The Nature of Guarantee Obligations in Japan: Key Characteristics Such as Accessoriness and Independence

Japanese Attorney at Law - Bengoshi L.L.

• 8 min read

Guarantee obligations (保証債務, hoshō saimu) are a cornerstone of secured transactions and credit enhancement in Japan. When a party (the guarantor) undertakes to secure the debt of another (the principal debtor) for the benefit of a creditor, a distinct legal relationship is formed. Understanding the fundamental nature and inherent characteristics of these guarantee obligations under the Japanese Civil Code is essential for anyone involved in or relying upon them. Key traits include the guarantee's status as an independent obligation, its general (though nuanced) identicality in content to the principal debt, its profound accessoriness, its ability to transfer with the principal claim, and its supplementary nature.

1. The Guarantee as a Distinct, Independent Obligation (別個債務性, Bekko Saimusei)

A fundamental principle of Japanese guarantee law is that the obligation undertaken by the guarantor is a separate and independent debt owed by the guarantor directly to the creditor. It is not merely an extension of the principal debtor's liability or a promise to make the principal debtor pay.

This distinctness has several important legal consequences:

  • Distinction from Real Security Providers: Unlike a third-party provider of real security (物上保証人, butsujō hoshōnin), who encumbers specific property to secure another's debt and whose liability is generally limited to the value of that property, a guarantor undertakes a personal obligation. This means the guarantor is potentially liable with their general assets for the fulfillment of the guarantee.
  • Sub-Guarantees and Security for Guarantees: Because the guarantee is an independent obligation, it can itself become the subject of further security. For example, another party can guarantee the guarantor's obligation (a sub-guarantee or 副保証, fuku-hoshō), or real security can be established to secure the performance of the guarantee obligation itself.
  • Specific Terms for the Guarantee Obligation: Parties can agree on specific terms applicable only to the guarantee obligation, such as liquidated damages or penalties for the guarantor's failure to perform their guarantee duties, separate from those applicable to the principal debt (see Article 447, Paragraph 2 of the Civil Code).

2. Identical Content (内容同一性, Naiyō Dōitsusei) – A General Guideline

As a general rule, the content of the guarantee obligation is intended to mirror that of the principal debt. The guarantor essentially promises to provide the same performance that the principal debtor owes if the principal debtor fails to do so.

However, this principle of identical content requires careful interpretation, especially when the principal obligation involves non-fungible performance (e.g., the obligation of a specific artist to create a unique painting). In such cases, a guarantee of that obligation is typically understood as a guarantee for the monetary damages that would arise from the principal debtor's failure to render the unique performance. The scope of what the guarantee covers (the original unique performance itself, or damages for its non-performance) is ultimately a matter of interpreting the specific guarantee agreement.

Accessoriness is arguably the most defining characteristic of a guarantee obligation under Japanese law. It signifies that the guarantee is subordinate to, and dependent upon, the existence, content, and fate of the principal debt it secures. This dependency manifests in several ways:

a. Accessoriness in Formation (成立における付従性, Seiritsu ni okeru Fujūsei)

A guarantee obligation cannot validly come into existence or be maintained if the principal debt it purports to secure does not exist, is void from the outset, or is later rescinded with retroactive effect (e.g., due to lack of legal capacity of the principal debtor or a fundamental defect in the principal contract). If there is no valid principal debt, there is nothing for the guarantee to secure.

  • Guaranteeing Restitutionary Claims: If a principal contract is void or rescinded, and this gives rise to a restitutionary claim (e.g., for the return of benefits under unjust enrichment principles), whether the original guarantee extends to cover this restitutionary claim is a matter of interpreting the scope of the guarantee agreement. Parties can agree to such extended coverage.
  • Future or Conditional Debts: A guarantee can be validly established for a principal debt that is not yet in existence or is subject to a condition (e.g., guaranteeing future loans under a credit line or debts arising upon the fulfillment of a condition). This is well-established in Japanese law.

b. Accessoriness in Content (内容に関する付従性, Naiyō ni kansuru Fujūsei)

The terms of the guarantee obligation cannot be more onerous for the guarantor than the terms of the principal debt are for the principal debtor (Article 448, Paragraph 1 of the Civil Code).

  • If a guarantee is initially structured to be more burdensome (e.g., a higher interest rate on the guaranteed amount than on the principal loan), its terms are automatically reduced to match the scope of the principal debt.
  • If the principal debt is subsequently reduced (e.g., partial payment by the principal debtor, waiver of part of the debt by the creditor), the guarantor's liability is correspondingly reduced.
  • Conversely, if the terms of the principal debt are made more burdensome after the guarantee agreement has been concluded (e.g., interest rate increased, payment accelerated without the guarantor's consent), this subsequent aggravation does not increase the guarantor's liability beyond what was originally contemplated (Article 448, Paragraph 2). The guarantor is bound only to the extent of the principal obligation as it existed or was contemplated at the time the guarantee was given, unless they consent to the increased burden.

c. Accessoriness in Extinction (消滅における付従性, Shōmetsu ni okeru Fujūsei)

If the principal debt is extinguished, the guarantee obligation also extinguishes. Common reasons for the extinction of the principal debt include:

  • Performance by the principal debtor.
  • Set-off by the principal debtor against the creditor.
  • Completion of the prescription period (statute of limitations) for the principal debt, provided prescription is duly invoked.
  • Waiver or release of the principal debt by the creditor (though the effect on co-guarantors or other obligors depends on specific rules).

