Crystallization, Unification, or Differentiation - The Japanese Civil Code (Law of Obligations) Reform Commission and Basic Reform Policy (Draft Proposals)


CRYSTALLIZATION, UNIFICATION, OR
DIFFERENTIATION? THE JAPANESE CIVIL
CODE (LAW OF OBLIGATIONS) REFORM
COMMISSION AND BASIC REFORM POLICY
(DRAFT PROPOSALS)
Akira Kamo

Abstract
About one hundred ten years after enactment of the Japanese Civil Code, the
debate over the reform of contract law has heated up. On November 2009,

based on the consultation of the Minister of Justice, the Working Group on the
Civil Code (Law of Obligations) was established. One distinctive feature of this
reform process is that the academic contribution became a driving force.
Shortly before the consultation, several reform proposals were propounded by
different research groups. Notably, the Japanese Civil Code (Law of
Obligations) Reform Commission proclaimed a sweeping and ambitious
reform proposal: the Basic Reform Policy (Draft Proposals). However, not
every lawyer felt the necessity of a comprehensive reform, and some bitterly
criticized the reform movement. The fierce debate among academics and
practitioners brings to light key characteristics of the Japanese Civil Code,
several current streams of the Japanese legal scholarship, and the relationship
between academe and practice in Japan. Focusing on the Basic Reform Policy
(Draft Proposals), this article seeks to describe both legal scholarship
advancing Civil Code reform and criticism of reform from practitioners.

Author
Associate Professor, University of Tokyo. I am grateful to Hiroto Dogauchi,
Hiroyasu Ishikawa, Shoji Kawakami, Taro Kogayu, Hiroki Morita, Osamu
Morita, Hiroyasu Nakata, Masami Okino, Atsushi Omura, Satoru Takenaka,
Takashi Uchida, and the editors of the Columbia Journal of Asian Law for their
helpful comments and valuable criticism on a prior draft. I also thank
Nobuyoshi Chujo, Yu Fujiki, and Mari Makishima for their research assistance.
Remaining errors are my own.

INTRODUCTION 173
A. Reform of the Law of Obligations 173
B. The Reform Commission and the Basic Reform Policy 174

1. THE BACKGROUND OF THE RECENT REFORM MOVEMENT 176
A. Characteristics of the Japanese Civil Code 176

1. Drafting Policies of the Civil Code 176
2. Legal Development After the Enactment of the Civil Code 178



3. Change in Principle Regarding Codification? 179
B. The Underlying Legal Thought of Academic Activities 179

1. Continuous Efforts Toward Civil Code Reform 179
2. The Rise and Fall of Legal Realism in Japan 18o

3. The Harmonization of Contract Laws 182

4. Supplying the Japanese Model 184
C. The Role of the Ministry of Justice 186
D. Guiding Principles of the BRP 187

II. MAJOR PROPOSALS OF THE BRP 187
A. Clarification of the Legal Principles and Concepts 187
B. Embodiment of the Good Faith Clause 189
C. New System of Contractual Remedies 191

1. Initial Impossibility 191

2. Damages 192

i. Requirements for Liability 192

ii. Scope of Damages 194
3. Cancellation of Contract 196

D. Shorter Periods and Simpler Regimes of Prescription 198
E. Registration System for the Assignment of Monetary Claims 202

F. Consolidation of Provisions in the Commercial Code and the
Consumer Contract Act 205

G. Compilation of the Civil Code 210

CONCLUSION

Columbia Journal ofAsian Law, Vol. 24, No. i (2olo)172

211



Japanese Civil Code (Law of Obligations) Reform

INTRODUCTION

A. Reform of the Law of Obligations

One hundred ten years after the enactment of the Japanese Civil Code,'
the debate on contract law reform has heated up. On October 28, 2009, the
Minister of Justice consulted with the Ministry of Justice's Legislative Council
regarding reform of the Law of Obligations, contained in Book III of the
Japanese Civil Code.2 This meeting resulted in the establishment of a task force
devoted to the issue: the Working Group on the Civil Code (Law of
Obligations).' Book III of the Japanese Civil Code contains general provisions
and lists the four types of obligations (contract, negotiorum gestio, unjust
enrichment, and tort). The committee's activities are substantially limited to
revising provisions concerning contract law, some of which are also contained
in Book I of the Civil Code. This exclusive focus on contract is justified on the
grounds that, although contract law directly bears on the daily lives and
economic activities of citizens, it has never previously undergone a
fundamental reformation and would benefit from overhaul. Consequently, the
contract law should be revised in order to respond to the social and economic
changes that have occurred since the original enactment and to ensure that its
provisions are easily understood by the public.'

One distinctive feature of this reform process is that academic
contribution has been a driving force. Shortly before the October 28 meeting,
different research groups had already published several reform proposals.5

' t [CIVIL CODE] Law No. 89 of 1896 [hereinafter MINPO].

