Multiple Creditors for a Single Debt in Japan: How Do "Joint and Several Claims" (Rentai Saiken) and "Indivisible Claims" (Fukabun Saiken) Operate?

When a single debt or obligation is owed by a debtor to multiple creditors, the legal relationship can become complex. How can the debtor validly discharge the obligation? What are the rights of each creditor? Japanese law provides specific frameworks for managing such situations, primarily through the concepts of "Indivisible Claims" (Fukabun Saiken 不可分債権) and "Joint and Several Claims" (Rentai Saiken 連帯債権). These structures differ significantly from simple "divisible claims" where each creditor holds only a distinct, proportional share of the total obligation. This article explores how indivisible claims and joint and several claims operate.

Contrasting with Simple Divisible Claims (Kabun Saiken)

Before diving into indivisible and joint and several claims, it's useful to remember the simplest scenario: divisible claims (kabun saiken 可分債権). If an obligation is divisible by its nature (e.g., a monetary debt of ¥1 million owed equally to two creditors, A and B), then, in the absence of a specific agreement making it indivisible or joint and several, each creditor (A and B) holds a separate claim for their respective share (¥500,000 each). The debtor would discharge their obligation by paying each creditor their individual portion. Indivisible and joint and several claims create a different dynamic.

Indivisible Claims (Fukabun Saiken – Japanese Civil Code Art. 428, 429)

An indivisible claim arises when multiple creditors are entitled to a single performance whose object is, by its nature or by the intention of the parties, indivisible.

What is an Indivisible Claim?

• Nature of the Object (Art. 428): The subject matter of the performance cannot be divided without altering its essence or substantially diminishing its value.
  • Examples: A claim for the delivery of a single, unique painting co-owned by several individuals; a claim for the transfer of ownership of a specific, physically indivisible piece of land; a claim for a single, unpartitionable service to be rendered (e.g., a specific surgical operation).
• Intention of the Parties: Even if the object is physically divisible, parties can agree that the claim for its performance shall be treated as indivisible.

External Effects (Relationship between the Debtor and the Group of Creditors):

1. Right to Demand Performance:
   Each indivisible creditor has the right to demand performance of the entire obligation from the debtor, for the benefit of all the co-creditors (Article 428 of the Civil Code, which refers to the application of rules for joint and several claims, specifically Article 432).
   • Example: If three people co-own a unique sculpture and have a claim for its return from a borrower, any one of the co-owners can demand the return of the entire sculpture.
2. Debtor's Performance:
   The debtor can validly discharge the entire obligation by performing in full to any one of the indivisible creditors (again, by analogy to Article 432). Performance to one benefits all.
3. Impact of Other Events Concerning One Creditor (Art. 429, Para. 1):
   Article 429, Paragraph 1, states that with respect to events other than performance or demand (which have absolute effect benefiting all), an event that occurs between one indivisible creditor and the debtor generally does not affect the other co-creditors. This paragraph applies mutatis mutandis (with necessary changes) the rules for joint and several claims concerning novation, release, set-off by the debtor, merger, and prescription completion (specifically referring to Articles 433 to 435 of the pre-2017 Civil Code concerning joint and several creditors, which generally stipulated relative effects for these events, with some exceptions).
   • Demand for Performance: A demand for performance made by one indivisible creditor benefits all (e.g., it interrupts the statute of limitations for the entire claim). This is an absolute effect (Art. 429(1) applying Art. 434 by analogy).
   • Novation or Release Involving One Creditor: If one indivisible creditor enters into a novation agreement with the debtor regarding their share, or releases the debtor from their share, this generally only affects that specific creditor's interest in the claim. The other co-creditors can still demand performance of the remaining portion of the indivisible obligation (or their respective shares of its value, if the object itself cannot now be delivered in its entirety due to the novation/release). The entire indivisible claim is not necessarily extinguished for the others.
   • Set-Off by the Debtor Against One Creditor: Similarly, if the debtor has a claim against one of the indivisible creditors and validly sets it off, this extinguishes the debt only to the extent of that creditor's share.
   • Merger (Kondo) Involving One Creditor: If the claim and obligation merge with respect to one indivisible creditor (e.g., the debtor inherits that creditor's share), only that creditor's portion of the claim is extinguished.
     The principle here leans towards relative effect for acts like release, novation, or set-off involving a single indivisible creditor, meaning the underlying indivisible obligation continues to exist for the benefit of the remaining creditors, adjusted for the affected creditor's share.

Internal Relationships Among Indivisible Creditors (Art. 429, Para. 2):
The rules governing the external relationship between the debtor and the indivisible creditors do not affect the internal relationships among the co-creditors themselves. These internal relationships are determined by their underlying agreement or by general principles of co-ownership. If one indivisible creditor receives the entire indivisible performance (e.g., takes possession of the co-owned painting), they are typically accountable to the other co-creditors for their respective shares or interests in the benefit received.

