When commercial transactions involve multiple parties on one side of an obligation—either several entities owing a debt or several entities entitled to a claim—the legal framework governing their respective rights and liabilities becomes crucial. In Japan, the Civil Code, significantly amended effective April 1, 2020, provides the rules for such scenarios. These amendments have sought to clarify and, in some respects, substantially change how "joint and several" obligations (rentai saimu) and claims (rentai saiken), as well as indivisible obligations and claims, are treated, particularly concerning the effect of an event involving one party on the others.

General Restructuring of Multiple-Party Obligations/Claims

The Japanese Civil Code traditionally categorized obligations with multiple parties. The recent amendments have aimed to refine these categories and the rules governing them, with a particular focus on simplifying the often complex interplay of rights and duties. Key changes include the introduction of specific provisions for joint and several claims (which were not explicitly detailed in the old Code), a significant review of which events have an "absolute effect" (affecting all parties) versus a "relative effect" (affecting only the specific party involved) in joint and several obligations, and a clearer distinction based on the nature of the obligation (divisible or indivisible).

For instance, if Company A in the US enters into a contract where Japanese Companies B and C jointly agree to pay a sum of 40 million yen for services rendered by Company A, the question arises: can A demand the full 40 million from B alone, or from C alone, or must it claim a proportionate share from each? And if A makes a demand on B, does that affect C's legal position, for example, regarding the statute of limitations? The amended Civil Code provides updated answers.

Obligations with Multiple Debtors

When several parties owe an obligation to a single creditor, the nature of their liability can vary.

1. Divided Obligations (Bunkatsu Saimu) – The Default

Under Article 427 of the Civil Code (which itself was not amended), if several persons owe a divisible obligation, each debtor is, by default, liable only for an equal portion of the debt, unless specific laws or an agreement stipulate otherwise. So, in the absence of a "joint and several" clause or specific legal provision, if Companies B and C owe 40 million yen, each might only be liable for 20 million yen.

2. Joint and Several Obligations (Rentai Saimu)

This is a common and critical concept. Article 436 of the amended Civil Code clarifies that joint and several obligations arise when, for an obligation that is divisible by its nature, multiple persons assume the obligation jointly and severally, either by provision of law or by an agreement (which can be express or, in some cases, implied). The creditor can then demand full or partial performance from any one of the debtors, or from all of them simultaneously or sequentially.

So, if Companies B and C jointly and severally owe 40 million yen to Company A, A can demand the entire 40 million from B, or the entire 40 million from C, or 10 million from B and 30 million from C, etc., until the full amount is paid.

The Crucial Shift: From Absolute to Predominantly Relative Effect (Article 441)
A major reform concerns how events affecting one joint and several debtor impact the others. The old Civil Code listed several instances where an event concerning one debtor had an "absolute effect" (zettai-kō), automatically binding or benefiting the other co-debtors.

The amended Article 441 fundamentally shifts this by establishing the principle of relative effect (sōtai-kō) as the general rule. This means that, unless specifically provided otherwise by law or by an agreement between the creditor and the other co-debtors, an event that occurs with respect to one joint and several debtor does not affect the obligations of the other co-debtors.

Events Still Having Absolute Effect:
Despite the general shift to relative effect, certain events continue to affect all joint and several debtors:

• Performance: If one debtor performs the obligation (e.g., pays the debt), the obligation is extinguished for all debtors. This is inherent to the nature of the single debt.
• Novation (Kōkai) (Article 438): If the creditor and one debtor agree to replace the old debt with a new one (novation), the original obligation is extinguished for all co-debtors.
• Set-off (Sōsai) by a Debtor (Article 439, Paragraph 1): If one joint and several debtor has a claim against the creditor and validly effects a set-off, the debt is extinguished for all co-debtors to the extent of the set-off.
• Confusion (Kondō) (Article 440): If the rights of the creditor and the obligations of one debtor merge in the same person (e.g., a debtor inherits the creditor's position), that debtor is deemed to have performed, and the obligation is extinguished for all.

Events Now Generally Having Only Relative Effect (due to Article 441 and deletion of old articles):
This is where the most significant changes lie for creditors managing claims against multiple Japanese debtors.

