Dealing with Multiple Debtors in Japan: What Are the Key Features of "Joint and Several Obligations" (Rentai Saimu)?

When extending credit or entering into significant contractual arrangements in Japan, creditors often seek enhanced security for the performance of obligations. One common and powerful mechanism for achieving this is through "Joint and Several Obligations," known in Japanese as Rentai Saimu (連帯債務). This legal structure, governed by Article 436 et seq. of the Japanese Civil Code, makes multiple obligors individually and collectively responsible for the entirety of the same debt. Understanding its formation, the creditor's robust rights, the impact of events concerning one obligor on others (especially after significant 2017 Civil Code reforms), and the internal relationships among the obligors is crucial for both creditors and the obligors themselves.

What are "Joint and Several Obligations" (Rentai Saimu)?

Rentai Saimu arises when two or more obligors are each independently liable to the creditor for the full performance of the same, single obligation. The creditor can demand the entire performance from any one of the joint and several obligors, or from all of them, until the obligation is fully satisfied.

Core Purpose: Securing the Creditor's Claim
The primary purpose of establishing joint and several liability is to strengthen the creditor's position. It provides the creditor with multiple avenues for recovery, significantly reducing the risk of non-payment if one or more obligors become insolvent or otherwise fail to perform.

Distinction from Other Co-obligations:

• Simple Divisible Co-obligations: In a simple co-obligation where the debt is divisible (e.g., a monetary debt of ¥900,000 owed by three people without a joint and several clause), each obligor is typically liable only for their respective share (e.g., ¥300,000 each), unless otherwise agreed.
• "Non-Genuine" Joint and Several Obligations (Fushinsei Rentai Saimu 不真正連帯債務): This concept often arises in tort law (e.g., joint tortfeasors under Article 719 of the Civil Code are liable "jointly and severally" for damages). While externally similar to true Rentai Saimu in that the victim can claim full damages from any tortfeasor, the internal relationships and the effect of certain events (like prescription) might differ based on the underlying legal principles. True Rentai Saimu typically arises from a unified contractual intent or specific statutory provision creating such a shared liability for a single underlying obligation.

Formation of Joint and Several Obligations

Joint and several obligations can be created in two main ways:

1. By Agreement (Contract): This is the most common method in business transactions. Parties (the creditor and the multiple obligors, or the obligors among themselves with the creditor's acceptance) explicitly agree that the obligors will be jointly and severally liable for a particular debt. While using the specific words "jointly and severally" (rentai shite 連帯して) is advisable for clarity, an agreement can establish such liability if the intention to make each obligor responsible for the entire obligation is clear from its terms.
2. By Law (Statute): Certain provisions of Japanese law automatically impose joint and several liability in specific situations. For example, Article 511 of the Commercial Code stipulates that if two or more persons undertake an obligation for the purpose of their business with respect to one or all of them, they shall be jointly and severally liable for that obligation.

External Effects: The Creditor's Rights (Art. 436)

Once a joint and several obligation is established, the creditor enjoys significant flexibility in seeking performance, as outlined in Article 436 of the Civil Code:

• The creditor can demand full performance of the obligation from any one chosen joint and several obligor.
• The creditor can demand partial performance from any one chosen obligor.
• The creditor can demand performance simultaneously or sequentially from all or some of the joint and several obligors.

The choice of whom to pursue and for how much (up to the full amount) lies entirely with the creditor until the obligation is fully satisfied. Performance by one obligor reduces the debt owed by all.

Impact of Events Concerning One Obligor on Others: The Shift to "Relative Effect" (Sotai-ko)

A critical aspect of joint and several obligations is how an event concerning one obligor (e.g., they make a payment, are released from the debt, or the claim against them prescribes) affects the liability of the other co-obligors. The 2017 Civil Code reforms (effective April 1, 2020) brought about a fundamental shift in this area.

The New General Principle (Art. 441 – Principle of Relative Effect):
The reformed Civil Code establishes the principle of relative effect (sotai-ko no gensoku 相対効の原則) as the default rule. This means that, generally, an event occurring with respect to one joint and several obligor does not affect the rights and obligations of the other co-obligors, unless specifically provided otherwise by law. This reversed the pre-reform approach where many such events had an "absolute effect" (zettai-ko 絶対効), automatically benefiting all co-obligors.

Events Still Having Absolute Effect (Binding or Benefiting All Obligors):
Despite the shift to relative effect as the general rule, certain events continue to have an absolute effect due to their nature or specific legal provisions:

• Performance and Equivalent Acts (Art. 439, Para. 1): If one joint and several obligor performs the obligation (in whole or in part), this discharges the obligation for all other co-obligors to the extent of the performance. Acts equivalent to performance, such as a valid deposit (kyotaku 供託) made by one obligor, or a set-off (sosai 相殺) successfully exercised by one obligor against the creditor, also benefit all co-obligors.
• Novation or Merger (Art. 439, Para. 1, and Art. 440): If the creditor enters into a novation agreement (kokai 更改) with one joint and several obligor (extinguishing the old joint and several obligation and creating a new one with that obligor), or if the claim and the obligation merge (kondo 混同) with respect to one obligor (e.g., one obligor inherits the creditor's claim), the entire joint and several obligation is extinguished for all co-obligors.
• Demand for Performance by Creditor (Art. 438): A demand for performance (riko no seikyu 履行の請求) made by the creditor against one joint and several obligor is also effective against (i.e., benefits or affects) all other co-obligors. For instance, such a demand can interrupt the running of the statute of limitations for the claim against all obligors.

