Japan Compliance

How Does "Set-Off" (Sōsai) Work as a Method of Claim Collection in Japan, and What Are the Requirements for it to be Effective?

In the course of business, it's common for two parties to find themselves in a situation where each owes the other a sum of money or a similar obligation. Instead of making two separate payments, Japanese law provides an efficient mechanism for settling these mutual debts: Set-Off (相殺

What is "Subrogation by Performer" (Bensai ni yoru Dai'i) in Japanese Law and When Does it Occur?

In many commercial and financial arrangements, parties other than the principal debtor—such as guarantors, joint obligors, or those who have provided collateral—may step in to satisfy an obligation if the principal debtor fails to do so. When such a third party performs the debt, Japanese law provides a

I Made a Payment to Someone Who Appeared to be the Creditor but Wasn't. Am I Protected Under Japanese Law's Rules on "Performance to an Apparent Entitled Person"?

In the course of business, mistakes can happen. One particularly concerning scenario is when a debtor, acting with honest intent, makes a payment or renders performance to an individual or entity that convincingly appears to be the rightful creditor (or their authorized representative), only to later discover that this recipient

Can a Third Party Perform an Obligation on Behalf of My Japanese Debtor? Understanding "Third-Party Performance" (Daisansha Bensai)

In the course of business, situations can arise where a party other than the original debtor offers to fulfill a contractual obligation. This might be a guarantor stepping in, a related company offering assistance, or another interested party seeking to ensure a debt is settled. Under Japanese law, this concept

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)?

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

My Japanese Customer Made a Partial Payment for Multiple Debts. How is Payment "Appropriated" (Bensai no Jūtō) Under Japanese Law if We Don't Agree?

It's a common scenario in business: a customer owes your company for several different invoices or is behind on multiple installment payments, and then makes a payment that is insufficient to cover all outstanding amounts. When this happens, the question arises: which specific debt or portion of a

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

My Japanese Debtor Fraudulently Transferred Assets. What is "Obligee's Action for Revocation" (Sagai Koi Torikeshi Ken) and How Can It Help Me Recover?

When a debtor in Japan attempts to shield assets from creditors by transferring them to third parties, especially when facing insolvency, it can severely undermine a creditor's ability to recover what is owed. Japanese law provides a powerful judicial remedy to counteract such maneuvers: the "Obligee'

My Japanese Debtor is Insolvent. How Can "Creditor's Right of Subrogation" (Saikensha Daiiken) Help Me Preserve Their Assets in Japan?

When a debtor in Japan becomes insolvent or simply fails to actively manage their own assets and pursue claims against third parties, creditors can find their ability to recover outstanding debts significantly jeopardized. Japanese law, however, provides a potent remedy in such situations: the Creditor's Right of Subrogation

Are "Exemption Clauses" or "Limitation of Liability Clauses" (Menseki Jōkō / Sekinin Seigen Jōkō) Valid in Japanese Contracts?

In the world of commercial agreements, parties often seek to manage and allocate risks through contractual provisions. Among the most common tools for this are exemption clauses (免責条項 - menseki jōkō), which aim to entirely exclude a party's liability for certain breaches or events, and limitation of liability

Can We Agree on "Liquidated Damages" (Songai Baishōgaku no Yotei) in Our Japanese Contracts? How Are They Enforced?

In the often complex world of commercial contracts, anticipating and quantifying the precise financial fallout from a potential breach can be challenging and contentious. To address this, parties frequently seek to pre-determine the amount of compensation payable in such an event. In Japan, this practice is recognized and governed by

What are the Special Rules for Damages for Non-Performance of Monetary Obligations in Japan (e.g., Statutory Interest, Irrebuttable Presumption of Damage)?

The failure to pay a sum of money by its due date is one of the most common forms of contractual breach. In Japan, the Civil Code, through Article 419, establishes a set of special rules (特則 - tokusoku) for determining damages arising from the non-performance of monetary obligations (金銭債務の不履行

My Japanese Counterparty Delayed Performance. What Types of "Damages for Delay" (Chien Baisho) Can I Claim?

In the realm of commercial contracts, timeliness is often of the essence. When a Japanese counterparty fails to perform its obligations by the agreed-upon deadline, the non-breaching party may suffer various losses. Under Japanese law, these losses can potentially be recovered as "Damages for Delay" (遅延賠償 - Chien

Understanding Foreseeability in Japanese Contract Damages: What is the Scope of "Ordinary Damages" and "Special Damages" Under Article 416?

