Assuming Debts in Japan: What are "Co-existent Assumption" (Heizonteki Saimu Hikiuke) and "Discharging Assumption" (Mensekiteki Saimu Hikiuke) of Obligations?

Japanese Attorney at Law - Bengoshi L.L.

• 6 min read

In various business scenarios—such as corporate restructuring, financing arrangements, or simple third-party willingness to help—the question of transferring or sharing an existing debt arises. Japanese law provides a formal mechanism for this known as "Saimu Hikiuke" (債務引受 – Assumption of Obligation). This process allows a third party (the "assuming party" or hikiuke-nin 引受人) to take on an obligation owed by an original obligor to a creditor. The Japanese Civil Code, particularly after the 2017 reforms, clearly distinguishes between two main types of debt assumption, each with distinct methods of formation and significantly different consequences for the parties involved, especially concerning the original obligor's liability and existing security interests. These are the "Co-existent Assumption of Obligation" and the "Discharging Assumption of Obligation."

What is "Assumption of Obligation" (Saimu Hikiuke)?

At its core, Saimu Hikiuke is a legal act whereby a new party (the assuming party) undertakes to perform an obligation that was originally owed by another party (the original obligor) to a creditor. This makes the assuming party directly liable to the creditor for that obligation, either alongside or in place of the original obligor.

It's important to distinguish this formal assumption of debt from a mere internal agreement by a third party to perform the debtor's obligation, known as "riko hikiuke" (履行引受 – assumption of performance). In a riko hikiuke, the third party promises the debtor (not the creditor) that they will make the payment or render the performance. This creates an obligation between the third party and the debtor, but it does not make the third party directly liable to the creditor, nor does it affect the original debtor's liability to the creditor. Saimu Hikiuke, on the other hand, directly alters the debtor-creditor relationship regarding the assumed obligation.

The Two Main Types of Assumption of Obligation

Japanese law, under Articles 470 to 472-4 of the Civil Code, primarily categorizes debt assumption into two forms:

1. Co-existent Assumption of Obligation (Heizonteki Saimu Hikiuke 併存的債務引受 – Article 470)

(Also sometimes referred to as Juchofuku-teki Saimu Hikiuke 重畳的債務引受 – Overlapping Assumption of Obligation)

Concept:
In a co-existent assumption, the assuming party takes on the same obligation as the original obligor, but the original obligor remains liable for the debt alongside the new assuming party. The creditor effectively gains an additional debtor.

Common Result: Joint and Several Liability
A key effect, explicitly stated in Article 470, Paragraph 1 (clarified by the 2017 reforms), is that the original obligor and the assuming party become jointly and severally liable (rentai saimu 連帯債務) to the creditor for the performance of the obligation. This means the creditor can demand full performance from either the original obligor or the assuming party, or from both.

Formation Methods (Art. 470):
A co-existent assumption can be formed in two ways:

  • (a) Agreement between the Creditor and the Assuming Party (Art. 470, Para. 1): The creditor and the person willing to assume the debt can directly agree that the assuming party will also become liable. The original obligor's consent is not required for this type of agreement to be valid between the creditor and the assuming party.
  • (b) Agreement between the Original Obligor and the Assuming Party, with Creditor's Consent (Art. 470, Para. 2): The original obligor and the assuming party can agree that the assuming party will take on the debt. However, this agreement only becomes effective as a co-existent assumption (making the assuming party directly liable to the creditor) when the creditor gives their consent to the assuming party taking on the obligation.

Effects for the Creditor: The creditor benefits by having an additional party responsible for the debt, increasing the likelihood of recovery.

Effects on Original Obligor: The original obligor is not released from their liability but now shares that liability, typically on a joint and several basis, with the assuming party.

Assuming Party's Defenses (Art. 471):
The assuming party can assert against the creditor any defenses that the original obligor could have asserted against the creditor at the time the assumption took effect (e.g., that the original contract was invalid, or that a condition for performance has not been met). However, the assuming party generally cannot assert against the creditor defenses that arise purely from their own separate contractual relationship with the original obligor (e.g., that the original obligor failed to pay them a promised fee for agreeing to assume the debt).

Security Interests and Guarantees:
Since the original obligor remains liable, any security interests (e.g., mortgages, pledges) or guarantees that were provided to secure the original obligor's debt generally remain effective with respect to the original obligor's continuing liability.

2. Discharging Assumption of Obligation (Mensekiteki Saimu Hikiuke 免責的債務引受 – Article 472)

Concept:
In a discharging assumption, the assuming party effectively replaces the original obligor. The assuming party takes over the obligation, and the original obligor is discharged (released) from their liability to the creditor. The assuming party becomes the new, sole obligor for that debt.

