to the rescission. Therefore, the ability to\nrescind a contract will be lost if certain acts are performed that are deemed to\nbe an acceptance of the mistake. This change of the remedy from invalidity to\nrescission signifies a big change in the effect of a mistake.<\/p>\n\n\n\n A person cannot assert that there is a\nmistake if that person was grossly negligent. This point is consistent in both\nthe current and revised Civil Code. However, under the revised Code it has been\nspecified that a mistake can be asserted in the case of gross negligence, if\n(1) the other party was aware of that gross negligence, or was unaware due to their\nown gross negligence, or (2) both parties made the same mistake.<\/p>\n\n\n\n Until now, asserting mistake was not\nsubject to any time limits, plus it was easier to assert and prove than fraud\nor coercion, making it the most common assertion amongst the three. But considering\nthese revisions, it will be necessary to reserve an objection in order to avoid\nstatutory ratification, and it is important to manage the issue carefully to\navoid exceeding the time limit.<\/p>\n\n\n\n Several revisions to the Civil Code\nhave been made to codify judicial precedents concerning leases of real estate,\nbut here I would like to discuss some important revisions concerning leasing of\nproperty other than real estate.<\/p>\n\n\n\n Article 604 of the current Civil Code limits\nthe duration of each lease or renewal to 20 years, but this limit has been\nincreased to 50 years. This responds to the need to be able to make long-term\nleases that exceed 20 years in situations such as leases relating to large-scale\nprojects, heavy machinery and factory plant equipment.<\/p>\n\n\n\n The lessor’s obligation to repair a\nleased item has been codified in the revised Article 606. However, the\nobligation does not apply when the lessee is responsible for the damage. <\/p>\n\n\n\n If the leased item requires repair, the\nnewly added Article 607-2 allows the lessee to perform repairs when (1) the lessee\nnotifies the lessor that repairs are required, or the lessor is aware of that\nfact, but the lessor does not perform the repairs within a reasonable period,\nand (2) in the case of emergency. <\/p>\n\n\n\n In accordance with past judicial\nprecedents, the revised Article 621 clarifies that normal wear and tear and\naging of the leased item is not subject to restoration by the lessee at the end\nof the lease. Similarly, the lessee is not obliged to restore any damage which\nis not the fault of the lessee. <\/p>\n\n\n\n Conclusion<\/strong><\/p>\n\n\n\n As\nmentioned in the introduction, it will be at least two years before these\nrevisions to the Civil Code come into effect, in the second half of 2019 at the\nearliest. Some of the points above (such as mistake) only come into\nconsideration once a contract is in force, so all we can do is bare them in\nmind and be ready to act if necessary. On the other hand, we can start planning\nin advance for some of the other matters, like the revised laws governing\nstandard terms and conditions forms. The two-year period before the revisions\ncome into force gives everybody in industry the opportunity to plan their\nresponse, including updating forms or drafting new ones. I hope this column has\ngiven you an insight of what to expect when the revised Code comes into effect.<\/p>\n","protected":false},"excerpt":{"rendered":" 2017.05.27 Shinya YOSHIDA TEL +81-(0)6-6130-8285 On Friday, 26 May 2017, a bill to amend the portions of […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"sns_share_botton_hide":"","vkExUnit_sns_title":"","_vk_print_noindex":"","sitemap_hide":"","_veu_custom_css":"","veu_display_promotion_alert":"","vkexunit_cta_each_option":"","footnotes":""},"categories":[15],"tags":[],"class_list":["post-391","post","type-post","status-publish","format-standard","hentry","category-japanese-law"],"veu_head_title_object":{"title":"","add_site_title":""},"_links":{"self":[{"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=\/wp\/v2\/posts\/391","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=391"}],"version-history":[{"count":2,"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=\/wp\/v2\/posts\/391\/revisions"}],"predecessor-version":[{"id":428,"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=\/wp\/v2\/posts\/391\/revisions\/428"}],"wp:attachment":[{"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=391"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/sylawfirm.jp\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\uff11\u3000<\/strong>Standard terms and conditions<\/strong><\/strong><\/h4>\n\n\n\n
\uff12\u3000<\/strong>Extinctive prescription periods<\/strong><\/strong><\/h4>\n\n\n\n
\uff13\u3000<\/strong>Statutory interest rates and late payment charges<\/strong><\/strong><\/h4>\n\n\n\n
\uff14\u3000Cancellation of contracts<\/strong><\/h4>\n\n\n\n
\uff15\u3000Set-off of property damage<\/strong><\/h4>\n\n\n\n
\uff16\u3000<\/strong>Guarantees<\/strong><\/strong><\/h4>\n\n\n\n
\uff17\u3000<\/strong>Sales contracts<\/strong><\/strong><\/h4>\n\n\n\n
\uff18\u3000<\/strong>Work contracts<\/strong><\/strong><\/h4>\n\n\n\n
\uff19\u3000<\/strong>Mistake<\/strong><\/strong><\/h4>\n\n\n\n
10<\/strong>\u3000<\/strong>Leases<\/strong><\/strong><\/h4>\n\n\n\n