My Japanese Business Partner Failed to Perform: What Constitutes "Non-Performance" (Saimu-Furiko) and What Are My Basic Remedies?

Japanese Attorney at Law - Bengoshi L.L.

• 7 min read

When a contractual relationship with a Japanese business partner sours due to a failure to meet obligations, understanding the Japanese legal framework for "non-performance" – known as Saimu-Furiko (債務不履行) – is the first critical step toward seeking redress. This concept is central to Japanese contract law and dictates the availability and nature of remedies. This article explores what constitutes Saimu-Furiko, its common classifications, and the fundamental remedies available to the aggrieved party.

What Constitutes "Saimu-Furiko" (Non-Performance) in Japan?

The Japanese Civil Code, in Article 415, Paragraph 1, provides a foundational definition for non-performance. It essentially states that if a debtor fails to perform in accordance with the "main purport (or tenor) of the obligation" (saimu no honshi ni shitagatta riko o shinai 債務の本旨に従った履行をしない), or if performance of the obligation is impossible, the creditor can claim damages. This "main purport of the obligation" is a key interpretive concept, determined by looking at the specific terms of the contract, the nature of the obligation, the overall purpose of the agreement, and the overarching principles of good faith and fair dealing that permeate Japanese contract law.

The Unitary Concept and Traditional Classifications

While Article 415 presents a unitary concept of non-performance (a general failure to perform as required, often referred to as saimu-furiko ichigenron 債務不履行一元論), for practical understanding and analysis, non-performance is traditionally and commonly categorized into three main types. These categories help in identifying the specific nature of the breach and often guide the choice of remedies:

  1. Delay in Performance (Riko Chitai 履行遅滞): This occurs when the debtor fails to perform their obligation by the agreed-upon due date (or within a reasonable time if no date is specified), but performance is still possible. For example, if a supplier fails to deliver goods by the contractual delivery date but can still deliver them later.
  2. Impossibility of Performance (Riko Funo 履行不能): This arises when performance of the obligation has become impossible. Impossibility can be physical (e.g., a unique item to be delivered is destroyed), legal (e.g., a change in law makes the performance illegal), or, in some limited circumstances, economically impracticable to such an extreme degree that it's treated as impossibility. Article 415 expressly includes "when performance of the obligation is impossible" as a ground for claiming damages, which legal commentators often see as a clarification or a particularly significant instance of failing to perform according to the "main purport," rather than a separate category from a purely theoretical standpoint of the unitary concept.
  3. Defective or Incomplete Performance (Fukanzen Riko 不完全履行): This is where the debtor tenders some performance, but it is flawed, incomplete, or otherwise not in conformity with the "main purport of the obligation." This category is broad and can cover a wide range of scenarios, such as:
    • Delivering goods that are damaged or do not meet quality specifications (e.g., rotten potatoes delivered instead of fresh ones).
    • Providing a service negligently (e.g., an inaccurate investigation report by a consultant leading to client losses).
    • Causing collateral damage during performance (e.g., damaging a customer's carpet while installing wallpaper).
    • Providing insufficient ancillary support (e.g., delivering complex machinery with instructions only in a language the buyer cannot understand).
      This concept is somewhat analogous to the German doctrine of "positive Vertragsverletzung" (positive breach of contract), which influenced Japanese legal thought, addressing breaches that are not mere delay or impossibility but involve some improper positive act or omission in the course of performance.

Anticipatory Repudiation (Riko-ki-mae no Riko Kyozetsu 履行期前の履行拒絶)

Japanese law also recognizes situations akin to anticipatory repudiation, where a debtor, before the performance is due, clearly and definitively manifests an intention not to perform their obligations. In such cases, the creditor may not have to wait until the due date to seek remedies; depending on the circumstances, this clear refusal can itself constitute a non-performance allowing for immediate claims for damages or rescission (as per Civil Code Art. 415, Para. 2, Item 2, and Art. 542, Para. 1, Item 2).

Fundamental Remedies for Saimu-Furiko

When Saimu-Furiko occurs, Japanese law provides the aggrieved creditor with several fundamental remedies. The theoretical basis for these remedies is an interesting area of legal scholarship. One influential approach, which can be termed the "remedy approach," views these rights not just as inherent aspects of the original claim or secondary consequences, but as distinct legal tools provided by the legal order to protect and realize the creditor's underlying contractual interest (keiyaku-rieki 契約利益) when that interest is frustrated by non-performance. This perspective suggests that all primary remedies, including the right to demand performance, are, in essence, part of the state's mechanism to ensure the binding force of contracts is upheld.