• Demand for Performance (Rikō no Seikyū): Under the old law (former Article 434), a demand for performance made to one joint and several debtor had an absolute effect, for instance, interrupting the statute of limitations (prescription) for all debtors. This article was deleted. Now, under Article 441, a demand made to one debtor generally has only a relative effect. This means that to interrupt prescription for all debtors, the creditor must make a demand on each debtor individually, unless there's an agreement to the contrary. This is a crucial point for creditors, as it potentially weakens their position if not carefully managed.
• Release/Waiver of Obligation (Menjo): Previously (former Article 437), if a creditor released one joint and several debtor from the obligation, this generally had an absolute effect, reducing the liability of other debtors by the released debtor's internal share. This article was also deleted. Under Article 441, a release granted to one debtor now generally only benefits that specific debtor. The creditor can, in principle, still claim the full amount from the remaining debtors. The internal recourse relationships among the debtors (governed by Articles 442 et seq.) will then determine how the ultimate burden is shared. Article 445 confirms that even if one debtor is released, other debtors who pay the creditor can still seek recourse from the released debtor for their share.
• Completion of Prescription (Statute of Limitations, Jikō no Kansei): Formerly (old Article 439), if the statute of limitations ran out for one joint and several debtor, it often benefited all other debtors (absolute effect). This article was deleted. Now, under Article 441, the completion of prescription for one debtor is generally a relative event. This strengthens the creditor's position, as the claims against other debtors (for whom prescription has not run) remain viable for the full amount. Again, Article 445 allows a paying co-debtor to seek recourse from the debtor whose obligation had prescribed.

Right of Other Debtors to Invoke a Co-Debtor's Set-Off Right (Article 439, Paragraph 2):
If one joint and several debtor (Debtor X) has a monetary claim against the creditor, which could be used for set-off, but Debtor X does not exercise this right, what can the other co-debtors (Debtors Y and Z) do if the creditor demands payment from them?
The amended Article 439, Paragraph 2 provides that in such a situation, Debtors Y and Z can refuse to perform their obligation to the creditor, but only up to the extent of Debtor X's internal share (futan bubun) of the joint and several debt. This is a change from some older case law that suggested other debtors could actually effect the set-off themselves. The amended law limits their right to a refusal to perform for that specific portion, preserving Debtor X's autonomy over their own claim.

Internal Recourse (Kyūshō-ken) (Articles 442-445):
When one joint and several debtor pays more than their internal share of the debt (which, among themselves, are often presumed equal unless otherwise agreed), they have a right of recourse against the other co-debtors for their respective shares. Article 442 now clearly states that this right of recourse arises even for partial performance exceeding the paying debtor's share, calculated proportionally. These recourse rules are now also considered applicable to situations previously termed "improper joint and several obligations" (fushinsei rentai saimu), such as the liability of joint tortfeasors.

3. Indivisible Obligations (Fukabun Saimu) with Multiple Debtors (Article 430)

An indivisible obligation is one where the subject-matter of the performance cannot be divided by its nature (e.g., the obligation to deliver a specific, unique painting). The amended Code specifies that an obligation becomes an indivisible obligation only if it is indivisible by its nature. Parties cannot make a divisible obligation (like payment of money) "indivisible" by mere agreement; if they want a similar effect of all being liable for the whole, they should use a joint and several obligation.

For indivisible obligations owed by multiple debtors, Article 430 states that the provisions concerning joint and several obligations generally apply mutatis mutandis. However, there's a notable exception explicitly mentioned in the Civil Code and highlighted in the commentary:

• Confusion (Kondō): If an indivisible obligation and the corresponding claim merge in one of the indivisible debtors, this event has only a relative effect on the other co-debtors (unlike in joint and several obligations where it has an absolute effect). The rationale given is that for indivisible obligations, the nature of the primary performance and the nature of any subsequent internal recourse may differ significantly, making the "avoidance of circuity" argument (which supports absolute effect for confusion in joint and several obligations) less applicable. For other events like performance, novation, or set-off by one debtor, the rules for joint and several obligations would largely apply, resulting in absolute effects.

Obligations with Multiple Creditors

The amended Civil Code also clarifies rules for situations where multiple creditors are entitled to the same claim from a single debtor.

1. Divided Claims (Bunkatsu Saiken) – The Default

Similar to divided obligations, Article 427 dictates that if multiple persons are entitled to a divisible claim, each creditor is by default entitled only to an equal share of the claim, unless law or agreement states otherwise.

2. Joint and Several Claims (Rentai Saiken) (Articles 432-435-2)

This is a significant area where the amended Code introduced new, explicit provisions, as the old Code lacked detailed rules for joint and several claims.
Article 432 defines a joint and several claim: if a claim is divisible by its nature, multiple persons can hold it jointly and severally by provision of law or by agreement. In such a case:

• Each joint and several creditor can demand full or partial performance from the debtor for the benefit of all creditors.
• The debtor can fully discharge the obligation by performing to any one of the joint and several creditors.