Events Now Generally Having Only Relative Effect (Primarily Affecting Only the Specific Obligor Involved):
Under the reformed law, the following events, among others, generally have only a relative effect, meaning they primarily impact the specific obligor concerned and do not automatically extinguish or reduce the liability of the other co-obligors for the full amount (though they do affect internal reimbursement calculations, as discussed later):

• Release of Obligation (Menjo – Art. 439, Para. 2): If the creditor releases one joint and several obligor from the debt, this release generally benefits only that specific obligor. The other co-obligors remain liable to the creditor for the entire remaining debt. However, this release does affect the internal relationship: the remaining obligors are effectively discharged from having to reimburse the released obligor for their share (see Art. 445 discussed below).
• Completion of Prescription (Jiko no Kansei – Art. 439, Para. 2): If the statute of limitations (prescription) for the claim expires with respect to one joint and several obligor, this benefits only that obligor. The other co-obligors, against whom prescription has not completed, remain liable for the entire debt. Again, this impacts internal reimbursement.
• Other events like a set-off exercised by the creditor against one obligor, or facts constituting default attributable only to one obligor (e.g., one obligor's specific act of conversion when the obligation was to return property), also generally have only relative effect.

Rationale for the Shift to Relative Effect: The primary reason for this significant change was to achieve fairer outcomes. The old system of broad absolute effects often led to situations where co-obligors, who had not contributed to an event like a release granted to one particular obligor, would nonetheless benefit from it, potentially to the creditor's detriment. The new rules aim to ensure that the creditor's security provided by the joint and several nature of the obligation is not unduly eroded by events concerning only one obligor, while still maintaining fairness in the internal allocation of the burden.

Internal Relationships: Among the Joint and Several Obligors

While externally each obligor is liable to the creditor for the full amount, internally, among themselves, the joint and several obligors usually have respective shares of the ultimate burden of the debt. These are known as internal burden shares (futan bubun 負担部分).

• Determining Internal Burden Shares:
  • These shares are primarily determined by any agreement among the co-obligors themselves.
  • If there is no such agreement, the shares are determined based on factors such as the respective benefit each obligor received from the transaction that gave rise to the joint and several obligation.
  • If the shares are still unclear after considering these factors, they are presumed to be equal (Article 442, Paragraph 2, applying Article 427 for divisible obligations).
• Right of Reimbursement (Kyushoken 求償権 – Art. 442):
  A joint and several obligor who performs the obligation to the creditor (or otherwise obtains a common discharge of the debt for all obligors at their own expense, e.g., by their own set-off) in an amount exceeding their internal burden share has a right to seek reimbursement from the other co-obligors. They can claim from each co-obligor that co-obligor's respective internal share of the excess amount paid by the performing obligor.
  • The amount of reimbursement claimable typically includes:
    • The principal amount paid that was attributable to other co-obligors' shares.
    • Legal interest on that amount from the date of discharge.
    • Any unavoidable expenses incurred for the purpose of obtaining the common discharge.
    • Other related damages.
• Notification Duties for Reimbursement (Art. 443): To protect the fairness of the reimbursement process, the Civil Code imposes notification duties:
  • Pre-Performance Notification (Art. 443, Para. 1): An obligor who intends to perform the obligation (e.g., upon receiving a demand from the creditor) should, without delay, notify any other co-obligors who they know might have defenses against the creditor. If they fail to give such notice, and a co-obligor who was not notified had a valid defense that could have been asserted against the creditor (which would have reduced or eliminated the need for payment), the performing obligor's right to reimbursement from that unnotified co-obligor may be limited to the extent of the defense.
  • Post-Performance Notification (Art. 443, Para. 2): An obligor who has performed or otherwise obtained a common discharge must, without delay, notify the other co-obligors of this fact. If they fail to do so, and another co-obligor, unaware of the prior discharge, subsequently performs the same obligation to the creditor in good faith, that second performing obligor is entitled to treat their own performance as valid. This could lead to the first performing obligor being unable to seek reimbursement from the second (good faith) performer, or even being subject to a reimbursement claim from them.
• Insolvency of a Co-obligor (Art. 444):
  If one of the co-obligors is insolvent (lacks sufficient funds to pay) and cannot contribute their share to the reimbursement sought by a performing obligor, that uncollectible portion of the insolvent obligor's share is borne by the obligor who obtained the common discharge AND the other solvent co-obligors, in proportion to their respective internal burden shares.
• Effect of Creditor Releasing One Obligor from Joint and Several Liability (Art. 445):
  If the creditor releases one joint and several obligor from the "joint and several" nature of their liability (this may not necessarily be a full release of that obligor's share of the debt itself, but rather from the specific characteristic of being jointly and severally liable for the whole), the other co-obligors are thereby discharged from liability for the portion of the debt that the "released" obligor was internally burdened to pay. This ensures that the remaining obligors are not ultimately responsible for covering the share of an obligor whom the creditor has chosen to no longer hold jointly and severally liable with them.

Conclusion

Joint and several obligations (Rentai Saimu) offer a potent means for creditors in Japan to secure their claims by making multiple parties fully responsible for the same debt. The creditor enjoys wide discretion in pursuing recovery from any or all obligors. The 2017 Civil Code reforms have significantly reshaped the landscape concerning the "spill-over" effects of events involving one obligor on others, largely moving towards a system of relative effects, which requires careful attention. Internally, while each obligor faces full external liability, their relationships are governed by internal burden shares and rights of reimbursement, with crucial notification duties impacting the scope of these reimbursement claims. Understanding these interconnected external and internal dynamics is essential for any party involved in a joint and several obligation under Japanese law.