How Must "Bensai" (Performance) Be Made in Japan: Key Rules on Time, Place, and Method?

Following our discussion on what constitutes valid "Bensai" (performance or payment) for extinguishing obligations under Japanese law, we now turn to the crucial practicalities of how such performance must be rendered. The Japanese Civil Code (Minpō - 民法) provides a framework governing the time, place, and method of performance, aiming to ensure clarity, prevent disputes, and facilitate the smooth execution of contractual and other obligations. Adherence to these rules is essential for an obligor to effectively discharge their duties.

Time of Performance ("Bensai no Jiki")

The "time of performance" (弁済の時期 - bensai no jiki) refers to the specific point in time or period when an obligation is due to be performed. This is also known as the "performance period" or "due date" (履行期・弁済期 - rikōki / bensaiki). The determination of this due date is a fundamental aspect of any obligation and is typically established by the terms of the agreement between the parties or, in some cases, by statutory provisions. A detailed exploration of how the due date is determined and the consequences of performing before or after this time (such as issues related to premature performance or default) is a substantial topic in itself, often covered when discussing the creditor's right to demand performance.

Time of Day for Performance: "Business Hours" ("Torihiki Jikan")

Beyond the due date, Japanese law also considers the appropriate time of day for performance. Article 484, paragraph 2 of the Civil Code stipulates that if laws, regulations, or customs establish "business hours" (取引時間 - torihiki jikan), performance of an obligation or a demand for such performance can generally only be made within those specified hours.

This provision was newly established during the recent Civil Code reforms, effectively generalizing a rule that previously existed in Article 520 of the (now-deleted) Commercial Code, which specifically pertained to merchants. The inclusion of this rule in the general provisions of the Civil Code broadens its applicability. Examples of legally defined business hours can be found in specific laws like the Banking Act (銀行法 - Ginkō-hō, Article 15) concerning the operating hours of banks, or in the Bills of Exchange Act (手形法 - Tegata-hō, Article 72).

What if an obligor attempts to perform outside these recognized business hours, but still within the overall due period? If the creditor voluntarily accepts such performance, the debtor will typically not be held liable for default or any damages arising from delayed performance, provided the performance is otherwise timely with respect to the due date. This reflects a practical approach, balancing the formal rule with the creditor's ability to waive its protection.

Place of Performance ("Bensai no Basho") and Method

The "place of performance" (弁済の場所 - bensai no basho), also referred to as "rikō basho" (履行場所), is the geographical location where the acts necessary for the obligor to fulfill the obligation are to be completed. It's important to note that this is not necessarily the place where the creditor ultimately enjoys the benefit of the performance, but rather where the obligor's duty is discharged. The determination of the place of performance has practical significance, as it can, for instance, influence the determination of the competent court jurisdiction in case of disputes, as per Article 5 of the Japanese Code of Civil Procedure (Minji Soshō-hō - 民事訴訟法), which refers to the "place of performance of an obligation" (gimu rikōchi - 義務履行地).

Default Rules for Place of Performance: Article 484(1) of the Civil Code

The Japanese Civil Code, in Article 484, paragraph 1, sets out default rules for determining the place of performance when it is not otherwise specified by the parties' agreement or the nature of the obligation.

1. Delivery of a Specific Thing ("Tokuteibutsu" - 特定物):
   If the obligation involves the delivery of a specific, identified thing (e.g., a particular piece of art, a specific used car), the place of performance is the location where that thing existed at the time the obligation arose. This is stipulated in the first part of Article 484, paragraph 1.
   However, it's noteworthy that if the obligor defaults on delivering such a specific thing, the ensuing obligation to pay damages is treated differently; it typically becomes an obligation performable at the creditor's current domicile, following the general rule for other types of obligations.
2. Other Obligations – The Principle of "Jisan Saimu" (持参債務):
   For most other types of obligations, particularly monetary debts unless otherwise specified, the place of performance is the creditor's current domicile (住所 - jūsho). This is known as the principle of "jisan saimu," meaning an obligation to be brought and tendered at the creditor's location (Article 484, paragraph 1, second part). This represents a significant shift from the pre-Meiji Civil Code era and even the older provisions of the modern Civil Code's antecedents, which often defaulted to the debtor's domicile ("toritate saimu" - 取立債務, an obligation to be collected by the creditor at the debtor's location).
   The implications of the "jisan saimu" principle are:
   • If the creditor changes their domicile, the new domicile becomes the place of performance.
   • If the claim is assigned to a new creditor, the new creditor's domicile becomes the place of performance.
   • An important exception exists: If the creditor's actions, such as changing their domicile after the obligation arises, lead to an increase in the costs of performance for the debtor, this additional expense is to be borne by the creditor (Article 485, proviso of the Civil Code).

Tender at a Different Location

If an obligor tenders performance at a location different from the legally determined place of performance, such a tender is generally not considered to be "in accordance with the tenor of the obligation." Consequently, the creditor can usually refuse to accept it without being in default themselves. However, this rule is tempered by the principle of good faith (shingi soku - 信義則). If tendering performance at a slightly different location would cause no particular disadvantage to the creditor, the creditor's refusal to accept might be deemed contrary to good faith.

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

It is crucial to understand that the rules in Article 484, paragraph 1 are supplementary or default rules (任意法規 - nin'i hōki). They apply when the place of performance cannot be determined from the parties' explicit or implicit agreement or from the nature of the specific obligation. Parties are generally free to agree on a different place of performance.