Effect of Events Concerning One Joint and Several Creditor:
The governing principle, as per Article 435-2, is generally relative effect, unless specified otherwise by law or by agreement between the debtor and the other joint and several creditors.

Events with Absolute Effect on Joint and Several Claims:

• Performance to One Creditor (Article 432): As stated, this discharges the debtor's obligation towards all creditors.
• Novation or Release (Menjo) (Article 433): If the debtor and one joint and several creditor agree to a novation or if one creditor releases the debtor, the other joint and several creditors cannot demand performance of the portion of the claim that corresponds to the share of benefit the creditor who made the novation or release would have been entitled to. This is described as a "proportional absolute effect." This is designed to prevent circuity that would arise if the effect were purely relative (other creditors claim in full, then the debtor seeks reimbursement from the releasing creditor).
• Set-off (Sōsai) by the Debtor (Article 434): If the debtor has a claim against one of the joint and several creditors and effects a set-off against that creditor, the set-off is effective against all the other joint and several creditors as well (i.e., the debt is reduced or extinguished for all).
• Confusion (Kondō) (Article 435): If the claim of one joint and several creditor merges with the debtor's obligation (e.g., the creditor becomes the debtor by inheritance), the debtor is deemed to have performed the obligation, and it is extinguished for all creditors.

3. Indivisible Claims (Fukabun Saiken) with Multiple Creditors (Article 428)

An indivisible claim is one where the subject-matter of the debtor's performance is indivisible by its nature (e.g., a claim for the delivery of a specific, unique artwork) and is owed to multiple creditors. As with indivisible obligations, the amended Code limits this to "nature-based" indivisibility. Parties cannot simply agree to make a divisible claim indivisible; they would use a joint and several claim structure if they desire that each creditor can claim the whole.

For indivisible claims, Article 428 states that the provisions concerning joint and several claims apply mutatis mutandis, with the important exceptions of Article 433 (novation and release) and Article 435 (confusion).

• Novation or Release with One Indivisible Creditor (Article 429): If a novation or release occurs between the debtor and one of the indivisible creditors, this has only a relative effect. The other indivisible creditors can still demand full performance from the debtor. However, if they do so, the debtor is then entitled to be reimbursed by the creditor who agreed to the novation or release for the share of benefit that creditor would have lost. This specific rule for indivisible claims (Article 429) is distinct from the proportional absolute effect seen in joint and several claims (Article 433).
• Other Events: For events like performance by the debtor to one creditor, or set-off by the debtor against one creditor, the rules for joint and several claims would generally apply, leading to absolute effects.

Practical Considerations for Businesses

The amendments to the rules on multiple-party obligations and claims, especially the shift towards relative effects for many events in joint and several obligations, have significant practical implications:

• Contract Drafting: When dealing with multiple Japanese parties as co-debtors or co-creditors, it is more important than ever to clearly specify in the contract whether their obligations/rights are divided, joint and several, or (if the subject matter is by nature indivisible) indivisible. Parties can, by agreement (as allowed by Article 441 for joint and several obligations, and Article 435-2 for joint and several claims), opt for absolute effects for certain events if desired.
• Enforcement Strategy: If you are a creditor facing multiple joint and several debtors, be aware that actions like sending a demand notice or interrupting prescription against one debtor will generally not automatically affect your rights against the others. A comprehensive strategy addressing each debtor may be necessary.
• Release Negotiations: Releasing one joint and several debtor might not reduce the total recoverable amount from other debtors as it often did under the old law. However, the released debtor might still be subject to recourse claims from co-debtors who pay more than their share.
• Prescription Management: Diligently track prescription periods for each joint and several debtor individually, as the running of time against one will not typically shield the others.

Conclusion

The Japanese Civil Code amendments have brought a more structured and, in some areas, a fundamentally different approach to obligations and claims involving multiple parties. The most notable change is the significant narrowing of "absolute effects" in joint and several obligations, with most events now having only a "relative effect" unless specifically stated otherwise. This requires creditors to be more proactive in managing their rights against each individual joint and several debtor. The introduction of clear rules for joint and several claims also provides better guidance. Businesses engaging in transactions with multiple parties in Japan should review their standard agreements and enforcement strategies in light of these important revisions.