Are Standard Form Contracts (Teikei Yakkan) Enforceable in Japan, Even if I Didn't Read All the Terms?

Japanese Attorney at Law - Bengoshi L.L.

• 8 min read

In the fast-paced world of modern commerce, standard form contracts (SFCs) are ubiquitous. From software licenses and online service agreements to transportation terms and conditions, businesses and consumers alike frequently encounter pre-drafted contracts presented on a "take-it-or-leave-it" basis. A common concern is whether one can be bound by numerous, often complex, clauses that one may not have had the time or opportunity to read and understand thoroughly.

Japanese law, through the 2020 amendments to its Civil Code, introduced specific rules governing "Teikei Yakkan" (定型約款), the Japanese term for standard form contracts or standard terms and conditions. These provisions aim to bring clarity and fairness to the use of SFCs by defining when they become part of a contract and by providing safeguards against unilaterally unfair clauses. This article explores this framework and its implications.

1. What are "Teikei Yakkan" (Standard Form Contracts) in Japan?

Article 548-2, paragraph 1 of the Japanese Civil Code defines Teikei Yakkan as "terms and conditions that are prepared by one party for the purpose of forming contracts with an unspecified large number of persons, for transactions of a certain type, and for which it is mutually reasonable for the parties to make the contents of such contracts uniform."

Key characteristics implicit in this definition include:

  • Unilateral Preparation: The terms are drafted in advance by one party (the "preparing party" - 定型約款準備者, teikei yakkan junbisha).
  • Mass Transactions: They are intended for use in transactions with an "unspecified large number of persons" (不特定多数の者を相手方として行う取引 - futokutei tasū no mono o aitekate toshite okonau torihiki). This signifies their use in standardized, repetitive dealings.
  • Uniformity: The content is intended to be uniform across these multiple transactions, promoting efficiency and predictability for the preparing party.
  • Mutual Reasonableness of Uniformity: The nature of the transaction should be such that making the terms uniform is reasonable for both parties.

Common examples encountered in business include terms of service for online platforms, transportation agreements (as illustrated by the railway passenger rules in the PDF's example for item 119), insurance policies, and standard supply or purchase agreements used repeatedly with different counterparties without individual negotiation of each clause.

2. How Do Standard Terms Become Part of Your Contract? The "Deemed Agreement" Mechanism

The core of the teikei yakkan rules lies in how these pre-drafted terms are incorporated into an individual contract. Article 548-2, paragraph 1 provides two main scenarios for incorporation, leading to a "deemed agreement" (minashi gōi - みなし合意) on the individual clauses:

  1. Explicit Agreement to Use Standard Terms: When the parties have explicitly agreed that the transaction will be governed by a particular set of teikei yakkan.
  2. Indication of Intent to Use Standard Terms: When the party preparing the teikei yakkan has indicated to the other party, in advance of concluding the contract, that those standard terms will form the content of their agreement.

If either of these conditions is met, the individual clauses of the teikei yakkan are deemed to have been agreed upon by the parties and thus become part of their contract. This is crucial: it means the adhering party can be bound by the standard terms even if they have not read every clause or fully understood its implications.

The rationale behind this "deemed agreement" mechanism is primarily efficiency. If individual negotiation and explicit assent were required for every single clause in a mass transaction scenario, the entire purpose and efficiency of using standard forms would be undermined. The law attempts to balance this need for efficiency with protections against unfairness, as discussed below.

The "indication" that standard terms will apply does not necessarily mean handing over a physical copy in every instance. For example, in the context of railway travel, making the passenger service rules (which are teikei yakkan) publicly available, such as through a continuously accessible website as permitted under the Railway Business Act (鉄道営業法 - Tetsudō Eigyōhō, Article 18-2), can suffice as the necessary indication. A passenger using the service is then generally deemed to have agreed to those terms.

3. The Preparer's Duty to Make Terms Available (Article 548-3)

While individual clauses can be incorporated by deemed agreement, this does not mean the adhering party is left entirely without recourse if they wish to see the terms. Article 548-3 establishes a duty for the party preparing the teikei yakkan to disclose the terms upon request:

  • Request for Disclosure: The other party (the one adhering to the terms) has the right to request a copy or access to the standard terms.
  • Timing and Method of Provision:
    • If the request is made before or at the time of concluding the contract, the preparing party must provide the terms without delay. However, this duty does not apply if the preparing party has already provided the terms or if the terms are "easily accessible" to the other party (e.g., through a prominent and stable website link specifically referred to).
    • If the request is made after the contract has been concluded, the preparing party must still provide the terms without delay.
  • Consequence of Non-Disclosure:
    • If a request for disclosure is made before or at the time of contract conclusion and the preparing party fails to comply without a justifiable reason (such as unavoidable disruption of communication channels), the teikei yakkan will not be deemed to have been agreed upon and thus will not form part of the contract. This is a significant sanction for non-disclosure.
    • Failure to comply with a post-contractual request does not invalidate the incorporation of the terms but may lead to other liabilities or considerations.

This duty ensures a degree of transparency and allows the adhering party an opportunity to review the terms if they so choose, even if they are generally bound without having read them initially.

4. The Crucial Safeguard: Control of Unfair Clauses (Futō Jōkō Kontorōru - 不当条項コントロール)

Perhaps the most important protection for parties adhering to standard form contracts is the mechanism for controlling unfair clauses, found in Article 548-2, paragraph 2. This provision states:

"Notwithstanding the provisions of the preceding paragraph [which establishes deemed agreement], clauses among those listed in the items of said paragraph that unilaterally prejudice the rights of the other party in a manner contrary to the fundamental principle provided in Article 1, paragraph 2 (Principle of Good Faith) and which thereby harm the interests of that other party shall not be deemed to have been agreed upon." (Translation based on intent).