Specific Exceptions and Common Practices

The Civil Code and other laws provide specific rules, or established customs dictate practices, for certain types of obligations:

• Sale Contracts: Article 574 of the Civil Code contains special provisions for the place of payment of the purchase price.
• Deposit Contracts: Article 664 specifies the place for the return of a deposited item.
• Commercial Transactions: The Commercial Code (Shōhō - 商法) in Article 516 has special rules regarding the place of performance for obligations arising from commercial acts.
• Bank Deposits: Withdrawals from bank accounts are typically made at the branch where the account is held or other designated branches of the financial institution. This is effectively an obligation to be collected by the depositor (a form of "toritate saimu") established by the deposit agreement.
• Insurance Premiums: The payment of insurance premiums, unless specified otherwise in the policy, would generally follow the "jisan saimu" principle (creditor's domicile). Life insurance policies, for instance, often stipulate that premiums are to be paid at the insurer's head office or a designated location. However, if collection by an agent is a customary practice, the obligation might be treated as a "toritate saimu" by implied agreement or custom. If premiums are paid by automatic bank transfer (口座振替 - kōza furikae), the arrangement resembles a "toritate saimu" as the insurer effectively "collects" by initiating the transfer from the insured's account.

Special Rules for the Method of Performance in Monetary Obligations ("Kinsen Saimu")

For monetary obligations (金銭債務 - kinsen saimu), which are exceedingly common in business, the Civil Code provides specific guidance on methods of performance, particularly concerning payments into bank accounts.

Payment into Bank or Savings Accounts ("Yochokin Kōza e no Haraikomi")

1. Agreement is Key:
   Performance of a monetary obligation by paying funds into the creditor's designated bank or savings account (預貯金口座への払込み - yochokin kōza e no haraikomi) is permissible if the parties have agreed to this method. Article 477 of the Civil Code, which addresses the timing of when such a payment takes effect, operates on the premise that such an agreement exists. Without an agreement, a debtor cannot unilaterally discharge a monetary debt by simply transferring funds into an account they believe to be the creditor's.
   During the legislative discussions for the Civil Code reforms, there was a proposal to make bank transfer a default method of payment for monetary debts, unless parties agreed otherwise or different trade customs prevailed. However, this proposal was not adopted, primarily due to concerns that it might overly favor the debtor's convenience at the expense of the creditor's predictability and control over how they receive funds, especially if a creditor maintains multiple accounts for different purposes. If a creditor does have multiple accounts, the specific account into which payment must be made for it to constitute valid performance depends on the terms of their agreement with the debtor.
2. Timing of Effectiveness (Article 477 of the Civil Code):
   When payment is made by transfer into a bank or savings account, the performance (and thus the discharge of the debt to the extent of the payment) legally takes effect at the moment the creditor acquires the right to demand withdrawal of those funds from their financial institution.
   In typical banking practice, this right to demand withdrawal usually arises when the credited amount is formally recorded (入金記帳 - nyūkin kichō) in the creditor's account, thereby establishing or increasing their deposit claim (預金債権 - yokin saiken) against the bank. Therefore, in most cases, the payment becomes effective—and the underlying debt is extinguished to that extent—when the deposit is recorded in the creditor's account. This aligns with a Supreme Court precedent (Decision of April 26, 1996) which, in the context of an erroneous transfer, affirmed that a deposit claim is established in favor of the account holder when the transfer is recorded in their account, based on the deposit agreement with the bank.
   The wording of Article 477 ("when the creditor acquires the right to demand withdrawal") was a refinement from an earlier draft proposal that stated the payment takes effect "when the crediting of the transfer amount is recorded in the creditor's deposit account." This change was made due to practical considerations: pinpointing the exact moment of recording can be difficult, recording times can vary between financial institutions, and it might be problematic to make the legal effect hinge on a purely internal banking process that is not always transparent to the parties. Despite this nuanced wording, the practical outcome for most standard deposit agreements remains that the recording of the credit is the critical event signifying the creditor's acquisition of the right to withdraw.
   It follows that if a transfer initiated by the payer fails to be recorded in the payee's account—perhaps due to an error by the remitting or receiving bank, or because the payer recalled the transfer (組戻し - kumimodoshi)—the payer's original debt to the payee remains undischarged.
3. Other Instruments of Payment:
   The validity of using instruments like postal money orders (郵便為替 - yūbin kawase), cashier's checks issued by a bank (銀行の自己宛小切手 - ginkō no jikoate kogitte), or bank-guaranteed checks (銀行が支払保証をした小切手 - ginkō ga shiharai hoshō o shita kogitte) as a means of tendering performance for a monetary debt is also a relevant consideration. Generally, if such instruments are highly liquid and readily convertible to cash, representing a secure means of payment, their tender may be considered a valid tender of performance. The acceptability of such instruments often hinges on the degree of payment certainty they offer compared to, for example, a personal check. The provision of a passbook alone, however, is traditionally not seen as effective performance itself, but rather the actual withdrawal of funds would constitute performance.

Conclusion

The Japanese Civil Code's rules on the time, place, and method of "Bensai" provide a crucial framework for the orderly discharge of obligations. While many of these provisions are default rules that parties can modify by agreement, they offer essential guidance for ensuring that performance is rendered in a manner that is legally effective and minimizes disputes. Understanding these principles—from adhering to business hours and determining the correct place of performance based on the nature of the obligation (specific thing or other) and the "jisan saimu" principle, to correctly utilizing modern payment methods like bank transfers—is vital for any party involved in transactions governed by Japanese law.