Recovering a Loan in Japan: What are the Key Factual Allegations for a Lender to Succeed in Court?

The recovery of loaned funds is a common issue that businesses and individuals face. When a borrower in Japan fails to repay a loan, the lender seeking recourse through the Japanese courts must understand the specific factual allegations, known as "Yokenjijitsu" (要件事実), that are necessary to establish their claim. Japanese law, particularly the Civil Code, sets out a clear framework for what constitutes a loan and what a lender needs to prove to demand its repayment.

The "Loan for Consumption" (Shōhi Taishaku Keiyaku) in Japan

The primary legal concept governing most monetary loans in Japan is the "loan for consumption" (shōhi taishaku keiyaku - 消費貸借契約). Article 587 of the Japanese Civil Code defines this type of contract: "A loan for consumption becomes effective when one of the parties receives money or other things from the other party by promising that he/she will return by means of things of the same kind, quality, and quantity."

A crucial characteristic of a loan for consumption under Japanese law is its nature as a "real contract" (yōbutsu keiyaku - 要物契約). This means that the mere agreement to lend and borrow is not sufficient to form the contract. The contract is only perfected, and thus legally effective, upon the actual delivery of the money or other fungible goods from the lender to the borrower. This requirement for delivery is a fundamental element and distinguishes it from purely consensual contracts where agreement alone suffices.

Identifying the "Subject Matter of Litigation" (Soshōbutsu)

For a lender bringing a lawsuit to recover a loan, the "subject matter of litigation" (soshōbutsu - 訴訟物) is typically defined as "the right to claim repayment of the principal sum based on a loan for consumption contract." To properly identify this claim, the lender will need to specify:

• The parties involved (lender and borrower).
• The date the loan was made (or the contract formed through delivery).
• The principal amount of the loan.
• Any agreed-upon repayment terms, if applicable.

Core Factual Allegations (Yokenjijitsu) for the Lender's Claim (Seikyū Gen'in)

To succeed in court, the lender (plaintiff) must allege and, if disputed by the borrower (defendant), prove the following core Yokenjijitsu as their cause of action (seikyū gen'in - 請求原因):

1. Agreement to Repay (金銭の返還の合意 - kinsen no henkan no gōi):
   • The lender must allege that there was an agreement between themselves and the borrower. This agreement entails the borrower's promise to return money (or other fungibles) of the same kind, quality, and quantity as those they received. This establishes the "loan" aspect, as opposed to a gift or some other form of transfer.
2. Delivery of the Loaned Money or Fungibles by the Lender (金銭等の交付 - kinsen tō no kōfu):
   • As a loan for consumption is a real contract, the lender must allege that they actually delivered the agreed-upon sum of money (or the specific fungible goods) to the borrower. This act of delivery is what perfects the contract. Proof of this delivery (e.g., bank transfer records, signed receipts) is often a critical piece of evidence. Without delivery, the loan contract for consumption is not formed, and thus no obligation to repay arises under Article 587.
3. Agreement on the Repayment Date and Its Arrival (返還時期の合意とその到来 - henkan jiki no gōi to sono tōrai) (If a Repayment Date Was Fixed):
   • If a specific date or condition for repayment was agreed upon: The lender must allege the terms of this agreement (e.g., "repayment due on December 31, 2024," or "repayment due upon the borrower securing X contract").
   • The arrival of this date or fulfillment of the condition: The lender must also allege that the agreed-upon repayment date has passed, or the condition has been met. The passage of a specific calendar date is often a "notorious fact" (顕著な事実 - kencho na jijitsu) that the court can recognize without extensive proof, once the agreement itself is established.
4. Demand for Repayment and Lapse of a Reasonable Period (If No Repayment Date Was Fixed):
   • If the loan agreement did not specify a repayment date, Article 591, Paragraph 1 of the Civil Code becomes relevant. It states: "If the parties did not specify the time for return, the lender may demand the return by specifying a reasonable period."
   • In such cases, the lender’s Yokenjijitsu must include:
     • The act of demanding repayment (saikoku - 催告): The lender must allege they made a formal demand to the borrower for repayment.
     • Fixing a reasonable period for repayment within that demand: The demand should specify a period considered reasonable under the circumstances for the borrower to prepare for and make the repayment.
     • The lapse of that reasonable period: The lender must allege that this specified reasonable period has passed since the demand was made, and repayment has not occurred. The "reasonableness" of the period can be a point of contention and may depend on factors like the loan amount and the parties' relationship.

Successfully alleging and proving these elements establishes the lender's prima facie right to have the loan repaid.

