Q&A: Deposit Contracts (Kitaku Keiyaku) in Japan: Duties of the Depositary and Special Types of Deposits

Japanese Attorney at Law - Bengoshi L.L.

• 8 min read

When one party entrusts goods or property to another for safekeeping in Japan, the legal relationship formed is typically a "deposit contract" (寄託契約 - kitaku keiyaku). Governed by the Japanese Civil Code, these agreements can range from simple, informal arrangements to complex commercial warehousing or financial deposits. Understanding the core duties of the party taking custody (the depositary) and the nuances of special deposit types is crucial for anyone involved in such transactions.

Q1: What is a "Deposit Contract" (Kitaku Keiyaku) under Japanese Law?

A deposit contract, as defined by Article 657 of the Japanese Civil Code, is formed when one party (the depositary - 受寄者 jukisha) promises to keep custody of a specific thing on behalf of another party (the depositor - 寄託者 kitakusha), and the depositor agrees to this arrangement.

Key characteristics of a standard deposit contract include:

  • Consensual Nature: It is a consensual contract, meaning it is formed by the mere agreement of the parties. The actual delivery of the thing to be deposited is not required for the contract itself to come into existence, though it is, of course, necessary for the custody obligation to commence in practice. This aligns with the general principle of consensualism in Japanese contract law.
  • Default Gratuitous Nature: Unless otherwise agreed, a deposit contract is presumed to be gratuitous (無償 - mushō) (Civil Code, Article 659 refers to the standard of care for gratuitous depositaries, implying this default). However, parties are free to agree on remuneration for the depositary, making it an onerous (remunerated) deposit (有償寄託 - yūshō kitaku). In such cases, provisions regarding remuneration in mandate contracts may apply (Civil Code Art. 665 applying Art. 648).
  • Implied Obligation to Return: A fundamental, though not explicitly stated in the main definition, obligation of the depositary is to return the deposited thing to the depositor upon the termination of the deposit or upon the depositor's demand.
  • Distinction from Lease of Space: It's important to distinguish a true deposit contract, where custody is undertaken, from a mere lease of space for storage (e.g., renting a safe deposit box at a bank or using a coin locker). In the latter cases, the relationship is typically one of lease, not deposit, and different legal rules apply.

Q2: What are the core duties of a depositary (受寄者 - jukisha) in a standard Japanese deposit contract?

Once a deposit contract is formed and the thing is entrusted, the depositary assumes several key duties:

  • A. Duty of Care in Custody (保管における注意義務 - Hokan ni okeru Chūi Gimu):
    The level of care required of the depositary depends on whether the deposit is gratuitous or onerous:
    • Gratuitous Deposit: If the deposit is gratuitous, the depositary must exercise the same degree of care in keeping custody of the deposited thing as they exercise in respect of their own property (自己の財産に対するのと同一の注意 - jiko no zaisan ni taisuru no to dōitsu no chūi) (Civil Code Art. 659). This is generally considered a lower, more subjective standard of care compared to onerous deposits.
    • Onerous (Remunerated) Deposit: If the depositary receives remuneration, they must exercise the care of a good manager (善良な管理者の注意 - zenryō na kanrisha no chūi) in keeping custody of the thing (Civil Code Art. 400, as a general principle for obligations, applies to onerous deposit contracts). This is a higher, objective standard, requiring the diligence that a reasonably prudent person in the depositary's position would exercise.
    • Special Note for Innkeepers: Businesses like hotels or inns have a stricter, special liability for guests' deposited goods under the Commercial Code (Article 594), often referred to as receptum liability, where they are liable for loss or damage unless caused by force majeure.
  • B. Prohibition on Use of the Deposited Thing (寄託物の使用禁止 - Kitakubutsu no Shiyō Kinshi):
    As a general rule, the depositary is not permitted to use the deposited thing for their own purposes unless they have obtained the depositor's consent (this is implied by Civil Code Art. 658, Paragraph 1, which allows use with consent). Unauthorized use of the deposited item constitutes a breach of the deposit contract.
  • C. Principle of Personal Custody / Prohibition on Sub-Deposit (自己保管原則 / 再寄託の禁止 - Jiko Hokan Gensoku / Sai-kitaku no Kinshi):
    The depositary is generally expected to keep custody of the thing personally due to the trust placed in them by the depositor. Therefore, a depositary may not entrust the deposited thing to a third party for custody (a sub-deposit - 再寄託 sai-kitaku) unless:
    1. The depositor has consented to the sub-deposit; OR
    2. There are unavoidable circumstances (yamu o enai jiyū - やむを得ない事由) that make it necessary (Civil Code Art. 658, Paragraph 2).
      If a sub-deposit is permissibly made, the original depositary generally remains responsible to the depositor for the actions of the sub-depositary. Furthermore, the sub-depositary is deemed to owe the same duties directly to the original depositor within the scope of the authority of the sub-deposit (Civil Code Art. 658, Paragraph 3).
  • D. Duty to Notify (通知義務 - Tsūchi Gimu) (Civil Code Art. 660):
    If a third party initiates a lawsuit claiming rights over the deposited thing, or if the thing is subjected to legal actions such as seizure, provisional attachment, or provisional disposition, the depositary must notify the depositor of these facts without delay. This duty does not apply if the depositor already has knowledge of the situation. This notification allows the depositor to take appropriate legal steps to protect their interests.
  • E. Duty to Return the Thing and Ancillary Obligations (返還義務 - Henkan Gimu):
    This is the fundamental object of the deposit. Upon the termination of the deposit agreement (e.g., expiry of an agreed term, or demand by the depositor), the depositary must return the exact thing deposited to the depositor.
    This duty also extends to:
    • Delivering any "fruits" (e.g., interest, offspring of animals) that the deposited thing may have produced during the custody period, if applicable (Civil Code Art. 665 applying mandate rules under Art. 646(1)).
    • Transferring to the depositor any rights that the depositary may have acquired in their own name but for the benefit of the depositor in connection with the deposited thing (Art. 665 applying mandate rules under Art. 646(2)).
    • If the deposited thing was money and the depositary consumed it (which is only permissible in a "deposit for consumption," discussed below), specific rules on paying interest and damages apply (Art. 665 applying mandate rules under Art. 647).

Q2: Can the depositor demand the return of the deposited item at any time in Japan?

  • General Right to Demand Return at Any Time (Civil Code Art. 662(1)):
    Yes, even if a specific period for the duration of the deposit was agreed upon between the depositor and the depositary, the depositor generally has the right to demand the return of the deposited thing at any time.
  • Compensation to Depositary for Early Return (Civil Code Art. 662(2)):
    However, if a deposit period was fixed, and the depositor demands the return of the thing before the expiry of that agreed period, thereby causing loss or damage to the depositary (e.g., a remunerated depositary who had planned on receiving fees for the full term, or had made specific arrangements based on the agreed duration), the depositor must compensate the depositary for such loss or damage.

Q3: What is a "Deposit for Consumption" (Shōhi Kitaku - 消費寄託) and how does it differ from a regular deposit?

A "deposit for consumption" is a special and very common type of deposit contract with distinct characteristics.

