Q&A: Mandate Contracts (Inin Keiyaku) in Japan: The Scope of the Mandatory's Duty of Care and Rules on Delegation

Japanese Attorney at Law - Bengoshi L.L.

• 10 min read

Mandate contracts, known in Japanese as inin keiyaku (委任契約), are a fundamental type of service agreement under the Japanese Civil Code. They govern situations where one party (the mandator - 委任者 ininsha) entrusts another party (the mandatary - 受任者 juninsha) with the performance of certain acts. These acts can be juridical acts, such as negotiating and concluding a contract on behalf of the mandator (covered by Article 643 of the Civil Code), or factual acts, such as providing expert advice, medical treatment, or management services (these fall under "quasi-mandate" or 準委任 - jun-inin, to which the mandate rules apply mutatis mutandis via Article 656). Given their prevalence in professional services (lawyers, accountants, consultants), real estate agency, and even corporate governance (e.g., the relationship between a company and its directors), understanding the scope of the mandatary's duties, particularly the standard of care and the rules on delegating tasks, is vital for businesses operating in Japan.

Q1: What is the fundamental standard of care owed by a mandatary (受任者 - juninsha) in a Japanese mandate contract?

The Japanese Civil Code sets a distinct standard of care for mandataries, reflecting the trust-based nature of the relationship.

  • A. The Duty to Act in Accordance with the "Purport of the Mandate" (委任の本旨 - Inin no Honshi):
    The mandatary's primary obligation is to manage the affairs entrusted to them in accordance with the "purport of the mandate" (Civil Code, Article 644). This means the mandatary must understand and act in line with the fundamental purpose, objectives, and scope of the tasks as agreed with or understood by the mandator. It requires a faithful execution of the entrusted responsibilities.
  • B. The "Care of a Good Manager" (善良な管理者の注意 - Zenryō na Kanrisha no Chūi) (Civil Code Art. 644):
    Article 644 further specifies that the mandatary must perform these duties with the "care of a good manager" (often abbreviated as 善管注意義務 - zenkan chūi gimu). This is an objective standard of diligence. It does not refer to the mandatary's personal, subjective abilities but rather to the level of care that would be exercised by a reasonably prudent and competent person belonging to the same professional, social, or business category as the mandatary, when handling similar affairs. For instance, a lawyer acting as a mandatary would be expected to exercise the care of a reasonably competent lawyer in that field.
  • C. Application Even if the Mandate is Gratuitous:
    A significant feature of Japanese mandate law is that this relatively high standard of "care of a good manager" applies even if the mandate is undertaken without remuneration (i.e., gratuitously). The default rule under the Civil Code is that a mandate is gratuitous unless a special agreement for remuneration exists (Article 648, Paragraph 1). This contrasts with some other types of gratuitous contracts in Japanese law, such as a gratuitous deposit, where the depositary is only required to exercise the same level of care as they do for their own property (Civil Code Art. 659). The higher standard for even gratuitous mandates is justified by the special relationship of personal trust and confidence (shinnin kankei - 信頼関係) that is considered inherent in any mandate relationship. The mandator entrusts affairs to the mandatary based on this trust, and the mandatary is expected to honor it with a corresponding level of diligence.
  • D. The Duty of Loyalty (Chūjitsu Gimu - 忠実義務):
    While the Civil Code's general mandate provisions do not use the explicit heading "duty of loyalty" in the same way as for the "care of a good manager," it is widely understood in modern Japanese legal theory and practice that a mandatary also owes a duty of loyalty to the mandator. This duty is often seen as an intrinsic component of acting "in accordance with the purport of the mandate" and the trust relationship.
    The duty of loyalty requires the mandatary to act solely in the interest of the mandator concerning the entrusted affairs. This includes:
    • Avoiding conflicts of interest between the mandatary's personal interests (or the interests of another party they represent) and the mandator's interests.
    • Not using the position or information gained through the mandate for personal profit at the mandator's expense without disclosure and consent.
    • Maintaining confidentiality regarding the mandator's affairs.
      Specific statutes governing certain professions, such as the Companies Act for company directors (Article 355 explicitly mandates a duty of loyalty), often reinforce this principle.

Q2: Must the mandatary personally perform all entrusted tasks, or can they delegate by appointing a sub-mandatary (復委任 - fuku-inin)?

The question of whether a mandatary can delegate their duties to a sub-mandatary touches upon the personal nature of the trust relationship.

