What Key Facts Must We Prove to Enforce a Sales Contract in Japanese Civil Litigation?

Successfully enforcing a sales contract through Japanese civil litigation hinges on meticulously establishing certain "essential facts" (yokenjijitsu). These are the ultimate facts that a party must allege and prove to support its legal claim or defense. This article explores the fundamental essential facts required for common claims arising from sales contracts, such as a seller's claim for payment of the purchase price and a buyer's claim for delivery of goods, along with typical defenses encountered in such disputes. Understanding these principles is crucial for navigating commercial disagreements effectively in Japan.

The Japanese Civil Code, particularly after its significant amendments effective April 1, 2020, governs sales contracts. A sales contract (売買契約 - baibai keiyaku) is formed when one party agrees to transfer a property right to another party, and the other party agrees to pay the purchase price for it (Article 555 of the Civil Code).

I. Seller's Action for Payment of the Purchase Price (売主による代金支払請求)

When a seller (売主 - urinushi) seeks to compel a buyer (買主 - kainushi) to pay the agreed purchase price, the seller, as the plaintiff, bears the burden of proving the essential facts constituting their cause of action (請求原因 - seikyū gen'in).

A. Essential Facts for the Seller's Claim (請求原因)

The primary essential facts the seller must allege and prove are:

1. Formation of the Sales Contract (売買契約の成立 - baibai keiyaku no seiritsu):
   • The seller must demonstrate that a sales contract was validly concluded between the seller and the buyer. This involves proving a meeting of the minds (合意 - gōi) on the essential terms.
   • Identification of Parties: Clearly, the identities of the seller and the buyer must be established.
   • Subject Matter of the Sale (目的物 - mokutekibutsu): The specific goods or property being sold must be identified or identifiable.
   • Agreement on the Purchase Price (代金額 - daikin gaku): The seller must prove an agreement on the price or a method for determining the price. If the price itself wasn't fixed, but a clear mechanism for its calculation was agreed upon (e.g., based on a market price at a certain time), this would suffice. The level of specificity required for the price in pleadings can depend on the context of the dispute; for instance, if the existence of the contract itself is not substantially disputed, a less concrete assertion like "market price" might be acceptable in some ancillary contexts, but in a direct claim for payment, the price or its determination method must be clearly asserted.
   • It's noteworthy that Japanese law, as a general principle, does not require contracts to be in writing to be enforceable (except for certain specific types of contracts, not typically including general sales contracts). Oral agreements can be valid, though proving their existence and terms can be more challenging.
2. Due Date for Payment (支払時期 - shiharai jiki) (If applicable and relied upon for default interest):
   • Interestingly, an agreement on the specific due date for payment is generally not considered an essential element for the formation of a sales contract itself. It is typically viewed as an ancillary term (付款 - fukan).
   • Therefore, the seller does not necessarily need to prove the agreed payment date and its arrival as part of the primary cause of action for the price itself, unless the contract makes payment by a certain date a condition precedent to the seller's obligations or if it's foundational for calculating default interest from a specific date.
   • If a payment date was agreed, and the seller is claiming default interest from that specific date, then the agreement on the payment date and its passing would become relevant for that part of the claim. If no specific date was agreed, the Civil Code provides default rules (e.g., payment is due simultaneously with delivery of goods, Article 533, Article 573 of the Civil Code).

It is generally not an essential fact for the seller to prove that they owned the goods at the time of the contract. A contract to sell goods that the seller does not yet own (他人物売買 - taninbutsu baibai) is valid under Japanese law (Article 561 of the Civil Code, pre-amendment; the principle continues under the amended Code, though the specific article number changed context). The seller’s obligation is to acquire and transfer the property right by the time of performance. Similarly, actual delivery of the goods by the seller is not a prerequisite for the existence of the buyer's obligation to pay the price, although it becomes highly relevant when considering defenses like the defense of simultaneous performance.

