My Japanese Counterparty is Refusing to Accept My Performance. What is "Tender of Performance" (Bensai no Teikyō) and "Creditor's Delay in Acceptance" (Juryō Chitai)?

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

In contractual relationships, the obligation to perform usually rests primarily on the debtor. However, situations arise where a debtor is ready, willing, and able to fulfill their end of the bargain, but the creditor either refuses to accept the performance or fails to provide necessary cooperation. Japanese law addresses this scenario through two key concepts: "Tender of Performance" (弁済の提供 - Bensai no Teikyō) by the debtor, and "Creditor's Delay in Acceptance" (受領遅滞 - Juryō Chitai) (also known as Creditor's Default). Understanding these principles is vital for both debtors seeking to properly discharge their obligations and for creditors to avoid adverse legal consequences.

"Tender of Performance" (Bensai no Teikyō): The Debtor's Crucial Step

"Tender of Performance" refers to the act by which the debtor does everything that is incumbent upon them to make the contractual performance available to the creditor, putting the creditor in a position to receive it. A valid tender is a critical legal act with significant consequences.

Legal Effect of Valid Tender (Article 492)

The primary effect of a valid tender of performance, as stipulated in Article 492 of the Japanese Civil Code, is that from the time of the tender, the debtor is relieved of all responsibilities arising from the non-performance of the obligation. This means:

  • No Liability for Delay: The debtor can no longer be held liable for damages for delay in performance from that point onwards.
  • No Grounds for Creditor to Terminate for Non-Performance: The creditor generally cannot terminate the contract based on the debtor's non-performance if a valid tender has been made.
  • Shifting of Risks: While specific rules on risk transfer (e.g., in sales contracts under Article 567) are also paramount, a valid tender can influence the allocation of risk for accidental loss or damage to the subject matter of the contract.
  • Prerequisite for Creditor's Delay: A valid tender by the debtor is usually a necessary precondition for establishing that the creditor is in "delay of acceptance."

Requirements for a Valid Tender

For a tender to be legally effective, it must meet certain conditions:

  1. Accordance with the "Main Purpose of the Obligation" (本旨に従った提供 - Honshi ni Shitagatta Teikyō):
    The performance offered must strictly conform to all the terms of the contract. This includes the correct timing, place, object (subject matter), quantity, and quality. Offering a partial performance when full performance is due, or tendering non-conforming goods, is generally not considered a valid tender unless such partial or non-conforming tender is permitted by the contract, accepted by the creditor, or justifiable under principles of good faith in very limited circumstances. For instance, if a contract requires delivery of 100 specific units, tendering only 90 units would not be a valid tender for the whole. Similarly, tendering goods of a different specification would also be invalid.
  2. Clear Indication of Readiness and Availability:
    The debtor must make it clear to the creditor that the performance is ready, available, and that the debtor is awaiting the creditor's acceptance or necessary cooperation to complete the transfer.
  3. Consideration of Creditor's Cooperation:
    If the creditor's active cooperation is essential for the debtor to complete the performance (e.g., the creditor must provide access to a site for installation, give specific instructions for custom manufacturing, or come to the debtor's premises to collect goods as per an "obligation to be picked up" - toritate saimu), the tender involves the debtor doing everything possible on their part up to the point where the creditor's action becomes the next necessary step.

Types of Tender (Article 493)

Article 493 of the Civil Code distinguishes between two main types of tender:

  1. Actual Tender (現実の提供 - Genjitsu no Teikyō) (Article 493, main part):
    This is the standard and most complete form of tender. It involves the debtor physically presenting the performance to the creditor or taking all actions necessary to put the creditor in a position to directly and immediately take possession or receipt of it. For example, if a contract requires the debtor to deliver goods to the creditor's warehouse ("debt to be brought" - jisan saimu), actual tender involves bringing the conforming goods to that warehouse during agreed hours and offering them for acceptance.
  2. Oral Tender / Verbal Tender (口頭の提供 - Kōtō no Teikyō) (Article 493, proviso):
    In certain specific circumstances, a less formal "oral tender" is sufficient. This involves the debtor notifying the creditor that all preparations for performance have been completed and demanding (requesting) the creditor's acceptance or cooperation. Oral tender is permissible in two main situations:Degree of Preparation for Oral Tender: It is critical to understand that an "oral tender" is not merely an empty statement of readiness. The debtor must have made such thorough preparations that actual performance can be immediately rendered if the creditor does cooperate or signifies willingness to accept.
    • (a) Creditor's Prior Refusal to Accept: If the creditor has clearly and unequivocally communicated in advance that they will refuse to accept the performance. Even in this scenario, the debtor must still be genuinely prepared to make actual tender if the creditor were to change their mind and agree to accept. It is not an excuse for the debtor to fail to prepare the performance.
    • (b) Performance Requires an Act by the Creditor: If an act by the creditor is a prerequisite for the debtor to complete the delivery or performance. For example, if goods are to be custom-made based on specifications the creditor must provide, and the debtor has completed all work possible pending those specifications, an oral tender (notifying readiness and requesting specifications) may suffice. Similarly, if goods are to be collected by the creditor (toritate saimu), the debtor, having prepared the goods for collection, can make an oral tender by notifying the creditor that the goods are ready for pickup.