  • A. Traditional Emphasis on Personal Performance (自己執行義務 - Jiko Shikkō Gimu):
    Historically, due to the emphasis on the personal trust and confidence placed by the mandator in the specific skills, judgment, and integrity of the chosen mandatary, there was a strong presumption that the mandatary had a duty of personal performance. Unauthorized delegation or sub-contracting of the core mandated tasks was generally not permitted.
  • B. Modern Realities and Codification of Rules on Sub-Mandate (Civil Code Art. 644-2):
    Recognizing that in modern complex transactions or professional services, some degree of delegation or reliance on others might be necessary or even beneficial to the mandator, the amended Civil Code (effective April 1, 2020) introduced Article 644-2, which clarifies the rules for appointing a sub-mandatary (復受任者 - fuku-juninsha). This article provides a more structured approach than the previous reliance on general principles.
    Under Article 644-2, Paragraph 1, a mandatary may appoint a sub-mandatary to handle the entrusted affairs only if one of the following conditions is met:
    1. The mandator has consented to such an appointment; OR
    2. There are unavoidable circumstances (やむを得ない事由 - yamu o enai jiyū) that necessitate it (e.g., sudden illness of the mandatary preventing personal performance of an urgent task).
      This is a relatively restrictive rule, underscoring that delegation is not a general right of the mandatary but an exception.
  • C. Mandatary's Responsibility for the Sub-Mandatary:
    Even if a sub-mandatary is permissibly appointed, the original mandatary generally remains responsible to the mandator for the performance of the entrusted affairs. While Article 644-2 itself does not explicitly detail the full scope of the original mandatary's liability for a sub-mandatary's actions, general principles suggest that the original mandatary cannot simply discharge their own responsibility by proving they exercised due care in selecting and supervising the sub-mandatary if the sub-mandatary ultimately breaches the duties owed to the mandator or performs poorly. The original contract is between the mandator and the mandatary.
    However, Article 644-2, Paragraph 2, provides a specific rule when the mandatary appoints a sub-mandatary who is to act with authority to represent the mandator (i.e., as a sub-agent). In such cases, the sub-mandatary (sub-agent) is deemed to have the same rights and owe the same duties directly to the original mandator within the scope of the authority delegated to them. This creates a direct legal link between the sub-mandatary and the mandator for those specific delegated representative acts.
  • D. Distinguishing Sub-Mandate from the Use of Assistants (履行補助者 - Rikō Hojosha):
    It is important to distinguish the formal appointment of a sub-mandatary, who undertakes a portion of the mandated affairs with a degree of independence, from the mandatary's use of their own employees or assistants (履行補助者 - rikō hojosha) who act under the mandatary's direct control, supervision, and responsibility. The use of such assistants to help perform tasks is generally considered permissible without requiring the mandator's specific consent for each individual assistant, as long as the mandatary maintains overall responsibility for the work and the use of assistants does not alter the essentially personal nature of the service expected by the mandator. The mandatary remains fully liable for the actions of these assistants.

Q3: What other key duties does a mandatary have in performing the entrusted affairs?

Beyond the overarching duties of care and loyalty, and the rules on delegation, the Civil Code outlines several other specific obligations for mandataries:

  • A. Duty to Follow Mandator's Lawful Instructions (指図に従う義務 - Sashizu ni Shitagau Gimu):
    If the mandator provides specific and lawful instructions regarding the method or manner of performing the entrusted affairs, the mandatary is generally bound to follow them. The mandate is, after all, for the mandator's benefit and according to their general will.
    • Exception: If following specific instructions would clearly be contrary to the mandator's best interests or the fundamental purport of the mandate (e.g., an instruction that has become obviously detrimental due to changed circumstances unknown to the mandator), the mandatary should not blindly proceed. In such situations, the mandatary typically has a professional and ethical duty (often linked to the duty to report under Art. 645) to inform the mandator of the concerns, explain the potential adverse consequences, and seek clarification or revised instructions.
  • B. Duty to Report (報告義務 - Hōkoku Gimu) (Civil Code Art. 645):
    The mandatary has a duty to keep the mandator informed:
    • Progress Reports: The mandatary must report to the mandator on the status and progress of the entrusted affairs whenever requested by the mandator.
    • Final Report: Upon the completion (or other termination) of the mandate, the mandatary must, without delay, provide the mandator with a full and accurate report of the outcome and the entire course of the handling of the affairs.
      This duty to report includes providing a proper accounting of any funds or property received or disbursed on behalf of the mandator.
  • C. Duty to Deliver Received Property and Transfer Acquired Rights (引渡義務・権利移転義務 - Hikiwatashi Gimu / Kenri Iten Gimu) (Civil Code Art. 646):
    • The mandatary must deliver to the mandator any money, documents, or other property received in the course of, or as a result of, performing the mandated affairs (Art. 646(1)). This also includes any "fruits" (e.g., interest, dividends, rent) derived from such property.
    • If the mandatary acquires any rights (e.g., contractual rights, property rights) in their own name but for the benefit or account of the mandator (as might occur in some forms of indirect agency), they are obligated to take the necessary steps to transfer those rights to the mandator (Art. 646(2)).
  • D. Liability for Personal Use of Mandator's Money (Civil Code Art. 647):
    If the mandatary uses any money that should be delivered to the mandator, or money that was entrusted to them to be used for the mandator's benefit, for their own personal purposes, the mandatary must pay interest on the sum so used, calculated from the date of such personal use. Furthermore, if the mandator suffers any additional damages beyond the interest, the mandatary is also liable to compensate for those damages.
  • E. Implied Duty of Segregation of Property (分別管理義務 - Bunbetsu Kanri Gimu):
    Although not explicitly stated as a standalone article in the general mandate provisions of the Civil Code for all types of mandates (unlike, for instance, the explicit duty for trustees under the Trust Act, Article 34), a fundamental principle derived from the duty of care of a good manager and the duty of loyalty is that a mandatary must keep any property received or held on behalf of the mandator clearly segregated from their own personal or business assets. This is essential to protect the mandator's property rights and to facilitate proper accounting, especially in the event of the mandatary's insolvency.

