What is Tender of Performance ("Bensai no Teikyō") and Its Effects on Debtor's Liability in Japan?

In the performance of obligations under Japanese law, while the primary responsibility to act rests with the obligor (debtor), the successful completion of many duties often hinges on the cooperation of the obligee (creditor). When a debtor is ready, willing, and able to perform, but the creditor fails to cooperate or accept the performance, Japanese law provides a mechanism to protect the diligent debtor: "Bensai no Teikyō" (弁済の提供), or the tender of performance. This concept is crucial as a valid tender can significantly alter the debtor's liability for non-performance or delay.

The Interplay of Debtor's Performance and Creditor's Cooperation

The process of fulfilling an obligation (履行過程 - rikō katei) is not always a unilateral act by the debtor. Except for purely negative obligations (e.g., an obligation not to do something), most obligations require some form of interaction or acceptance from the creditor to be fully discharged. This could range from the simple act of receiving goods or payment to more active participation, such as providing access to premises or supplying necessary specifications. The performance process is thus often a dynamic interplay of the debtor's acts of prestation and the creditor's cooperative acts.

Challenges When Creditor Cooperation is Lacking

A debtor who has made all necessary preparations to perform can face significant prejudice if the creditor fails to provide the required cooperation:

1. Risk of Unjust Liability: The debtor might be deemed in default (non-performance or delayed performance), incurring liability for damages or giving the creditor grounds for contract termination, even though the failure to complete performance was due to the creditor's inaction.
2. Ongoing Burdens: The debtor may remain bound by the obligation, potentially incurring further costs for maintaining readiness to perform or for preserving the subject matter of the performance.
3. Limited Affirmative Remedies for Non-Cooperation (under Tender Rules): While the creditor's failure to cooperate might constitute a breach of a separate (often implied) obligation, the specific rules surrounding "tender of performance" primarily offer the debtor a defensive shield against claims of their own default, rather than an independent cause of action against the creditor for non-cooperation itself. (Other doctrines like "creditor's delay" address different aspects of this problem).

To address these challenges, Japanese law distinguishes between the effects of a "tender of performance" (governed by Article 492 of the Civil Code, primarily focusing on shielding the debtor from default liability) and the consequences of "creditor's delay" (受領遅滞 - juryō chitai, governed by Article 413, focusing on shifting certain burdens to the uncooperative creditor). This article focuses on the former.

"Bensai no Teikyō": Meaning and Function

"Bensai no Teikyō" refers to the debtor taking all steps necessary for the performance of the obligation that can be done without the creditor's cooperation, thereby making it possible for the creditor to accept the performance. It signifies that the debtor has done their part and is only prevented from completing the performance by the creditor's failure to accept or cooperate.

The primary function of a valid tender of performance, as established in Article 492 of the Civil Code, is to relieve the debtor from liability for non-performance or delay from the moment the tender is made. It acts as a crucial defense for a debtor who has acted diligently but is stymied by the creditor. This concept is particularly relevant in two main contexts:

1. As a counter-defense in bilateral contracts: When a debtor, sued for performance, raises the defense of simultaneous performance (同時履行の抗弁権 - dōji rikō no kōbenken under Article 533), the creditor (who is also an obligor for their counter-prestation) can, in turn, assert that they have tendered their own performance.
2. To avoid liability for default: This is the focus of Article 492, where a debtor tenders performance to avoid being held liable for damages or having the contract terminated by the creditor due to non-performance, when such non-completion is attributable to a lack of creditor cooperation.

This article will primarily explore the second context.

Effects of "Bensai no Teikyō" (Article 492 of the Civil Code)

A valid tender of performance has several significant legal effects concerning the debtor's liability:

1. Exemption from Liability for Non-Performance

Article 492 of the Civil Code states: "An obligor shall be relieved from any and all liability to arise from the non-performance of the obligation from the time of tendering performance." (債務者は、弁済の提供の時から、債務を履行しないことによって生ずべき責任を免れる。) This means:

• No Default Interest: The debtor will not be liable for default interest (遅延損害金 - chien songaikin) that would otherwise accrue from the time of the valid tender.
• No Contract Termination by Creditor: The creditor cannot terminate the contract based on the debtor's failure to perform if such failure is subsequent to a valid tender and due to the creditor's non-acceptance.
• No Contractual Penalties: Any contractual penalties (違約金 - iyakukin) stipulated for non-performance or delay will not be applicable for the period after a valid tender.
• Non-Enforceability of Security Interests: Security interests (e.g., mortgages, pledges) granted to secure the obligation cannot be enforced on the grounds of non-performance occurring after a valid tender.
• Cessation of Agreed Interest: In some cases, even contractually agreed interest (約定利息 - yakujō risoku) may cease to accrue. If it were to continue accruing despite the debtor having done everything possible to perform, it would effectively penalize the debtor similarly to default interest. This is particularly relevant for interest-bearing loans where the debtor tenders full repayment at or after maturity.