The primary remedies include:

1. Right to Demand Performance (Riko Seikyuken 履行請求権)

This is often the creditor's first and most direct recourse: the right to demand that the debtor actually performs the specific obligation that was agreed upon (Japanese Civil Code Art. 412-2, Para. 1, implicitly recognizes this right as a basis for compulsory execution). For example, if a seller fails to deliver goods, the buyer can demand delivery.

The right to demand performance is generally considered to have priority in Japanese law, reflecting the principle that the creditor is primarily entitled to receive what was promised. However, this right is not absolute. It may be denied if:

  • Performance has become impossible (riko funo).
  • Performance would involve expense or hardship for the debtor that is grossly disproportionate to the benefit the creditor would receive.
  • The nature of the obligation does not permit compulsory performance (e.g., highly personal services).

2. Right to Claim Damages (Songai Baisho Seikyuken 損害賠償請求権)

If the debtor's non-performance causes loss or harm to the creditor, the creditor has the right to claim monetary compensation for these damages (Japanese Civil Code Art. 415 et seq.). The general requirements for a successful damages claim are:

  • Fact of Non-Performance: The debtor failed to perform in accordance with the main purport of the obligation.
  • Occurrence of Loss/Damage: The creditor suffered a legally recognized loss.
  • Causation: A causal link exists between the non-performance and the loss.
  • Attributability to the Debtor (Kisai-Jiyu 帰責事由): Generally, the non-performance must be attributable to the debtor. This concept of attributability is broad and not limited to intentional acts or negligence; it can include reasons for which the debtor is deemed responsible under the contract or by operation of law. The debtor can avoid liability if they can prove that the non-performance was due to a cause not attributable to them ("grounds for exemption" or menseki-jiyu 免責事由), considering the contract, the cause of the obligation, and transactional common sense (Art. 415, Para. 1, proviso).

The scope of recoverable damages is governed by Article 416 of the Civil Code, which distinguishes between ordinary damages and special damages (recoverable if foreseeable).

3. Right of Rescission (Kaijoken 解除権)

In the case of a material breach of contract, the creditor may have the right to rescind (or terminate) the contract (keiyaku no kaijo) (Japanese Civil Code Art. 540 et seq.). Rescission effectively unwinds the contract, releasing both parties from their future obligations and often requiring the return of any benefits already conferred (restitution).

The purpose of rescission is primarily to free the aggrieved creditor from their own contractual obligations when the other party has fundamentally failed to perform. Whether rescission requires a prior demand (saikoku 催告) for performance depends on the nature of the breach (e.g., impossibility or clear refusal to perform may allow for rescission without demand – Art. 542). The 2017 Civil Code reforms notably removed the debtor's attributability as a general requirement for rescission due to non-performance, emphasizing its role as a mechanism for releasing the creditor from the binding force of the contract rather than purely as a sanction for culpable breach.

A claim for damages can often be made in conjunction with rescission (Art. 545, Para. 4).

While the above are the direct remedies for non-performance, other legal principles might also come into play:

  • Risk Allocation (Kiken Futan 危険負担): In bilateral contracts, if performance by one party becomes impossible due to a cause not attributable to either party, rules on risk allocation determine whether the other party must still perform their counter-obligation (e.g., pay the price). Article 536 of the Civil Code deals with this.
  • Principle of Change of Circumstances (Jijo Henko no Gensoku 事情変更の原則): Although not explicitly detailed as a general remedy for simple non-performance, this principle allows for the modification or termination of a contract if there has been an unforeseen and fundamental change in the circumstances that formed the basis of the agreement, making continued adherence to the original terms grossly unfair. Its application is exceptional.

Interplay of Remedies

The availability and pursuit of these remedies are not always mutually exclusive. For instance:

  • A creditor can typically demand performance and, if performance is delayed, also claim damages for the delay.
  • A creditor can rescind a contract due to a material breach and also claim damages for losses suffered as a result of that breach and the contract's termination.
  • If performance has become impossible, the right to demand performance ceases, but the right to claim damages (in lieu of performance) or rescind the contract generally remains.

The specific strategic choice of remedies will depend on the nature of the non-performance, the terms of the contract, and the creditor's objectives (e.g., whether they still want the performance or prefer to exit the contract and seek compensation).

Conclusion

When a Japanese business partner fails to fulfill their obligations, the concept of Saimu-Furiko provides the legal framework for understanding the breach and seeking redress. While the Civil Code takes a unitary view of non-performance—a failure to perform according to the "main purport of the obligation"—the traditional classifications of delay, impossibility, and defective performance offer practical ways to analyze the situation. The primary remedies available to the aggrieved creditor are the right to demand performance, the right to claim damages, and the right of rescission. Each of these has its own set of requirements and effects, and understanding these options is crucial for any party seeking to enforce their rights or manage the fallout from a contractual breach in Japan.