What is a "Joint and Several Guarantee" (Rentai Hosho) in Japan, and How Does It Differ from a Simple Guarantee?

When a creditor in Japan seeks to secure an obligation, particularly a significant one, they often request a guarantee. While a "simple" or "ordinary" guarantee (futsu hosho 普通保証) provides a layer of security, a far more potent and commonly utilized instrument is the "Joint and Several Guarantee," known as Rentai Hosho (連帯保証). Understanding the critical distinctions between these two forms, especially the heightened liability faced by a joint and several guarantor, is essential for anyone involved in Japanese contractual and financing arrangements, whether as a creditor, debtor, or prospective guarantor.

Recap: The "Simple" or "Ordinary" Guarantee and Its Protections (Subsidiarity)

Before delving into joint and several guarantees, it's helpful to recall the fundamental characteristics of a simple guarantee under the Japanese Civil Code:

1. Accessory Nature (Fujusei 付従性): This is common to all true guarantees. The guarantee obligation is dependent on the existence, validity, and scope of the principal debt. If the main debt is void or extinguished, so is the guarantee. The guarantor can also assert most defenses available to the principal debtor against the creditor (Japanese Civil Code Art. 457, Para. 1).
2. Subsidiary/Supplementary Nature (Hojusei 補充性): This is the hallmark of a simple guarantee and provides crucial protections for the guarantor. It means the guarantor's liability is secondary to that of the principal debtor. This subsidiarity gives rise to two key defenses for the simple guarantor:
   • Defense of Notice (Saikoku no Kobenken 催告の抗弁権 – Art. 452): When the creditor demands performance from a simple guarantor, the guarantor can insist that the creditor first make a formal demand for performance against the principal debtor. The creditor must then generally pursue the principal debtor before returning to the guarantor (unless the principal debtor is bankrupt or their whereabouts are unknown).
   • Defense of Prior Execution/Search (Kensaku no Kobenken 検索の抗弁権 – Art. 453): Even if the creditor has demanded performance from (or sued) the principal debtor, if the creditor then attempts to enforce the debt against the simple guarantor, the guarantor can demand that the creditor first levy execution against the principal debtor's assets. To successfully invoke this, the guarantor must prove that the principal debtor has sufficient easily executable assets.

These defenses effectively position the simple guarantor as a "backup" source of payment, who should only be called upon after reasonable efforts to recover from the principal debtor have failed or are clearly futile.

What is a "Joint and Several Guarantee" (Rentai Hosho – Article 454)?

A "Joint and Several Guarantee" (Rentai Hosho) is a type of guarantee where the guarantor explicitly undertakes to be liable "jointly and severally" (rentai shite 連帯して) with the principal debtor for the performance of the principal obligation.

The Defining Feature: Absence of Subsidiarity Defenses (Art. 454)
The single most critical difference between a simple guarantee and a joint and several guarantee lies in the complete absence of the subsidiarity defenses for the joint and several guarantor. Article 454 of the Civil Code unequivocally states:
"If a guarantor has undertaken an obligation jointly and severally with the principal obligor, such guarantor shall not have the rights set forth in Article 452 [Defense of Notice] and Article 453 [Defense of Prior Execution]."

Consequences of Lacking Subsidiarity Defenses:
This absence has profound implications for the joint and several guarantor:

• The creditor can demand full performance directly from the joint and several guarantor immediately upon the principal debtor's default, or even if the principal debtor has not yet been formally pursued for payment.
• The joint and several guarantor cannot compel the creditor to first demand payment from the principal debtor.
• The joint and several guarantor cannot compel the creditor to first attempt to execute against the principal debtor's assets, even if such assets exist and are easily identifiable.

In essence, the joint and several guarantor's liability to the creditor becomes co-extensive with, and as immediate as, that of the principal debtor. The creditor has the discretion to pursue either the principal debtor, the joint and several guarantor, or both, in any order, for the full amount of the debt until it is satisfied. This places the joint and several guarantor in a position very similar to that of a joint and several co-obligor (rentai saimusha) vis-à-vis the creditor.

Why is Joint and Several Guarantee Strongly Preferred by Creditors?

Given the above, it's clear why creditors in Japan overwhelmingly prefer, and often insist upon, joint and several guarantees:

• Significantly Stronger Security: It provides a much more robust and readily enforceable form of security compared to a simple guarantee.
• Avoidance of Procedural Hurdles: The creditor does not need to go through the procedural steps of first demanding from and attempting to execute against a potentially defaulting or insolvent principal debtor before turning to the guarantor. This saves time, cost, and uncertainty.
• Immediate Recourse: The creditor can proceed directly against the joint and several guarantor as soon as the conditions for claiming under the guarantee are met (typically, the principal debtor's default).