The precise scope of "liability to arise from the non-performance" has been subject to interpretation, especially concerning contract termination rights. While earlier drafts of the Civil Code revision explicitly separated the exemption from damages and the preclusion of contract termination, the final version of Article 492 uses a unified expression. Scholarly consensus suggests that this unified expression should be interpreted broadly to include the inability of the creditor to terminate the contract, consistent with the provision's protective purpose for the diligent debtor.

2. The Underlying Obligation Continues to Exist

It is critical to understand that a tender of performance, by itself, does not extinguish the underlying substantive obligation (the claim itself - 債権の存続 - saiken no sonzoku). The debtor is relieved from the consequences of default, but the debt remains.

To achieve the actual extinguishment of the obligation when a creditor refuses to accept a valid tender, the debtor typically must take the further step of making a formal deposit (供託 - kyōtaku) of the subject matter of the performance with a competent authority (e.g., a Legal Affairs Bureau) in accordance with Article 494 of the Civil Code. Tender alone does not prevent the creditor from eventually accepting the performance or, if other independent grounds for enforcement exist, pursuing them (though the fact of tender would complicate such actions).

3. Relationship with "Juryō Chitai" (Creditor's Delay)

A valid tender of performance by the debtor is usually a prerequisite for the creditor to be considered in "creditor's delay" (受領遅滞 - juryō chitai) under Article 413 of the Civil Code. Creditor's delay has its own set of legal effects, such as reducing the debtor's duty of care for specific things or making the creditor liable for increased performance costs. While related—as both often arise from the creditor's failure to accept a ready performance—the effects of tender (focused on the debtor's non-liability for default) and the effects of creditor's delay (focused on imposing burdens on the uncooperative creditor) are legally distinct concepts stemming from the same factual scenario of a properly tendered but unaccepted performance.

Content and Types of Valid Tender (Article 493 of the Civil Code)

Article 493 of the Civil Code specifies what constitutes a legally sufficient tender of performance. It primarily distinguishes between "actual tender" and "oral tender."

1. Actual Tender ("Genjitsu no Teikyō" - 現実の提供)

This is the standard and primary form of tender. Actual tender occurs when the debtor does everything that is necessary to complete the performance in accordance with the tenor of the obligation, such that the only remaining step for completion is the creditor's cooperation (e.g., acceptance of delivery, receipt of payment).

• No Need to Demand Cooperation: The debtor is not required to specifically demand or urge the creditor to cooperate. The focus is on the debtor's state of readiness and the availability of the performance.
• Creditor's Absence: If the performance is to be made at a specific place and time, and the debtor is present and ready with the performance, the creditor's absence does not invalidate the actual tender.
• Examples:
  • For an obligation performable at the creditor's address ("jisan saimu" - 持参債務), the debtor bringing the subject matter (e.g., money, goods) to the creditor's designated place of performance at the due time constitutes actual tender, even if the creditor is not present to receive it.
  • For an obligation where the creditor is to collect the performance ("toritate saimu" - 取立債務), the debtor having the subject matter segregated and ready for the creditor to take at the agreed place and time is actual tender.
• Conformity with the Obligation's Tenor: The tender must be fully in accordance with the terms of the obligation. For instance, tendering only a partial amount of a monetary debt is generally not a valid tender, unless the shortfall is so trivial that refusing it would violate good faith (a principle acknowledged in a Supreme Court decision of December 15, 1960, though the specific monetary values are of their time). Similarly, tendering an excessive amount, especially if it puts the creditor in a difficult position (e.g., requiring them to acknowledge disputed items to receive undisputed ones, as per a Supreme Court decision of November 27, 1956), is usually not a valid tender.
• Monetary Obligations and Payment Instruments:
  • The tender of certain highly liquid and secure payment instruments, such as postal money orders (郵便為替 - yūbin kawase), cashier's checks issued by a bank (銀行の自己宛小切手 - ginkō no jikoate kogitte), or bank-guaranteed checks (銀行が支払保証をした小切手 - ginkō ga shiharai hoshō o shita kogitte), has often been recognized as valid actual tender due to their inherent payment certainty and common acceptance in commerce.
  • However, reliance on these instruments is not absolute. For example, some legal scholars express reservations about unconditionally accepting bank-issued checks as equivalent to cash tender, especially considering past instances of financial institution failures.
  • The tender of a personal check, which lacks guaranteed payment, is generally not considered valid actual tender.
  • Simply providing a bank passbook (預金通帳 - yokin tsūchō) has traditionally not been seen as actual tender of the funds themselves; performance occurs when the funds are actually withdrawn and made available. The legal status of this practice might warrant re-evaluation in light of modern banking regulations like those concerning AML/KYC.