B. Ancillary Claims (附帯請求 - futai seikyū)

Often, a seller will also claim default interest (遅延損害金 - chien songaikin) for late payment.

• Default Interest: If claiming default interest, the seller would need to prove:
  • The existence of the principal debt (i.e., the purchase price, established by the facts above).
  • The due date for payment has passed.
  • The legal or agreed-upon interest rate. The default statutory rate for commercial claims can apply if no rate was specified (Article 404 of the Civil Code, which was amended to introduce a variable statutory interest rate, initially 3% per annum, reviewed every three years; Article 419(1) states that default interest is calculated at the statutory rate unless an agreed rate exists).
  • If the seller’s obligation (e.g., delivery of goods) is a concurrent condition, the seller must also prove they tendered their own performance or that the buyer is otherwise in default without such tender being necessary (e.g., if the buyer unequivocally refused to pay).
• Statutory Interest on Purchase Price (民法575条2項の利息 - Minpō 575-jō 2-kō no risoku): Article 575(2) of the pre-amendment Civil Code (related provisions exist in the current code, e.g., Article 573) stipulated that if goods that have been delivered produce fruits, the buyer is obliged to pay interest on the purchase price from the date of delivery. There was debate whether this "interest" was statutory interest or a form of damages. If considered damages, the seller would need to prove the elements for damages, including their own performance (delivery). If statutory interest, the requirements would be simpler. The prevailing view leans towards it being statutory interest, payable regardless of the buyer's default, once delivery has occurred.

C. Typical Defenses by the Buyer (買主からの典型的な抗弁)

Once the seller establishes the essential facts for their claim, the burden shifts to the buyer to prove any defenses (抗弁 - kōben).

1. Defense of Simultaneous Performance (同時履行の抗弁 - dōji rikō no kōben):
   • In bilateral contracts like sales, where both parties have obligations, the buyer can refuse to pay the purchase price until the seller tenders delivery of the goods, and vice-versa (Article 533 of the Civil Code).
   • The buyer asserts their right to withhold payment until the seller performs their corresponding obligation (delivery).
   • If this defense is successful, the court will typically render a judgment ordering performance in exchange for counter-performance (引換給付判決 - hikikae kyūfu hanketsu).
   • The seller can overcome this defense by proving they have already delivered the goods or tendered delivery (再抗弁 - sai-kōben), or that there was an agreement for the buyer to perform first (先履行の合意 - senrikō no gōi).
2. Payment (弁済 - bensai):
   • The buyer can assert that the debt has been extinguished because they have already paid the purchase price (Article 473 of the Civil Code).
   • The essential facts for this defense are:
     • The buyer (or a third party) made a payment or provided the agreed-upon performance to the seller.
     • The payment was made in respect of the specific debt in question. Typically, this is pleaded as "the buyer paid X amount to the seller as performance of the purchase price obligation under this contract."
3. Contract Rescission (契約の解除 - keiyaku no kaijo):
   • The buyer may argue that the contract was validly rescinded, thereby extinguishing the obligation to pay. Rescission can be statutory (法定解除 - hōtei kaijo) or based on a contractual agreement (約定解除 - yakujō kaijo).
   • a. Statutory Rescission due to Seller's Non-Performance:
     • Delay in Delivery (履行遅滞 - rikō chitai): If the seller failed to deliver the goods by the agreed time (or within a reasonable time if no time was fixed), the buyer can rescind the contract after giving notice (催告 - saikoku) demanding performance within a reasonable period, and that period elapsing without performance (Article 541 of the Civil Code). No notice is required if performance is impossible, if the seller unequivocally refuses to perform, or in certain other circumstances (Article 542).
     • Non-Conformity of Goods (目的物の契約不適合 - mokutekibutsu no keiyaku futekigō): This is a significant area, particularly under the amended Civil Code, which replaced the concept of "latent defects" (瑕疵担保 - kashi tanpo) with a broader concept of "non-conformity with the contract terms regarding type, quality, or quantity." If the delivered goods do not conform to the contract, the buyer may demand repair, replacement, or a price reduction (Article 562, 563). If the non-conformity is not remedied despite notice, or if it's significant, the buyer may rescind the contract (Article 564, applying Article 541 and 542). The buyer generally needs to prove:
       • The goods were delivered.
       • The goods did not conform to the contract specifications (e.g., regarding type, quality, or quantity) at the time of delivery.
       • The buyer notified the seller of the non-conformity within a certain period (usually one year from discovery for non-conformities other than quantity or type, unless the seller knew or was grossly negligent in not knowing about it - Article 566).
       • The buyer demanded cure (e.g., repair/replacement) within a reasonable period, and this was not met, or other grounds for rescission without notice exist.
       • The buyer declared their intention to rescind.
     • It's important to note that under the amended Civil Code, the seller's "fault" or "attributability" (帰責事由 - kiseki jiyū) is generally not a requirement for the buyer to exercise these remedies, including rescission for non-conformity or delay (though it remains relevant for damages claims). However, rescission may be precluded if the non-performance is trivial (keibi) in light of the contract and common commercial practices (proviso to Article 541).
   • b. Other Grounds for Rescission:
     • Agreed Rescission (約定解除 - yakujō kaijo): The contract itself may specify conditions under which either party can rescind.
     • Rescission by Earnest Money (手付解除 - tetsuke kaijo): If earnest money (tetsuke) was exchanged, the buyer can typically rescind by forfeiting the earnest money, and the seller by refunding double the amount, as long as the other party has not yet "commenced performance" (履行に着手 - rikō ni chakushu) (Article 557).
4. Risk of Loss (危険負担 - kiken futan):
   • Under the amended Civil Code, if the goods are lost or damaged after the contract but before delivery due to a cause not attributable to either party, the buyer can refuse to pay the purchase price (or demand a refund if already paid) (Article 536(1), Article 567(1)). This defense essentially allows the buyer to reject the seller's claim for payment if the seller can no longer perform their primary obligation of delivering conforming goods due to such supervening events.
   • However, if the loss is attributable to the buyer, or if the seller's inability to deliver is due to the buyer's failure to accept delivery after tender, the buyer cannot refuse payment.