However, there are critical exceptions where the principal debtor's ability to avoid enforcement does not extinguish the guarantee:

  • Principal Debtor's Bankruptcy Discharge: If the principal debtor obtains a discharge in bankruptcy, this typically releases the debtor from the enforceability of the debt against their assets but does not extinguish the debt itself for all purposes. Crucially, Article 253, Paragraph 2 of the Japanese Bankruptcy Act provides that such a discharge does not affect the rights of the creditor against a guarantor of the bankrupt debtor. The guarantee remains viable because it is precisely in situations of the principal debtor's insolvency that the guarantee is intended to function.
  • Dissolution of a Corporate Principal Debtor After Bankruptcy: If a corporate principal debtor undergoes bankruptcy proceedings and is subsequently dissolved, its legal personality ceases. While this leads to the extinguishment of the principal debt due to the absence of a debtor (as affirmed by the Supreme Court on March 14, 2003, Minshu Vol. 57, No. 3, p. 286, where no assets remain), Japanese case law has held that the guarantee obligation can survive. This is often justified by stating that to hold otherwise would defeat the purpose of guarantee law, which is to provide security against the principal debtor's failure to pay for any reason, including insolvency leading to dissolution.

d. Evidentiary Implications

Due to accessoriness, a creditor wishing to enforce a guarantee must typically plead and prove not only the guarantee agreement itself but also the existence, validity, and terms of the underlying principal debt.

e. Relaxation for Revolving Guarantees

The strictness of accessoriness is somewhat relaxed in the context of "revolving guarantees" (根保証, ne-hoshō), which secure a series of unspecified future debts arising from an ongoing relationship (e.g., a continuous line of credit). These have their own specific regulatory framework concerning limits (maximum amounts) and duration, especially for individual guarantors.

4. Transferability with the Principal Claim (随伴性, Zuihansei)

Accessoriness also manifests in the context of transfer. If the principal claim is assigned by the original creditor to a new creditor, the guarantee obligation securing that claim generally transfers automatically with the principal claim to the assignee. The new creditor acquires the benefit of the guarantee.

  • Perfection: Typically, if the assignment of the principal claim is properly perfected against the principal debtor (e.g., by notice with a certified date), this perfection is also effective for the transfer of the accessory guarantee. No separate notice to, or consent from, the guarantor is usually required for the guarantee to follow the principal claim to the assignee. However, a mere notice of assignment given only to the guarantor, without perfecting the assignment against the principal debtor, would not suffice to make the assignment of the principal claim effective against the principal debtor.

5. Supplementariness (補充性, Hojūsei)

In its classic form, a guarantee obligation is supplementary to the principal obligation. This means the guarantor is liable only if and when the principal debtor fails to perform. This characteristic gives rise to specific defenses for the guarantor, often termed "surety defenses":

a. Right to Demand Creditor Pursue Principal Debtor First (催告の抗弁権, Saikoku no Kōbenken)

As stipulated in Article 452 of the Civil Code, if a creditor makes a demand on the guarantor for performance, the guarantor can, as a general rule, require the creditor to first make a demand on the principal debtor. This right is unavailable if the principal debtor has received a ruling for the commencement of bankruptcy proceedings or if their whereabouts are unknown. In practice, this defense is often considered of limited strength because the creditor only needs to make a formal demand on the principal debtor; the outcome of that demand doesn't prevent a subsequent claim against the guarantor.

b. Right to Demand Creditor Levy Execution on Principal Debtor's Assets First (検索の抗弁権, Kensaku no Kōbenken)

Even if the creditor has already made a demand on the principal debtor, Article 453 allows the guarantor to demand that the creditor first attempt to levy execution against the assets of the principal debtor, provided the guarantor can prove that the principal debtor has the ability to satisfy the debt and that execution on their assets would be easy. "Easy execution" is a factual determination based on the nature and location of assets.

c. Waiver and Inapplicability to Joint and Several Guarantees

Both the saikoku no kōbenken and kensaku no kōbenken can be waived by the guarantor, often through explicit clauses in the guarantee agreement.
Crucially, these supplementary defenses are not available to a "joint and several guarantor" (連帯保証人, rentai hoshōnin) (Article 454 of the Civil Code). In a joint and several guarantee, the guarantor undertakes to be liable "jointly and severally" with the principal debtor. This places the guarantor in a position akin to a co-principal obligor vis-à-vis the creditor, stripping them of these supplementary defenses. Given that joint and several guarantees are very common in Japanese commercial practice, the practical availability of these defenses is often contractually excluded.

d. Evidentiary Burden for the Creditor

When a creditor sues a guarantor, they are not required to prove as part of their initial case that the principal debtor has failed to perform or is insolvent. Performance by the principal debtor is a defense that the guarantor would raise. If a guarantor (not a joint and several one) raises the defense of saikoku or kensaku, the creditor may then need to demonstrate they have met those requirements or that the conditions for the defense are not met. If the guarantee is joint and several, the creditor would rebut such defenses by proving the joint and several nature of the guarantee.

Conclusion

The guarantee obligation under Japanese law is a distinct legal undertaking characterized by its independent existence yet profound connection to the principal debt through the doctrine of accessoriness. This accessoriness influences its formation, scope, and extinction. Furthermore, guarantees typically follow the principal claim upon assignment (transferability) and, in their standard form, possess a supplementary character, affording the guarantor certain defenses—though these are commonly waived or inapplicable in the pervasive joint and several guarantee structure. A clear understanding of these foundational characteristics is indispensable for effectively navigating secured transactions and credit relationships in Japan.