When a breach of contract occurs in Japan, leading to a claim for damages, a critical legal question arises: which of the ensuing losses are actually recoverable from the breaching party? Not all damages that flow from a breach are automatically compensable. Article 416 of the Japanese Civil Code provides

Are "Consequential Damages" or "Extended Damages" (Kakudai Songai) Recoverable for Breach of Contract in Japan?

When a breach of contract occurs, the direct damages related to the non-performance of the primary obligation—such as the cost of repair or the difference in value—are typically the first consideration. However, businesses often face losses that ripple beyond the immediate subject matter of the contract. These "

What is "Performance Interest" (Riko Rieki) and How Does It Determine the Scope of Recoverable Damages in Japanese Contract Law?

When a contract is breached under Japanese law, the non-breaching party is generally entitled to claim monetary damages. A fundamental concept guiding the calculation and award of these damages is the "Performance Interest" (履行利益 - Riko Rieki). Understanding what this entails is crucial for assessing potential recovery when

Calculating Damages for Breach of Contract in Japan: What is the "Difference Theory" (Sagaku Setsu) and How Are Damages Assessed?

When a party to a contract in Japan fails to perform its obligations (債務不履行 - saimu furikō), one of the principal remedies available to the aggrieved party is a claim for monetary damages. The Japanese Civil Code, particularly Article 415, provides the basis for such claims. However, determining the actual

My Japanese Business Partner Used a Subcontractor Who Caused Damages. Is My Partner Liable? Understanding "Liability for Acts of Performance Assistants" (Riko Hojosha no Koi)

In today's interconnected global economy, it's common for businesses to rely on a network of third parties—subcontractors, agents, carriers, and other service providers—to fulfill their contractual commitments. However, when one of these "performance assistants" (履行補助者 - Riko Hojosha) falters, causing delays, defects,

My Japanese Counterparty Caused Damages Due to Non-Performance. What Do I Need to Prove to Claim Damages Under Article 415 of the Civil Code?

When a Japanese contractual counterparty fails to meet its obligations, leading to financial or other harm, the aggrieved party typically looks to Article 415 of the Japanese Civil Code as the primary basis for claiming monetary damages. This provision sets out the general conditions for liability arising from the non-performance

My Japanese Counterparty Breached a Contract. What Are My Options for Demanding Performance Under Japanese Law?

When a commercial agreement with a Japanese counterparty is breached due to non-performance, understanding the available legal remedies is paramount. Under the Japanese Civil Code, one of the primary recourses for the aggrieved party (the creditor) is the Right to Demand Performance (履行請求権 - Rikō Seikyūken). This right allows the

Interest Claims in Japanese Law: Understanding "Risoku Saiken," Agreed Interest vs. Statutory Interest, and the New Floating Statutory Rate

Interest claims (利息債権 - Risoku Saiken) are a fundamental component of countless financial and commercial dealings in Japan. Whether arising from loan agreements, deposits, or as a consequence of legal provisions, understanding how Japanese law governs the calculation and recovery of interest is essential for businesses. This article provides an

Monetary Claims in Japan: Navigating "Kingaku Saiken," Foreign Currency Obligations, and the Debtor's Right of Substitution

Monetary claims (金銭債権 - Kinsen Saiken) are the lifeblood of commerce, forming the basis of countless transactions daily. In Japan, as in any developed economy, the Civil Code provides a framework for understanding and regulating these obligations. For international businesses, a clear grasp of how Japanese law categorizes monetary claims,

Specific vs. Generic Goods in Japanese Contracts: What Are the Implications of Designating a Claim as "Tokuteibutsu Saiken" or "Shurui Saiken"?

When drafting and interpreting contracts under Japanese law, particularly those involving the sale or transfer of goods, the precise definition of the subject matter is paramount. Japanese civil law draws a fundamental distinction between obligations concerning "specific things" (特定物 - tokuteibutsu) and those concerning "generic or non-specific

Understanding "Protective Duties" (Hogo Gimu) in Japanese Contracts: Beyond Performance, What Extra Responsibilities Might My Company Have?

When entering into contracts under Japanese law, businesses typically focus on the primary performance obligations—the delivery of goods, the provision of services, or the payment of a price. However, Japanese contract law, deeply influenced by the principle of good faith and fair dealing (信義則 - Shin-Gi-Soku), recognizes an additional

How Does the Japanese Concept of "Shin-Gi-Soku" (Good Faith and Fair Dealing) Influence Contractual Obligations and Performance in Japan?

Navigating the intricacies of Japanese contract law requires an understanding of its foundational principles. Among the most pervasive and significant is "Shin-Gi-Soku" (信義則), the principle of good faith and fair dealing. Enshrined in Article 1, Paragraph 2 of the Japanese Civil Code, which states, "The exercise of