II. Buyer's Action for Delivery of the Goods (買主による目的物引渡請求)

When a buyer seeks to compel a seller to deliver the agreed-upon goods.

A. Essential Facts for the Buyer's Claim (請求原因)

The primary essential facts the buyer must allege and prove are typically simpler:

1. Formation of the Sales Contract (売買契約の成立 - baibai keiyaku no seiritsu):
   • Similar to the seller's claim, the buyer must prove the valid conclusion of the sales contract, including the agreement on parties, subject matter, and price (or its determination method).
   • The buyer does not need to prove they have already paid the price as part of their initial cause of action, nor that the seller owned the goods at the time of the contract.

B. Typical Defenses by the Seller (売主からの典型的な抗弁)

1. Defense of Simultaneous Performance (同時履行の抗弁 - dōji rikō no kōben):
   • The seller can refuse to deliver the goods until the buyer tenders payment of the purchase price (Article 533).
   • The buyer can overcome this defense by proving they have paid, tendered payment, or that there was an agreement for the seller to perform first.
2. Contract Rescission (契約の解除 - keiyaku no kaijo):
   • The seller may argue the contract was validly rescinded, for example, due to the buyer's failure to pay the purchase price (履行遅滞 - rikō chitai as per Article 541), or based on a contractual right to rescind (約定解除 - yakujō kaijo).
   • The seller would need to prove the grounds for rescission, such as:
     • The buyer's payment obligation was due.
     • The seller made a demand (saikoku) for payment within a reasonable period.
     • The buyer failed to pay within that period.
     • The seller declared their intention to rescind.
     • Alternatively, if a valid "no-notice rescission clause" (無催告解除特約 - musaikoku kaijo tokuyaku) exists and certain conditions (often relating to the buyer's bad faith or breach of trust) are met, the seller might rescind without prior notice, although courts scrutinize such clauses.