This "unfair clause control" acts as a vital check on the power of the party drafting the standard terms.

  • Interpretation and Application: This is a general clause, meaning its application requires a case-by-case assessment by the courts based on the specific clause and the context of the transaction. The core test is whether a clause, when viewed objectively, creates an unacceptable imbalance that harms the adhering party in a way that violates the principle of good faith and trust (信義誠実の原則 - shingi seijitsu no gensoku).
  • Factors Considered: In determining if a clause is unfairly prejudicial, courts may consider:
    • The degree of one-sidedness or prejudice to the adhering party.
    • Whether the clause significantly deviates from default statutory rules or customary practices without a compelling justification.
    • The nature of the transaction and the typical expectations of the parties.
    • The clarity and conspicuousness of the clause.
  • Examples of Potentially Unfair Clauses:
    • Excessively broad limitations or exclusions of the preparing party's liability (e.g., for negligence resulting in significant harm).
    • Clauses that unduly restrict the adhering party's fundamental rights, such as their right to terminate the contract under reasonable circumstances or their right to seek legal remedies.
    • Clauses that impose unreasonable penalties or liquidated damages on the adhering party.
    • Clauses that allow the preparing party to unilaterally change significant terms without adequate reason or notice.
  • Relationship with the Consumer Contract Act: Japan's Consumer Contract Act (消費者契約法 - Shōhisha Keiyakuhō) contains its own set of rules for invalidating unfair clauses in consumer contracts (e.g., Article 10). The Civil Code's Article 548-2, paragraph 2, provides a similar, though more general, layer of protection that applies to all transactions involving teikei yakkan, including business-to-business (B2B) and consumer-to-consumer (C2C) contracts, where the Consumer Contract Act might not apply.
  • Effect of an "Unfair" Clause: If a clause is found to violate this provision, it is not deemed to have been agreed upon. This means the specific unfair clause is effectively severed from the contract and is unenforceable. The remainder of the teikei yakkan and the contract generally remain valid, unless the unfair clause was so central that the contract cannot reasonably stand without it.

The example provided in the PDF materials (item 119) concerning railway passenger rules illustrates how specific, and potentially harsh, penalty clauses within standard terms can be deemed incorporated if the initial conditions are met. However, if such a penalty were found to be outrageously disproportionate and contrary to good faith, Article 548-2, paragraph 2 could theoretically be invoked to challenge its enforceability, although public transport tariffs often have a degree of regulatory backing.

5. Changes to Standard Terms After Contract Conclusion (Article 548-4)

The Civil Code also addresses the situation where the party preparing the teikei yakkan seeks to unilaterally change its terms after a contract based on those terms has already been formed. This is a common issue with ongoing services or subscriptions.

Article 548-4 permits such changes under specific conditions:

  1. The change must be for the benefit of the other party, OR
  2. The change is not disadvantageous to the other party and is reasonable in light of the purpose of the contract, the necessity of the change, the appropriateness of the new content, and other circumstances surrounding the change.

Furthermore, the preparing party must:

  • Determine an effective date for the change.
  • Publicize (e.g., via internet) the fact that the terms will be changed, the content of the changed terms, and their effective date, by a reasonable period before the effective date.

If these conditions are met, the changed teikei yakkan are deemed to have been agreed upon from the effective date. This framework attempts to balance the preparing party's need to adapt terms over time with the adhering party's interest in contractual stability.

6. Practical Implications for Businesses

  • For Businesses Preparing Standard Form Contracts:
    • Clear Indication: Ensure it is clear to the other party that standard terms will govern the transaction.
    • Accessibility: Make the full text of the teikei yakkan easily accessible (e.g., through clear and persistent website links, or by providing a copy upon request or at the time of contracting).
    • Fairness in Drafting: Draft clauses with fairness and balance in mind. Avoid overly one-sided terms that could be challenged as "unilaterally prejudicial" under Article 548-2, paragraph 2.
    • Transparency in Changes: If terms need to be changed for existing contracts, follow the procedures outlined in Article 548-4, ensuring reasonableness and adequate notification.
  • For Businesses Adhering to Standard Form Contracts:
    • Awareness of "Deemed Agreement": Understand that you are likely to be bound by the terms even if you have not read every single clause, provided the conditions for incorporation are met.
    • Request Disclosure if Necessary: If the terms are not readily available, do not hesitate to request a copy from the preparing party, especially before committing to the transaction.
    • Challenge Unfair Clauses: Be aware that even if incorporated, clauses that are grossly unfair and contrary to good faith may be unenforceable under Japanese law.
    • Monitor for Changes: For ongoing contracts governed by standard terms, be vigilant for notifications regarding changes to those terms.

Conclusion: Balancing Efficiency and Fairness in Standardized Contracting

The introduction of specific rules for Teikei Yakkan in the Japanese Civil Code represents a significant step towards modernizing contract law to reflect the realities of mass transactions. These provisions aim to strike a balance: facilitating the efficiency that standard form contracts offer, while also providing crucial protections for adhering parties against the imposition of unilaterally unfair or surprising terms. While the principle of "deemed agreement" means you can be bound by terms you haven't meticulously scrutinized, the control mechanism for unfair clauses serves as an important safeguard. For businesses operating in or with Japan, a working knowledge of these rules is essential for both drafting enforceable standard terms and understanding their rights and obligations when presented with them.