Revision of Credit-related Provisions in Civil Law – the First Great Reform in Contract Law in Nearly 120 Years
Professor, Waseda Law School, Waseda University
January 18, 2018
The original provision of Civil Law in Japan, established by Law Number 89 of April 27, 1896, was one of the most important results of social modernization in the country in the 19th century. After World War II, the Family Law section of this body of law underwent radical revision due to the democratization of Japanese society. The text of other sections, especially Property Law, which includes Contract Law, did not undergo any essential reform until the revision under Law Number 44 of June 2, 2017. Here I introduce this very law.
In the fall of 2009, the Minister of Justice of Japan requested the Legislative Council of the Ministry of Justice, an advisory body, to present a proposal for a drastic revision in the provisions of Civil Law dealing with contracts. In this consultation, the Minister of Justice suggested that this reform be framed based on two main policies. The first was to revise provisions concerning contracts based on the recent socioeconomic conditions in Japan to reflect changes in these conditions. The second policy to consider while making this reform was to clarify the meaning of vague or technically worded provisions so that they are easy to read and easily understood by common citizens.
This contract law reform of exceptional scale addresses an extremely diverse amount of subject matter, including revision of stipulations concerning errors, fraud, invalidation, cancellation, proxy, conditions, laches, default of financial obligations, contract cancellation, repayment, offset, renewal, assignment of an obligation, warranty, joint liability, creditor proxy, right to revoke fraudulent acts, standard terms and conditions, principles of contract formation, sale, donation, loans for consumption, leases, delegation of authority, contracting, depositing, and unions.
Understanding the norms of the contracts as a whole requires one to note the two contrasting thoughts, which, at a glance, appear to be in conflict and even contradictory, just like the ancient god Janus. For example, these two contrasting aspects can be seen especially in Article 415.1 of the new provisions, which covers requirements for compensation of damages due to default on obligations. This provision stipulates that the debtor is exempt from contractual liability when presenting claims and proof because default on obligations in view of contractual and commercial general wisdom is not attributable to the responsibility of the debtor. Some view this as giving consideration to the aspect of individualism that underpins the autonomy of intent of the parties to the contract based on the process of forming the agreement. Among the Legislative Council members, mainly university researchers emphasized the importance of this aspect from an academic viewpoint.
On the other hand, among those holding other views, mainly practitioners, including attorneys who participated in the deliberative council, pointed out the importance of commercial general wisdom to find and emphasize the social aspect of contracts.
Have Japanese legislators been successful in reconciling these two different principles? This will undoubtedly be a significant research issue in evaluating the reform of contract law introduced here and implemented by Law Number 44 of 2017. This law will come into force within three years from June 2, 2017, the date of its promulgation.