2 M 1 6 0 121 A [16oth Meeting of the Legislative Council of the Ministry
of Justice], http://www.moj.go.jp/SHINGh2/091028-1.html (last visited Oct. 21, 2010).

AtlJWS A ({ iAW) %N [Working Group on the Civil Code (Law of
Obligations)] http://www.moj.go.jp/shingii/shingikai-saiken.html (last visited Oct. 21,
2010). The working group has an English website where readers can download translated
documents: http://www.moj.go.jp/ENGLISH/ccr/CCR-index.html (last visited Oct. 21, zoo).

4!fill9 8 8 4 [Consultation No. 88], http://www.moj.go.jp/content/ooooo5o84.pdf
(last visited Oct. 21, zoo). English versions are also available at http://www.moj.go.jp/
ENGLISH/ccr/consultationno88.html (last visited Oct. 21, 2010).

s In addition to the Reform Commission discussed below, two independent research
groups merit mention. First, the Research Group on the Reform of Civil Code (iL&ETi
4i# ) published several versions of its reform proposals, most recently MMMEfE

[Research Group on the Reform of the Civil Code], AM-Th IE -
[Japanese Civil Code Reform Proposals (Book I, II and III) Drafted by the Interested

Parties], in RA & 1E [M R * U * Wf [JAPANESE CIVIL CODE REFORM

PROPOSALS (BOOK 1, 11 AND III) DRAFTED BY THE INTERESTED PARTIES] 110-239 (2009). As the
title suggests, the proposal covers not only the Law of Obligations but also the General
Provisions and Law of Property, Books I and II of the Japanese Civil Code. This group
held a series of meetings to foster the free exchange of opinions on its proposal among
academics and practitioners. Id. at 20-108. Unlike the vast investigatory scope of the
first group, the second research group focused its attention on prescription, the civil

173



Columbia Journal ofAsian Law, Vol. 24, No. 1 (2010)174

These proposals were subsequently referenced at the first meeting of the
Working Group on the Civil Code (Law of Obligations).6 Notably, the Japanese
Civil Code Law of Obligations Reform Commission' (Reform Commission)
proclaimed a sweeping and ambitious reform proposal: the Basic Reform
Policy (Draft Proposals), or "BRP."

B. The Reform Commission and the Basic Reform Policy

The importance of the BRP is attributed primarily to the authority of
members of the Reform Commission. The establishment of the Reform
Commission was a response to the February 2oo6 decision of the Ministry of
Justice to launch inquiries regarding the necessity of Civil Code reform.9 In
October 2oo6, eight professors, along with the Counselor of the Ministry of
Justice, who was responsible for drafting the reform bill, gathered to establish
the Reform Commission, which ultimately included thirty-three professors. It
is unthinkable that the Ministry of justice advance the reform process without
the assistance of these professors. In fact, thirteen professors of the Reform
Commission were nominated as members of the Working Group.

law equivalent of the statute of limitations. The Research Group on Prescription (F42A
4)MO ) published its own reform proposal in zoo8. IMW3 [Research Group on
Prescription], @iW (J kiE A [Reform Proposals by the Research Group on
Prescription], in L &T TE [THE CURRENT SITUATION AND REFORM

PROPOSALS OF THE LAW OF PRESCRIPTION] 290-336 (2oo8). This group conducted
intensive comparative research. Id. at 138-288.

6 1J ({ M ) $ 1 I [First Meeting of the Working Group
on the Civil Code (Law of Obligations)], http://www.moj.go.jp/shingii/shingi-ogn24-1.
html (last visited Oct. 21, 2010).

A ~ ({ ) iE A [Civil Code (Law of Obligations) Reform
Commission], http://www.shojihomu.or.jp/saikenhou/ (last visited July 13, 2010).

8I (W i f) & -E R V [CIVIL CODE (LAW OF OBLIGATIONS) REFORM

COMMIssIoN], fA1T7 O&#lb'A t [BASIC REFORM POLICY (DRAFT PROPOSALS)] (2009)

[hereinafter BRP]. An English translation of the BRP is available at http://www.shojihomu
.or.jp/saikenhou/English/draftproposals.html (last visited Oct. 21, 2010). [EDS. This source
may also be referred to in English as the "Draft Proposals of the Reform Commission."
Each citation is properly rendered as Book #, Part #, Chapter #, Section #, but for
improved searchability, the editors have elected to render the citations as above.]

9 tATW [Ministry of Justice], MM (M*9) ORTE -O'T [On the Reform of the
Civil Code (Law of Obligations)], http://www.moj.go.jp/MINJI/minji99.html (last visited
Oct. 21, zoo); see also M #5 [Tsutsui Takeo], KM (fA-)) M ODM1 [Trends
Relating to Reform of the Civil Code (Law of Obligations)], 848 x, 1 - * x- [NEW

BUSINESS LAW] 31 (2007); M 4f* [Tsutsui Takeo], M& (MOM) NW*000 Lk -I
[Trends and Topics Relating to Reform of the Civil Code (Law of Obligations)], 824 x
3 - - r /, [NEW BUSINESS LAW] 42 (2oo6).