III. Deeper Dive into Contract Rescission in Sales Agreements (売買契約における解除の詳細)

Rescission is a powerful remedy that effectively unravels the contract.

A. Grounds for Statutory Rescission

• Non-Performance by the Other Party: As discussed, this includes delay (Article 541) and, in the context of delivery, non-conformity (Article 564 applying Articles 541 and 542).
• Impossibility of Performance (履行不能 - rikō funō): If performance by one party becomes impossible for reasons not attributable to the other party, the other party can generally rescind the contract without notice (Article 542(1)(i)). Even if attributable to the performing party, rescission is possible.
• Unequivocal Refusal to Perform (履行拒絶の明確な意思表示 - rikō kyozetsu no meikaku na ishi hyōji): If a party clearly states they will not perform their main obligation, the other party can rescind without notice (Article 542(1)(ii)).

The 2020 Civil Code amendments clarified that, as a general rule, the rescinding party does not need to prove fault (attributability) on the part of the non-performing party for statutory rescission based on non-performance. However, the non-performing party might be able to avoid rescission if they can prove the non-performance was due to a cause attributable to the rescinding party (Article 543).

B. Requirements and Effects of Rescission

• Declaration of Intent (意思表示 - ishi hyōji): Rescission is effected by a declaration of intent to the other party (Article 540).
• Restoration to Original State (原状回復義務 - genjō kaifuku gimu): Upon rescission, both parties are obliged to restore each other to their original state (Article 545). This means returning any goods received and refunding any payments made. If money is to be refunded, interest from the time of receipt must also be paid.
• Damages (損害賠償 - songai baishō): Rescission does not preclude a claim for damages (Article 545(4)).

C. Agreed Rescission Clauses (約定解除条項)

Parties are free to agree on specific conditions that would allow for rescission (e.g., failure to meet certain milestones, or "for convenience" clauses, though the latter are less common in standard sales and more typical in ongoing service or construction contracts). The effect of such clauses depends on their precise wording. Clauses allowing for termination or rescission upon a party's insolvency or commencement of bankruptcy proceedings are common but their enforceability can be subject to limitations under insolvency laws.

IV. Brief Comparative Notes (日米比較の視点 - 概略)

While a detailed comparison with, for example, the Uniform Commercial Code (UCC) in the United States is beyond this article's scope, a few high-level differences are worth noting for context:

• Formality: Japanese contract law is generally less formalistic regarding written requirements for sales contracts compared to the UCC's Statute of Frauds (though proving oral contracts has its own challenges).
• "Perfect Tender Rule" vs. Non-Conformity: The UCC historically had a "perfect tender rule" (though with many exceptions and rights to cure), allowing rejection for any non-conformity. Japanese law, especially post-amendment, focuses on "non-conformity with the contract" and provides a more nuanced set of remedies (cure, price reduction, damages, rescission), where rescission for trivial non-conformity is restricted. The Japanese approach to cure (追完請求 - tsuikan seikyū) emphasizes the seller's right and obligation to remedy non-conformities.
• Good Faith: While both systems value good faith, its application and doctrinal basis can differ.

Conclusion (結論)

Enforcing a sales contract in Japan, whether as a seller seeking payment or a buyer demanding delivery, requires a clear understanding of the "essential facts" that must be proven for the specific claim. The Japanese Civil Code provides the framework, and successful litigation depends on carefully constructing the cause of action and anticipating potential defenses. The structure of claim and defense, often involving counter-defenses (再抗弁 - sai-kōben) and even further rebuttals, highlights the systematic approach of Japanese civil procedure in dissecting contractual disputes. For businesses operating in Japan, familiarity with these core principles is indispensable for managing contractual risks and effectively pursuing remedies when disputes arise.