Situations Where Even Oral Tender May Be Excused

In exceptional cases, Japanese courts have recognized that the principle of good faith and fair dealing may excuse the debtor from making even an oral tender if the creditor's refusal to accept is so absolute, definitive, and unwavering that any attempt at tender would be a demonstrably futile and meaningless gesture. A leading Supreme Court judgment (en banc, June 5, 1957, Minshu Vol. 11, No. 6, p. 915), in a case involving a landlord's persistent and categorical refusal to accept rent payments due to a dispute over the lease's validity, indicated that in such extreme circumstances of "definitive refusal" (kakuteitekina juryō kyozetsu), the debtor might be relieved of the obligation to tender. However, this is a high threshold.

"Creditor's Delay in Acceptance" (Juryō Chitai) – Article 413

When a debtor has made a valid tender of performance, but the creditor fails or is unable to accept it, or fails to provide necessary cooperation, the creditor may be deemed to be in "Delay in Acceptance" (Juryō Chitai) (also sometimes referred to as Creditor's Default - Saikensha Chitai).

There has been academic debate in Japan regarding the precise legal nature of Juryō Chitai:

  • Contractual Liability View (債務不履行責任説 - Saimu Furikō Sekininsetsu): This perspective views the creditor's failure to accept or cooperate as a breach of an implied contractual duty owed to the debtor.
  • Statutory Responsibility View (法定責任説 - Hōtei Sekininsetsu): This is the prevailing view. It does not treat Juryō Chitai as a form of contractual breach by the creditor in the same way as a debtor's non-performance. Instead, it sees it as a special situation defined by statute where the law imposes certain burdens, risks, or consequences on the creditor to achieve a fair balance between the parties when the debtor has fulfilled their part by tendering performance. A key implication of this prevailing view is that the debtor generally cannot claim damages from the creditor specifically for the "delay" itself, unless the creditor's failure to cooperate also happens to breach an explicit and independent contractual obligation to cooperate.

Requirements for Creditor's Delay (Article 413, Paragraph 1)

For a creditor to be deemed in delay of acceptance, the following conditions generally need to be met:

  1. Valid Tender by the Debtor: The debtor must have made a valid actual or oral tender of performance, as appropriate to the circumstances.
  2. Possibility of Performance: The performance itself must still be possible at the time of tender and refusal/non-cooperation.
  3. Creditor's Failure/Inability to Accept or Cooperate: The creditor must have failed to accept the tendered performance, been unable to accept it when tendered, or failed to provide cooperation that was necessary for the debtor to complete performance.
  4. Grounds for Failure to Accept/Cooperate (Attributability): The revised Civil Code (Article 413, Paragraph 1) states that if the above conditions are met, "the debtor shall not bear responsibility for non-performance of the obligation for the failure of performance caused by the creditor's failure to accept performance or inability to accept it, or by the failure of cooperation necessary for performance on the part of the creditor." Article 413-2 then lists certain legal effects (like the creditor bearing increased costs or risk) that apply even if the creditor's failure to accept or cooperate is not due to grounds attributable to the creditor.
    This suggests a nuanced approach. For certain consequences (like the debtor being relieved of responsibility for their own non-performance directly caused by the creditor's inaction), the creditor's "fault" or "attributability" for their non-acceptance/non-cooperation might still be relevant, particularly if the debtor seeks further remedies like contract termination (under Article 542(1)(ii), which requires the impossibility of the debtor's performance to be due to grounds attributable to the creditor). However, for other effects, such as the creditor bearing increased costs or certain risks, the creditor's subjective fault may not be a prerequisite.