  • A. Definition (Civil Code Art. 666(1)):
    A shōhi kitaku is a deposit contract where the depositary is contractually permitted to consume or dispose of the deposited thing(s). Because the specific items deposited will be consumed, the depositary's obligation is not to return the identical items but to return things of the same kind, quality, and quantity as those deposited.
    This type of deposit is inherently applicable to fungible goods (things that are interchangeable, like money, grain, oil, or other commodities where one unit is essentially the same as another).
  • B. Application of Rules for "Loan for Consumption" (Civil Code Art. 666(2)):
    Due to its nature—where the depositary consumes the goods and returns equivalents—a shōhi kitaku shares many characteristics with a "loan for consumption" (消費貸借 - shōhi taishaku, such as a typical money loan where the borrower uses the money and repays an equivalent amount).
    Recognizing this similarity, Article 666, Paragraph 2 of the Civil Code states that certain provisions concerning loans for consumption apply mutatis mutandis (with necessary changes) to deposits for consumption. These include rules regarding:
    • The depositor's (acting like a lender) liability for any non-conformity of the thing deposited (referring to Article 590, which in turn applies rules for gifts if the deposit was gratuitous, or sales rules if it was onerous).
    • The depositary's (acting like a borrower) duty to make reimbursement in monetary value if the return of equivalent things becomes impossible due to certain changes in currency standards (referring to Article 592, which applies Article 402, Paragraph 2).
  • C. Bank Deposits (預貯金 - Yochokin) as a Prime Example:
    The most ubiquitous example of a shōhi kitaku is a bank deposit. When a customer deposits money into a bank account, the bank does not keep the specific notes and coins segregated; it consumes (uses) the money for its banking operations (e.g., lending to others). The bank's obligation is to return an equivalent sum of money to the depositor upon demand or at the maturity of a time deposit.
    • Special Rule for Return by Depositary (Bank) in Money Deposits (Art. 666(3)): For deposits of money where the depositary (such as a bank) is obligated to return money of the same value, a special rule applies: the depositary (bank) may return the money at any time, even if a specific term for the deposit was agreed upon. However, if this early return by the depositary causes loss to the depositor (e.g., loss of agreed interest that would have accrued over the full term of a fixed-term deposit), the depositary must compensate the depositor for such loss. This provision applies Articles 591, Paragraphs 2 and 3 (which concern the borrower's right of early repayment in a loan for consumption) to the depositary in a money deposit for consumption. This gives financial institutions a degree of flexibility in managing their funds.

Q4: What is a "Commingled Deposit" (Kongō Kitaku - 混合寄託) under Japanese law?

A "commingled deposit" addresses situations involving the storage of fungible goods from multiple depositors.

  • A. Definition (Civil Code Art. 665-2(1)):
    This occurs when a depositary accepts deposits of fungible things (things of the same kind and quality, like grain of a certain grade from different farmers) from two or more depositors and, crucially, with the consent of each depositor, keeps these things commingled (mixed together in a single mass or storage facility) rather than keeping each depositor's items physically segregated. This is common in warehousing operations for bulk agricultural products, oil, or other similar commodities.
  • B. Depositor's Right to Claim Return (Civil Code Art. 665-2(2)):
    In a commingled deposit, each depositor is entitled to demand the return of the same quantity of the thing that they originally deposited from the commingled mass. They do not have a claim to the specific items they deposited but rather to a share of the undifferentiated bulk.
  • C. Allocation of Loss if Part of the Commingled Mass is Lost (Civil Code Art. 665-2(3)):
    If a portion of the commingled deposited things is lost or destroyed (typically without the depositary being at fault, e.g., due to an unavoidable natural event), the loss is borne by all the depositors pro-rata, in proportion to the quantity each had deposited in the commingled mass. Each depositor can then only demand the return of their correspondingly reduced share.
    This pro-rata sharing of loss does not, however, preclude depositors from claiming damages from the depositary if the loss was in fact due to the depositary's breach of their duty of care (e.g., failure to properly store or protect the goods).

Conclusion

Japanese deposit contracts (kitaku keiyaku) provide a framework for the safekeeping of another's property, with the depositary's duties centered on exercising an appropriate standard of care and returning the item as agreed. The standard of care varies depending on whether the deposit is gratuitous or remunerated. Key obligations include refraining from unauthorized use of the deposited item and, generally, maintaining personal custody, with limited exceptions for sub-deposits. The depositor usually retains the right to demand the return of their property at any time, subject to compensating the depositary for losses from premature termination of a fixed-term remunerated deposit.
The Civil Code also recognizes specialized and commercially significant forms of deposit, such as the "deposit for consumption" (shōhi kitaku), where the depositary can consume the goods and is obligated to return items of the same kind, quality, and quantity—bank deposits being the most prominent example. "Commingled deposits" (kongō kitaku) for fungible goods from multiple depositors allow for practical storage solutions with rules for pro-rata sharing of losses. Understanding these distinctions and the specific duties, rights, and applicable standards of care is essential for any party entrusting property for safekeeping or undertaking custody obligations under agreements governed by Japanese law.