Formation Methods (Art. 472):
A discharging assumption can be formed through:

  • (a) Agreement between the Creditor and the Assuming Party (Art. 472, Para. 1): This agreement also requires that the creditor notify the original obligor of their discharge from the obligation. The assumption (and discharge) generally takes effect upon this notification.
  • (b) Agreement between the Original Obligor and the Assuming Party (Art. 472, Para. 2): This agreement requires the creditor's consent to both the assumption by the new party and the discharge of the original obligor.
  • (c) Triangular Agreement (Implicit): While not explicitly listed as a separate method in Article 472, a discharging assumption can also be effected by a simultaneous agreement among all three parties—the creditor, the original obligor, and the assuming party—whereby the new assumption and the original obligor's discharge are agreed upon.

Effects for the Creditor: The creditor now has a new (or sole) obligor and loses their claim against the original obligor. This can be advantageous if the new obligor is more creditworthy, but disadvantageous if they are less so.

Effects on Original Obligor: The original obligor is completely released from the debt and has no further liability to the creditor for it.

Crucial Impact on Security Interests and Guarantees (Art. 472-2):
This is a critical area where discharging assumption significantly differs from co-existent assumption and also from simple novation (discussed below):

  • General Rule: Extinguishment. Any security interests (such as pledges or mortgages) that were created by the original obligor, or by a third party, to secure the original obligation are extinguished when a discharging assumption of that obligation occurs.
  • Similarly, any guarantees that were provided for the original obligation are also extinguished.
  • Exception – Continuation with Consent: These security interests or guarantees can continue to exist for the benefit of the (now assumed) obligation only if the original creator of the security (e.g., the third-party mortgagor who provided their property as collateral for the original debtor) or the guarantor expressly consents to their continuation for the assuming party's obligation. This consent must clearly indicate an intention to secure the debt now owed by the new, assuming party. Without such explicit consent, these ancillary rights are lost.

Assuming Party's Defenses (Art. 472-3):
Similar to a co-existent assumption, the assuming party in a discharging assumption can assert against the creditor any defenses that the original obligor could have asserted against the creditor concerning the assumed obligation.

Assuming Party's Right to Pre-Notification from Creditor (Art. 472, Para. 4):
If the discharging assumption is made by an agreement between the creditor and the assuming party (under Art. 472, Para. 1), the assuming party has a right, before the assumption takes effect (i.e., before the creditor notifies the original obligor of their discharge), to demand that the creditor provide them with information regarding the content of the obligation being assumed and any defenses the original obligor might have against the creditor. This allows the assuming party to make a more informed decision before committing.

Distinguishing Discharging Assumption from Novation by Change of Debtor (Art. 514)

Both a discharging assumption of obligation and a "novation by change of debtor" (saimusha no kotai ni yoru kokai 債務者の交替による更改 – Article 514 of the Civil Code) result in the original debtor being discharged and a new debtor becoming liable to the creditor. However, they are distinct legal concepts with different implications, particularly for accessory rights:

  • Novation: Involves extinguishing the old debt entirely and creating a brand new, distinct obligation. This has a more absolute effect on extinguishing all accessory rights (like security interests and guarantees) that were tied to the old debt, unless these are expressly agreed to be transferred to the new obligation (as per Art. 513-2 for security and Art. 518 for guarantees).
  • Discharging Assumption: The underlying obligation itself is considered to be the same obligation that is transferred from the original obligor to the assuming party. While Article 472-2 also leads to the extinguishment of security interests and guarantees unless there's consent for their continuation, the conceptual framework is that the identity of the obligation is preserved, whereas novation changes it.

The 2017 Civil Code reforms clarified these as separate mechanisms, each with its own specific rules for formation and effect, particularly regarding the treatment of pre-existing security.

Conclusion

Understanding the nuances between "Co-existent Assumption of Obligation" and "Discharging Assumption of Obligation" under Japanese law is vital for any party involved in a transaction where debt responsibility is being altered. Key considerations include the method of formation (which parties need to agree or consent), whether the original obligor remains liable or is discharged, and critically, the significantly different impact each type of assumption has on existing security interests and guarantees. For creditors, a co-existent assumption offers additional security, while a discharging assumption means relying solely on the new obligor and potentially losing prior collateral unless specific consents are obtained. For original obligors, a discharging assumption offers a clean break, while a co-existent one means continued (though shared) liability. Assuming parties, in turn, must understand the defenses available to them and, in discharging assumptions, their right to pre-notification about the debt.