How is "Performance" (Bensai) Defined in Japanese Civil Law and What Are the Standard Methods and Place of Performance?

The ultimate goal of any contractual obligation is its fulfillment, a concept known in Japanese Civil Law as "Bensai" (弁済), or performance. When a debtor duly performs their obligation, the corresponding claim of the creditor is extinguished, bringing the obligatory relationship, or at least that specific part of it, to an end. Understanding the legal definition of Bensai, who bears the burden of proving it, and the default rules established by the Civil Code for the method, timing, and particularly the place of performance, is fundamental for any business engaging in contracts under Japanese law.

Defining "Performance" (Bensai) in Japanese Law

Bensai refers to the realization of the object or benefit of a claim (債権 - saiken) through the debtor's act of performance (給付行為 - kyūfu kōi). It is the process by which the debtor discharges their duty, thereby satisfying the creditor's right.

The primary legal effect of valid performance is clearly stated in Article 473 of the Japanese Civil Code: "When a debtor effects performance of an obligation to a creditor, such claim shall be extinguished." This extinguishment is the natural and intended outcome of the obligatory relationship.

Evidentiary Matters: Proving Performance

In the event of a dispute, the question of whether performance has occurred is a critical factual issue. For example, if a creditor sues for payment or delivery, the debtor might raise the defense that they have already performed. Conversely, a debtor who has performed might seek a court declaration that the obligation no longer exists.

Under Japanese law, the debtor (or the party who actually rendered the performance, if it was a third party) generally bears the burden of proving that performance took place. To successfully establish performance, the performing party typically needs to prove two key elements:

1. That the debtor (or a permissible third party) rendered a certain performance (e.g., delivered goods, paid money, provided a service) to the creditor or an authorized recipient.
2. That this performance was made specifically in fulfillment of the particular obligation in question.

Merely showing that some benefit was conferred upon the creditor is insufficient; the performance must be demonstrably linked to the discharge of the specific debt being disputed. If only the act of performance is proven, without establishing its connection to the specific obligation, it may not be recognized as a valid Bensai for that debt, though rules on the appropriation of payments might become relevant if multiple debts exist between the parties. A Supreme Court judgment of July 15, 1955 (Minshu Vol. 9, No. 9, p. 1058) underscores the importance of linking the performance to the specific debt.

Timing and Time of Day for Performance

Timing of Performance (Due Date - 履行期 - Rikōki)

The "timing of performance" refers to the due date (履行期 - rikōki, or 弁済期 - bensaiki) by which the obligation must be fulfilled. This is the point at which the obligation becomes mature and enforceable by the creditor. The rules for determining when an obligation is due (e.g., fixed date, uncertain date, no date specified) and when a debtor is considered in delay for not performing by that time are detailed elsewhere in the Civil Code (primarily Article 412) and are crucial for assessing whether non-performance has occurred.

Time of Day for Performance (Transaction Hours - 取引時間 - Torihiki Jikan)

Article 484, Paragraph 2 of the Civil Code addresses the permissible time of day for performance. It provides that if laws or customs establish specific "business hours" or "transaction hours" (取引時間 - torihiki jikan) for certain types of dealings, then performance must generally be tendered, or a demand for performance made, only within those designated hours.

For example, attempting to deliver commercial goods to a business late at night, outside its normal receiving hours, might not constitute a valid tender of performance if refused. However, if a performance tendered outside of such hours is voluntarily accepted by the creditor (and it is still within the overall due date for performance), it can still be effective in discharging the obligation and will prevent the debtor from being considered in default for delay.

Place of Performance (弁済の場所 - Bensai no Basho)

The "place of performance" (bensai no basho or rikō basho) is the geographical location where the acts necessary for the debtor to complete their performance are to be carried out. It is important to note that this is not necessarily the same as the place where the creditor ultimately enjoys the benefit of the performance. Article 484, Paragraph 1 of the Civil Code provides default rules for determining the place of performance when the contract is silent and no other specific law or binding custom applies.

Default Rules under Article 484, Paragraph 1:

1. Delivery of a Specific Thing (特定物の引渡し - Tokuteibutsu no Hikiwatashi):
   If the obligation is for the delivery of a specific, identified item (e.g., a particular piece of machinery, a unique artwork), the place of performance is where that specific thing was located at the time the obligation arose (i.e., when the contract was made or the claim came into existence). For instance, if a contract is for the sale of a specific antique car located in Osaka at the time of sale, then, unless otherwise agreed, Osaka is the place of delivery.
   • It's noteworthy that if this obligation to deliver a specific thing is breached and converts into a monetary claim for damages, that monetary claim would then typically become a "debt to be brought" to the creditor's domicile (see below), as per a Great Court of Cassation judgment of November 8, 1936 (Minshu Vol. 15, p. 2149).
2. Other Types of Performance (Generally, "Debts to be Brought" - 持参債務 - Jisan Saimu):
   For all other types of obligations, including most monetary debts and deliveries of generic goods where no specific source is agreed, the default place of performance is the creditor's current domicile (現在の住所 - genzai no jūsho). This establishes the principle of "debts to be brought" (jisan saimu), meaning the debtor is generally responsible for taking the performance to the creditor.
   • Changes Affecting Place of Performance: If the creditor changes their domicile after the obligation arises, the new domicile becomes the place of performance. Similarly, if the claim is validly assigned to a new creditor, the assignee's current domicile becomes the new place of performance. For example, if a Tokyo-based company owes money to a supplier in Osaka, and the supplier subsequently relocates its relevant office to Kyoto, Kyoto becomes the new place of performance for the payment, absent contrary agreement.
   • Increased Costs Due to Creditor's Actions: If actions taken by the creditor (such as relocating their domicile or place of business) result in an increase in the cost of performance for the debtor, the creditor is responsible for bearing that incremental increase (Article 485, proviso).