When a creditor is found to be in Juryō Chitai, several legal consequences ensue, generally aimed at protecting the diligent debtor:

  1. Debtor's Relief from Responsibility for Non-Performance (Article 413(1)):
    As stated above, the debtor is not liable for any failure to perform their obligation to the extent that such failure is directly caused by the creditor's delay in accepting or cooperating.
  2. Reduction of Debtor's Duty of Care (債務者の注意義務の軽減 - Saimusha no Chūi Gimu no Keigen):
    While not explicitly stated in Article 413 itself, a long-standing principle in Japanese law is that once the creditor is in delay, the debtor's duty of care for preserving the subject matter of the performance (if it's a specific thing) may be reduced. For instance, if the duty was originally the "care of a good manager" (zenkan chūi gimu), it might be lessened to the level of care the debtor exercises for their own property. This means the debtor would only be liable for loss or damage to the item if caused by their intentional act or gross negligence, not simple negligence.
  3. Debtor No Longer Required to Pay Interest (for Monetary Obligations):
    If a debtor has validly tendered payment of a monetary sum and the creditor is in delay of acceptance, the debtor is generally relieved from the obligation to pay interest on that sum from the time of the tender onwards (this is also linked to Article 492, second sentence).
  4. Increased Costs of Performance Borne by Creditor (Article 413, Paragraph 2):
    Any additional expenses incurred by the debtor for preserving the subject matter or for making a subsequent tender of performance, which arise due to the creditor's delay, must be borne by the creditor. This applies even if the creditor's failure to accept or cooperate was not due to grounds attributable to them. For example, if a seller tenders goods and the buyer improperly refuses acceptance, forcing the seller to incur further storage costs, these costs are the buyer's responsibility.
  5. Potential Shift of Risk of Accidental Loss or Damage to Creditor (e.g., Article 567(2) for Sales):
    In specific types of contracts, such as sales, if the seller has tendered delivery of specific goods and the buyer is in delay of acceptance, the risk of accidental loss of or damage to those goods (i.e., loss/damage not caused by the seller's fault) may pass to the buyer, even if legal title has not yet formally transferred. This, too, can apply even if the buyer's delay is not due to grounds attributable to them.
  6. Debtor's Right to Terminate the Contract (契約解除権 - Keiyaku Kaijoken):
    The creditor's delay can, in certain circumstances, give the debtor a right to terminate the contract:
    • If the creditor has definitively refused to accept performance or if it is clear from their conduct that they will not accept or provide necessary cooperation, the debtor may terminate the contract without prior demand (Article 542(1)(i)).
    • If the debtor's performance has become impossible due to grounds attributable to the creditor (which can include the creditor's culpable delay making performance impossible), the debtor may terminate (Article 542(1)(ii)).
  7. Debtor's Right to Deposit the Subject Matter (供託権 - Kyōtakuken) (Article 494):
    If the creditor refuses or is unable to accept performance, the debtor can often discharge their obligation by depositing the subject matter of the performance with an official depository (供託所 - kyōtakusho). This remedy is particularly useful for monetary debts or for certain types of goods that are suitable for deposit. Once a valid deposit is made, the debtor is deemed to have performed their obligation.
  8. Debtor's Right of Self-Help Sale (自助売却権 - Jijo Baikyaku-ken) (Article 497):
    If the subject matter of the performance is perishable, or if its value would be significantly diminished by prolonged storage, or if the costs of preservation are excessive, the debtor may, with the permission of a court (unless the matter is urgent and court permission cannot be obtained in time), sell the subject matter by public auction (or by private sale if more beneficial and court-approved). The debtor can then deposit the net proceeds of the sale, thereby discharging their original obligation to deliver the goods.

Conclusion

When a Japanese counterparty obstructs the completion of a contract by refusing to accept performance or failing to cooperate, the diligent debtor is not left without recourse. By making a valid "Tender of Performance" (Bensai no Teikyō), the debtor can shield themselves from liability for non-performance and trigger a state of "Creditor's Delay in Acceptance" (Juryō Chitai). This, in turn, leads to several important legal consequences, including the potential reduction of the debtor's duty of care, the shifting of certain costs and risks to the creditor, and even rights for the debtor to deposit the goods or terminate the contract. For both parties in a contractual relationship under Japanese law, a clear understanding of their respective obligations concerning the giving and receiving of performance is essential to navigate these complexities and ensure a fair and predictable outcome.