How Are Joint and Several Guarantees Formed?

A guarantee takes on a joint and several nature primarily in two ways:

1. By Explicit Agreement:
   The most common method is through the guarantee contract itself. If the contract expressly states that the guarantor "guarantees jointly and severally with the principal debtor" (shu-saimusha to rentai shite hosho suru 主債務者と連帯して保証する) or uses other clear language indicating the assumption of joint and several liability and the waiver of subsidiarity defenses, it will be treated as a Rentai Hosho.
2. By Operation of Law – Commercial Guarantees (Japanese Commercial Code Art. 511, Para. 2):
   This is a particularly important rule for business transactions and a common reason why many business-related guarantees in Japan are joint and several. Article 511, Paragraph 2 of the Commercial Code stipulates:
   "If a guarantee is given for an obligation that has arisen from a commercial transaction of the principal debtor, such guarantee shall be joint and several with the principal debtor."
   • This means that if a guarantee is provided for a debt that is a "commercial obligation" of the principal debtor (e.g., a business loan, a debt arising from the sale of goods between merchants, etc.), the guarantee is automatically and by law presumed to be a joint and several guarantee, unless the parties explicitly agree otherwise in the guarantee contract (i.e., by specifically stating it is an ordinary/simple guarantee and that the defenses of notice and search apply).
   • Given that many guarantees in a business context relate to commercial transactions of the principal debtor, this statutory presumption effectively makes Rentai Hosho the default for such guarantees.

What Remains the Same? The Accessory Nature (Fujusei)

Despite the elimination of subsidiarity, a joint and several guarantee retains its fundamental characteristic of being accessory to the principal debt. This means:

• Dependence on Principal Debt: The existence, validity, and scope of the joint and several guarantee still depend on the principal debt (Japanese Civil Code Art. 447, Para. 1; Art. 448). If the principal debt is void or extinguished (e.g., paid by the debtor), the joint and several guarantee also ceases. The guarantor's liability cannot exceed that of the principal debtor.
• Guarantor's Right to Use Debtor's Defenses: Crucially, the joint and several guarantor can still assert against the creditor any defenses that the principal debtor has against the creditor concerning the principal obligation (Art. 457, Para. 1). For example, if the principal contract was invalid, if the debt was induced by the creditor's fraud against the principal debtor, or if the principal debtor has a valid set-off claim against the creditor, the joint and several guarantor can raise these defenses to refuse or reduce their own payment.

The "joint and several" nature primarily affects the procedural aspect of when and how the creditor can pursue the guarantor; it does not strip the guarantee of its substantive link to the underlying principal debt.

Internal Relationship: Guarantor's Right of Reimbursement Unaffected

The fact that a guarantee is joint and several primarily governs the guarantor's external liability to the creditor. It does not eliminate or alter the joint and several guarantor's internal right of reimbursement (kyushoken 求償権) against the principal debtor if the guarantor pays the debt (as per Japanese Civil Code Art. 459 et seq.). After satisfying the creditor, the joint and several guarantor can seek to recover the amount paid (plus interest and expenses) from the principal debtor, just like a simple guarantor would.

Practical Implications for Guarantors

Undertaking a joint and several guarantee carries significantly higher risk than a simple guarantee:

• The guarantor can be pursued for the full debt immediately upon the principal debtor's default, without the creditor first needing to exhaust remedies against the debtor.
• The guarantor has fewer procedural defenses.
  This necessitates careful due diligence on the principal debtor's financial stability and ability to perform their obligations before agreeing to become a joint and several guarantor.

Conclusion

The distinction between a simple guarantee and a joint and several guarantee (Rentai Hosho) under Japanese law is profound and primarily revolves around the presence or absence of subsidiarity defenses. Simple guarantors benefit from the defenses of notice and prior execution, making their liability secondary. Joint and several guarantors, by contrast, lack these defenses and stand on a more primary footing, directly and immediately liable to the creditor alongside the principal debtor. Given that guarantees for business debts are often presumptively joint and several under the Commercial Code, and that creditors routinely require this form, it is the more common and potent type of guarantee encountered in Japanese commercial practice. While its accessory nature to the principal debt remains, the stripping of subsidiarity makes the Rentai Hosho a significantly more onerous undertaking for the guarantor and a much stronger form of security for the creditor.