2. Oral Tender ("Kōtō no Teikyō" - 口頭の提供)

Oral tender is an exceptional form of tender, permitted by the proviso to Article 493 when:

• The creditor has previously clearly stated their refusal to accept performance (あらかじめ受領を拒んだ場合 - arakajime juryō o kobanda baai).
• The performance of the obligation requires a prior act of cooperation from the creditor (履行につき債権者の行為を要する場合 - rikō ni tsuki saikensha no kōi o yōsuru baai), and the creditor has failed to perform that act.

For an oral tender to be valid, the debtor must:

• Have made all necessary preparations for performance (弁済の準備をしたこと - bensai no jumbi o shita koto). This means the debtor must be in a state of readiness to make an actual tender immediately if the creditor changes their mind and decides to accept, or if the creditor performs their necessary preceding act.
• Notify the creditor that these preparations are complete.
• Request (催告 - saikoku) the creditor to accept the performance.

Debtor's Continued Readiness: Even when oral tender is permissible, the debtor must maintain this state of readiness. If the creditor, in response to an oral tender, indicates willingness to accept or performs their cooperative act, the debtor must then proceed with actual tender without delay. Failure to do so at that point could place the debtor in default. The burden of maintaining readiness can be significant, and if the creditor's non-cooperation is prolonged, making a formal deposit (kyōtaku) might be a more secure way for the debtor to definitively discharge their responsibilities.

Examples of Creditor's Prior Acts Justifying Oral Tender:

• An obligation where the creditor is to collect goods at the debtor's location, and the creditor fails to come for collection.
• An obligation where the creditor must first specify the precise place or time for performance.
• A manufacturing contract where the creditor (customer) is obliged to supply materials to the debtor (manufacturer) before work can commence, and fails to do so.
• In the context of real estate registration under current Japanese law (which mandates joint application), the creditor's participation in the registration application can be seen as a necessary prior act.

3. Cases Where Even Oral Tender is Not Required ("Kōtō no Teikyō sura Hitsuyō to sarenai Baai")

Although Article 493 formally requires at least an oral tender even if the creditor has previously refused performance (the rationale being that the creditor might change their mind), Japanese case law has, through the application of the principle of good faith (信義則 - shingisoku), carved out exceptional situations where even an oral tender by the debtor is deemed unnecessary to avoid liability for default.

• Firm and Definitive Refusal by Creditor ("Kakuteiteki na Juryō Kyozetsu" - 確実的な受領拒絶):
  • If the creditor has unequivocally and definitively manifested their intention not to accept any performance, requiring the debtor to go through the motions of an oral tender would be a futile and meaningless act. The law, guided by good faith, does not demand pointless formalities.
  • This principle was notably affirmed by the Supreme Court in a Grand Bench decision on June 5, 1957, and has been applied particularly in disputes involving ongoing contracts like leases. For example, if a landlord invalidly claims termination of a lease due to an alleged (but unfounded) breach by the tenant and clearly states they will not accept any further rent payments, the tenant might be excused from formally tendering subsequent rent payments to avoid being in default for non-payment.
  • The true sphere for this exception often arises when the debtor has not yet made any tender (so the creditor is not yet in "creditor's delay" for a specific tendered performance), but the creditor's prospective refusal of any performance is objectively clear and unambiguous.
  • It's important to note that this exception is highly fact-specific and its application depends on a thorough assessment of the creditor's conduct and communications. The burden of proving such a definitive refusal would lie with the debtor.
• Debtor's Own Inability to Perform: This exception of "no tender required" is predicated on the debtor being capable of performance. If the debtor is themselves unable to make the necessary preparations for performance (e.g., due to insolvency or lack of the subject matter), they cannot rely on the creditor's anticipated refusal to excuse their own lack of readiness. A Supreme Court decision of May 1, 1969, emphasized that a debtor who cannot prepare for performance is not in a position to demand cooperation from the creditor.
• Fixed-Term "Toritate Saimu" (Obligation to be Collected by Creditor at a Fixed Time):
  • If an obligation requires the creditor to collect the performance from the debtor at a specifically agreed-upon time and place (a "toritate saimu" with a fixed deadline), and the creditor fails to appear for collection at that time, the debtor is generally not considered in default, even without making a formal tender. The debtor's duty in such a case is to have the performance ready at the specified time and place. If the creditor does not come, the onus of non-completion shifts. This principle finds an analogue in some other legal systems (e.g., German Civil Code, §296).

Conclusion

The concept of "Bensai no Teikyō" in Japanese law serves as a vital protective mechanism for a debtor who has made bona fide efforts to perform their obligations but is prevented from completing them due to the creditor's lack of cooperation or refusal to accept. By making a valid tender—whether actual or, in specific circumstances, oral—the debtor can shield themselves from the adverse consequences of default, such as liability for damages or contract termination. While tender does not extinguish the underlying debt itself (for which a formal deposit is usually required in cases of creditor refusal), it significantly rebalances the legal positions of the parties, emphasizing the law's expectation that both obligor and obligee act in good faith throughout the performance process. Understanding the nuances of what constitutes a valid tender, and when even formal tender might be excused, is essential for navigating performance issues in Japanese contractual relationships.