Facts Typically Not Forming Part of the Lender's Initial Yokenjijitsu

Certain facts, while potentially relevant to the broader context of the loan, are generally not required as part of the lender's initial Yokenjijitsu to establish the core repayment claim:

• Purpose of the Loan (貸付目的 - kashitsuke mokuteki): The reason why the borrower needed the funds is usually irrelevant to the legal obligation to repay the principal sum.
• Agreement on Interest (利息の合意 - risoku no gōi): If the lender is only suing for the return of the principal amount, then an agreement regarding interest is not a necessary Yokenjijitsu for that specific claim. If the lender also wishes to claim unpaid interest, they must allege separate Yokenjijitsu for the interest claim, such as an agreement to pay interest and the agreed-upon interest rate.
• The Fact of Non-Repayment by the Borrower: The lender's claim is based on their right to have the loan repaid. The assertion that the borrower has not yet repaid is inherent in the act of filing the lawsuit. The act of repayment (bensai - 弁済) is a fact that extinguishes the lender's right. Therefore, if the borrower claims they have already repaid the loan, this constitutes an affirmative defense (kōben - 抗弁), and the burden of alleging and proving this payment falls on the borrower.

Allocation of Burden of Pleading and Proof

The lender (plaintiff), as the party asserting the right to repayment, bears the burden of pleading (shuchō sekinin - 主張責任) and, if these facts are contested, the burden of proof (risshō sekinin - 立証責任) for all the Yokenjijitsu necessary to establish their claim. This includes the agreement to repay, the delivery of the funds, and either the arrival of the agreed repayment date or the completion of the demand process if no date was initially set.

The Borrower's (Defendant's) Common Responses

When faced with a loan repayment claim, a borrower might raise several responses:

• Denial of Key Yokenjijitsu: The borrower might deny that the money was ever delivered, or that there was ever an agreement for the money to be repaid (i.e., it wasn't a loan).
• Assertion of a Gift (Zōyo - 贈与) Instead of a Loan: A frequent defense is for the borrower to admit receiving the money but to argue that it was a gift from the lender, with no obligation of repayment.
  • Legally, this assertion of a gift functions as an "affirmative denial" (sekkyoku hinin - 積極否認) of the lender's Yokenjijitsu regarding the "agreement to repay."
  • Crucially, the borrower does not bear the burden of proving that a gift was made. Instead, the burden remains on the lender to prove that there was an agreement to repay (i.e., that it was a loan). The borrower's claim of a gift is intended to refute or cast doubt upon the lender's allegation of a loan agreement. If the lender cannot convince the court that there was an agreement to repay, their claim will fail, regardless of whether the borrower successfully proves all elements of a formal gift.
• Affirmative Defenses (Kōben - 抗弁): The borrower might also raise affirmative defenses, such as:
  • Repayment (Bensai - 弁済): Alleging that the loan has already been paid in full or in part.
  • Statute of Limitations (Shōmetsu Jikō - 消滅時効): Alleging that the claim is time-barred.
  • Set-off (Sōsai - 相殺): Alleging that the lender owes the borrower a separate debt that can be offset against the loan.

Claiming Interest and Default Interest (Risoku oyobi Chien Songaikin - 利息及び遅延損害金)

If the loan agreement included terms for interest, or if the lender wishes to claim default interest for late payment, these must be specifically pleaded with their own Yokenjijitsu beyond those for the principal:

• For Agreed Interest: An agreement to pay interest and the specific, agreed-upon interest rate.
• For Default Interest (Late Payment Interest): The fact that the principal (and/or agreed interest) is overdue, and either an agreed-upon default interest rate or, in the absence of such agreement, the applicable statutory default interest rate (e.g., under the Civil Code or Commercial Code, depending on the nature of the parties and transaction).

Practical Considerations for Lenders in Japan

To enhance the prospects of successful loan recovery:

• Written Loan Agreements are Paramount: Always document loan transactions in writing. A clear loan agreement (shōhi taishaku keiyakusho - 消費貸借契約書) should specify the parties, the principal amount, the date of fund delivery, explicit repayment terms (date, number of installments, etc.), and any agreed interest or default interest rates.
• Maintain Clear Proof of Fund Delivery: Bank transfer statements, signed receipts, or other verifiable records of the money changing hands are crucial to satisfy the "delivery" element for forming the loan for consumption.
• Document Demands for Repayment: If no repayment date was initially set, any demand (saikoku) for repayment should be made clearly, preferably in a manner that can be proven (e.g., content-certified mail - naiyō shōmei yūbin - 内容証明郵便), and should specify a reasonable period for repayment.
• Be Aware of Potential Defenses: Anticipate common defenses, such as claims of a gift, and ensure your evidence robustly supports the characterization of the transaction as a loan.

Conclusion

Successfully recovering a loan through the Japanese legal system requires a lender to meticulously establish the specific Yokenjijitsu that underpin a "loan for consumption." This means proving not only an agreement to repay but, critically, the actual delivery of the loaned funds, as well as the maturation of the repayment obligation (either through an agreed date or a formal demand process). Understanding these requirements, particularly the "real contract" nature of such loans and the evidential nuances when faced with defenses like an assertion of a gift, is essential for any party seeking to enforce loan repayment obligations in Japan.