Q4: How do these Japanese rules on a mandatary's duties and delegation compare to U.S. agency law principles?

While the terminology and specific codification differ, many underlying principles in Japanese mandate law find parallels in U.S. agency law:

  • A. Standard of Care and Duty of Loyalty:
    • Japan: The "care of a good manager" (Art. 644) is an objective standard of diligence. The duty of loyalty is also a fundamental expectation, often derived from the nature of the mandate and good faith.
    • U.S. Agency Law: An agent owes the principal core fiduciary duties. These include a duty of care (to act with the care, competence, and diligence ordinarily exercised by agents in similar circumstances) and a robust duty of loyalty (to act solely for the benefit of the principal in all matters connected with the agency, which includes avoiding self-dealing, conflicts of interest, and misappropriation of opportunities or confidential information) (see, e.g., Restatement (Third) of Agency §§ 8.01, 8.08). The conceptual goals are very similar.
  • B. Delegation of Authority (Sub-Agency):
    • Japan (Art. 644-2): The appointment of a sub-mandatary is restricted, generally requiring the mandator's consent or "unavoidable circumstances." The original mandatary's responsibility for the sub-mandatary's actions remains significant.
    • U.S. Agency Law: An agent generally cannot delegate acts that require the principal's personal trust and confidence in the agent, or acts that involve the agent's special skill, discretion, or judgment, without the principal's express or implied consent. Delegation of purely ministerial or mechanical acts is often permissible. If delegation is authorized, the agent typically must exercise due care in selecting the sub-agent. A properly appointed sub-agent may also owe fiduciary duties directly to the principal (Restatement (Third) of Agency §3.15). The original agent's liability for a sub-agent's misconduct can depend on the terms of the delegation and the nature of the agent's own duties.
  • C. Duty to Account and Provide Information:
    • Japan: The duty to report on request and upon completion (Art. 645) and the duty to deliver over property and rights acquired (Art. 646) are key.
    • U.S. Agency Law: Agents have a strong duty to keep and render accurate accounts of all money or property received or paid out on behalf of the principal. They also have a broad duty to provide the principal with facts that the agent knows or should know the principal would want to have (duty to provide information/disclosure) (Restatement (Third) of Agency §§ 8.11, 8.12).
  • D. Duty to Follow Instructions:
    • Japan: Mandataries must generally follow the mandator's lawful instructions, but with a responsibility to consult if instructions appear detrimental to the mandator.
    • U.S. Agency Law: An agent has a duty to obey all lawful and reasonable directions of the principal concerning the agent's actions on behalf of the principal (Restatement (Third) of Agency §8.09).

Conclusion

Mandate contracts (inin keiyaku and quasi-mandates or jun-inin) are integral to a wide array of service-based relationships in Japan, from engaging specialized professionals to broader agency arrangements. The Japanese Civil Code imposes a significant duty of care of a "good manager" on the mandatary. This objective standard, applicable even if the engagement is gratuitous, underscores the high degree of trust inherent in such relationships. This is complemented by a fundamental (and often statutorily specified for certain fiduciaries like company directors) duty of loyalty, requiring the mandatary to prioritize the mandator's interests. While personal performance is the default expectation due to this trust, the amended Civil Code now provides a clearer, albeit somewhat restrictive, framework under Article 644-2 for the appointment of sub-mandataries, generally requiring the mandator's consent or unavoidable circumstances. Furthermore, mandataries are subject to clear duties to report on the entrusted affairs, to account for and deliver any property or rights received or acquired on behalf of the mandator, and to act diligently in accordance with the mandate's purpose and the mandator's lawful instructions. For any business engaging services or acting as a service provider under contracts governed by Japanese law, a thorough understanding of these core duties related to care, loyalty, and the permissible scope of delegation is essential for establishing clear expectations, ensuring proper performance, and mitigating potential legal risks.