Joint and Several Claims (Rentai Saiken – Japanese Civil Code Art. 432-435-2)

A joint and several claim arises when multiple creditors each have an independent right to demand the entire performance of the same obligation from a single debtor. However, performance by the debtor to any one of these joint and several creditors extinguishes the entire obligation with respect to all of them.

What is a Joint and Several Claim?

• Definition (Art. 432): Multiple creditors are involved, each of whom can individually claim the full amount or entire performance. Crucially, satisfaction of the claim by performance to one creditor benefits all by discharging the debtor completely.
• Purpose: Primarily to secure the claim more effectively for the creditors. It is less common in practice than joint and several obligations (where multiple debtors are liable to one creditor).
• Formation: Joint and several claims can arise from an agreement among the creditors and the debtor, or by specific provisions of law.

External Effects (Relationship between the Debtor and the Creditors):

1. Each Creditor Can Demand Full Performance (Art. 432):
   Any one of the joint and several creditors can independently demand the entire performance from the debtor. The debtor cannot argue that they only need to perform a portion to that specific creditor.
2. Debtor Can Perform to Any One Creditor to Discharge All (Art. 432):
   The debtor has the right to choose to which joint and several creditor they will render performance. Full performance to any one of them completely discharges the debtor's obligation to all the joint and several creditors.
3. Impact of Other Events Concerning One Creditor:
   This area has been significantly clarified by the 2017 Civil Code reforms, particularly with the introduction of Article 435-2 establishing a general principle of relative effect.
   • Events with Absolute Effect (Extinguishing the Claim for All Creditors):
     • Performance to One Creditor: As stated in Article 432, this extinguishes the claim for all.
     • Set-Off Exercised by the Debtor (Saimusha ni yoru Sosai) (Art. 433): If the debtor has a claim against one of the joint and several creditors and validly declares set-off, this extinguishes the entire joint and several claim up to the amount set off, benefiting all creditors by discharging the debtor to that extent.
     • Novation (Kokai) or Release (Menjo) Involving One Creditor (Art. 433): If one joint and several creditor enters into a novation agreement with the debtor concerning the claim, or releases the debtor from the claim, this act extinguishes the entire claim for all joint and several creditors. This is a significant instance where an act by one creditor has an absolute, binding effect on all other co-creditors.
     • Merger (Kondo) Involving One Creditor (Art. 433): If the claim and obligation merge with respect to one joint and several creditor (e.g., that creditor becomes the debtor), this also extinguishes the entire claim for all.
   • Events with Generally Relative Effect (Based on New Art. 435-2):
     • Demand for Performance by One Creditor (Art. 434): A demand for performance made by one joint and several creditor is effective for (benefits) all co-creditors (e.g., it interrupts the statute of limitations for the claim with respect to all of them). This is an absolute effect.
     • The Principle of Relative Effect (Art. 435-2): The 2017 reforms introduced Article 435-2, which states that, except for matters specifically provided for in Articles 432 to 434 (i.e., performance, debtor's set-off, novation/release/merger by one creditor, and demand by one creditor), an event occurring with respect to only one joint and several creditor does not affect the rights of the other joint and several creditors.
       • Examples of Relative Effects under Art. 435-2:
         • If the statute of limitations for the claim completes against only one joint and several creditor (e.g., due to their personal circumstances or failure to act), this does not extinguish the claim for the other co-creditors against whom prescription has not completed.
         • A judgment obtained by (or against) one joint and several creditor does not automatically bind the other co-creditors regarding their independent right to claim.
         • A set-off declared by one joint and several creditor against a debt they owe to the debtor would only affect that creditor's share internally and not necessarily extinguish the entire claim for others unless it was a situation covered by the debtor's set-off under Art. 433.

Internal Relationships Among Joint and Several Creditors:
The external rules described above primarily govern the relationship with the debtor. Internally, among the joint and several creditors themselves, their respective shares or interests in the claim, and their rights to accountability if one creditor receives full performance, are determined by their underlying agreement or other relevant legal principles (e.g., partnership law if they are partners). If one joint and several creditor receives the entire performance from the debtor, that creditor is generally accountable to the other co-creditors for their respective shares or interests in the recovered amount or benefit.

Key Distinctions Summarized

Conclusion

When a single obligation in Japan is owed to multiple creditors, the legal framework governing the relationship—whether it's structured as an indivisible claim or a joint and several claim—has significant implications. For indivisible claims, while any creditor can demand full performance and performance to one discharges all, acts like release or novation by one creditor tend to have only a relative effect on the others. For joint and several claims, the debtor can also discharge the entire debt by performing to any one creditor. However, critically, acts like novation or release initiated by one joint and several creditor (or a set-off by the debtor against one) generally have an absolute effect, extinguishing the claim for all. The 2017 Civil Code reforms, particularly the introduction of a general principle of relative effect for other matters concerning joint and several claims (Art. 435-2), have brought further clarity to this area. Understanding these distinctions is essential for both debtors seeking to properly discharge their obligations and for co-creditors managing their collective rights.