Tender at a Location Other Than the Prescribed Place

If a debtor attempts to tender performance at a location different from the legally determined place of performance, this is generally not considered a valid tender that accords with the "main purpose of the obligation." Consequently, the creditor can usually refuse such a tender without being deemed in delay of acceptance.

However, there's a nuance: if tendering performance at a slightly different location would cause no particular disadvantage or inconvenience to the creditor, a rigid refusal by the creditor to accept might, in exceptional circumstances, be considered contrary to the principle of good faith and fair dealing (as suggested by a Great Court of Cassation judgment of March 23, 1939, Minshu Vol. 18, p. 250).

Article 484(1) as a Default Rule (任意法規 - Nin'i Hōki)

It is crucial to remember that the rules in Article 484, Paragraph 1 regarding the place of performance are default rules (nin'i hōki). Parties are always free to specify a different place of performance in their contract, and such an agreed-upon term will take precedence. Furthermore, specific types of contracts may have their own statutory default rules for the place of performance (e.g., Article 574 for the place of payment of a sales price, or Article 664 for the place of return of a deposited item), though these too are often default provisions that can be varied by agreement.

In practice, many commercial contracts will explicitly state the place of delivery for goods or the location for the provision of services to avoid ambiguity.

Practical Examples of Place of Performance

• Repayment of Bank Deposits: The repayment of bank deposits is typically governed by the bank's terms and conditions. Often, these stipulate that withdrawals are to be made at the branch where the account is held or through designated electronic channels, effectively making it an "obligation to be picked up" (toritate saimu) by the depositor or an obligation to be performed at a location (e.g., an ATM) designated by the bank.
• Payment of Insurance Premiums: Unless the insurance contract or prevailing custom (such as collection by an agent or automatic bank debit) specifies otherwise, the payment of insurance premiums by the policyholder might default to being a jisan saimu, meaning the policyholder is responsible for ensuring the payment reaches the insurer at the insurer's designated place of receipt.

Costs Associated with Performance (弁済の費用 - Bensai no Hiyō)

The act of performing an obligation often incurs costs. Article 485 of the Civil Code addresses who bears these expenses.

What Are "Costs of Performance"?

Costs of performance (bensai no hiyō or rikō hiyō) are expenses directly related to the act of rendering the due performance. Examples include:

• Transportation costs for delivering goods.
• Packaging expenses.
• Bank remittance fees for monetary payments.
• Customs duties if applicable.
• Costs associated with providing legally required notices, such as a notice of claim assignment.

These should be distinguished from "contract formation costs," such as fees for drafting the contract document or notarization fees. For instance, in a sales contract, such formation costs are typically shared equally between the buyer and seller (Article 558), rather than being borne solely by the party rendering performance under that specific cost head. There can sometimes be debate over whether certain costs, like those for property registration, are performance costs or contract formation costs.

Debtor Bears Costs (General Rule)

The default rule under Article 485, main part, is that, unless otherwise agreed by the parties, the debtor bears the costs of performing their obligation.

Exception: Increased Costs Due to Creditor's Actions

An important exception is provided in the proviso to Article 485: if the costs of performance are increased due to an act of the creditor (such as the creditor changing their domicile to a more distant location after the obligation arose), then the creditor must bear that incremental increase in costs. Similarly, if a creditor is in delay of acceptance (juryō chitai), and this causes the debtor to incur additional storage or preservation costs, the creditor is generally responsible for these increased expenses (as also covered by Article 413, Paragraph 2, concerning the effects of creditor's delay).

Special Rules for the Method of Payment of Monetary Debts

Given the prevalence of monetary transactions, the Civil Code includes a specific provision regarding a common modern method of payment:

Payment by Transfer to a Bank or Savings Account (Article 477)

Article 477, introduced in the recent Civil Code reforms, formally recognizes payment by transfer into a designated bank or savings account:

• Agreement or Designation Required: Parties can agree that a monetary debt may be discharged by the debtor paying the sum into a bank or savings account designated by the creditor. In the absence of such an agreement or designation by the creditor, a simple bank transfer by the debtor might not automatically constitute valid performance that the creditor is obliged to accept.
• Specificity of Account: If a creditor has multiple accounts (common for businesses), performance by bank transfer should be made to the specifically designated account, as per the parties' agreement or the creditor's clear instructions.
• When Payment by Transfer Becomes Effective: Such a payment legally takes effect, and the debt is discharged, when the creditor acquires the right to demand withdrawal of the funds from their financial institution (which is the debtor of the creditor's deposit claim). In typical banking practice, this occurs when the transferred funds are credited to the creditor's account and this is recorded by the creditor's bank. At this point, the creditor's deposit claim against their bank arises or is increased, signifying their effective receipt of the funds. (This aligns with principles from cases like Supreme Court, April 26, 1996, Minshu Vol. 50, No. 5, p. 1267, which dealt with an erroneous bank transfer).

Conclusion

"Performance" (Bensai) is the natural and intended culmination of an obligatory relation under Japanese law, leading to the extinguishment of the creditor's claim. While the concept is straightforward, the Civil Code provides a detailed set of default rules governing practical aspects such as the timing, method, place, and costs associated with rendering performance. The principle of "debts to be brought" (jisan saimu) for most obligations, the specific rules for delivery of unique items, and the provisions for payment into bank accounts are particularly relevant for commercial transactions. Understanding these rules, and recognizing that most are default provisions that can be (and often should be) modified by clear contractual agreement, is essential for businesses to ensure clarity, manage expectations, and avoid disputes in their dealings in Japan.