Japanese Civil Code (Law of Obligations) Reform

On the other hand, although its original members included officials of the
Ministry of Justice, the Reform Commission was not specifically commissioned to
investigate the necessity of reform or to advance reform proposals made by the
government or by the Ministry of Justice:o "The Reform Commission is a purely
private research group of academics who have been organized on their own volition,
and its activities are independent from the Government."" The word "Commission"
was chosen "to express its final goal of presenting, as a group, a set of coherent
proposals apart from the academic convictions of each individual member."'

The Reform Commission aimed to propose a basic reform plan that was
expected to be officially reviewed as part of the legislative process. Indeed, by
the end of March 2009, the Commission finalized the BRP and held the
Symposium for Reform of the Civil Code (Law of Obligations) on April 29,

20o9.' Beginning in December 2009, five volumes of commentary on the BRP
were published.' Each contained extensive research on the present situation
of Japanese law as well as comparative studies. Because of the members'
prominence in Japanese legal scholarship and the quality of their research, the
BRP was sure to receive detailed consideration by the Working Group on the
Civil Code (Law of Obligations), despite being solely the product of academics.

In spite of the engagement of leading legal academics, not every lawyer
feels that comprehensive reform of the Law of Obligations (like that
prescribed in the BRP) is necessary. Indeed, some practitioners have cast
doubt on the necessity of legal reform, insisting that even if such need exists,
the scope of reform should be limited to only those provisions that cause
practical problems in application." Even in the academic world, the Reform

'o The fact that the Reform Commission was sponsored solely by a private institution,
the Commercial Law Center, Inc., also gives an indication of its independence from the
Ministry of Justice.

" AX (MOVWE ) [CIVIL CODE (LAw OF OBLIGATIONS) REFORM COMMISSION],
About the Japanese Civil Code (Law of Obligations) Reform Commission and Draft
Proposal, http://www.shojihomu.or.jp/saikenhou/English/index-e.html (last visited Oct.
21, 2010).

21d.

" Presentations and discussions are available. I & A (1 , U #11) fk "E t RA
[Japanese Civil Code (Law of Obligations) Reform Commission], $z7 $- A r A
iEO)%Afif+ f[Symposium, "Basic Reform Policy (Draft Proposals) 1 (2009).

14MM ({ #) R [CML CODE (LAw OF OBLIGATIONs) REFORM COMMISSION],
gf-' RL (04iW ) REOM Wt~f [COMMENTARIES ON BASIC REFORM POLICY (DRAFT
PROPOSALS)] (2009-2010) (5 vols.) [hereinafter COMMENTARIES].

' 15 1t%- [OSAKA BAR ASSOCIATION], #Q MU: (fA*U:) &!E CO-'
[OPINIONS ON THE REFORM OF THE CIVIL CODE (LAw OF OBLIGATIONS)] (2oo9) [hereinafter
OSAKA BAR ASSOCIATION]. |1J EB- [Yamada Seiichi] et al., 1AM&& LE- L -8lk&I1 [The
Reform of the Law of Obligations and Financial Transactions], 1874 -- lWT9$14 [U. FIN.
& LEGAL AFF.] 28 (2009); A iftICE [TOKYO BAR ASSOCIATION], RMi (Mlta) QiiE
(:MtLAR [OPINIONS ON THE REFORM OF THE CIVIL CODE (LAW OF OBLIGATIONS)]
(2oo) [hereinafter TOKYO BAR ASSOCIATION], http://www.toben.or.jp/news/opinion/
2oo/201003 0 9 -2.pdf (last visited Oct. 21, 2010).

175



Commission's activities have been harshly criticized. The legitimacy of the
BRP, the role of academics in the legislative process, and the necessity of
contract law reform itself have all been cast in doubt.'6 The fierce debate
among academics and practitioners" brings to light key characteristics of the
Japanese Civil Code, several current streams of the Japanese legal scholarship,
and the relationship between academe and practice in Japan. Focusing on the
BRP, this article seeks to describe both legal scholarship advancing Civil Code
reform and criticism of reform from practitioners.

In Section I, I start by analyzing the background of the recent reform
movement with the aim of addressing two topics: (i) why the process of law
reform has recently started; and (2) the principles on which the BRP is based.
Because there is no political pressure, either domestic or international, which
itself justifies law reform, the first topic will be explained as a combination of
multiple motivations. On the second topic, reflecting the complexity of the
motivation for law reform, several possibly contradictory guiding principles
are noted. Section II introduces the major proposals of the BRP and reviews
criticisms leveled by practitioners. The aim of this work is not to offer an
exhaustive description of the BRP, but rather to provide examples of the
reform proposal based on the analysis outlined in the previous section and to
introduce typical responses to the BRP from practice. This article concludes
with an evaluation of the Reform Commission's activities and a perspective on
the future of the reform process, which until now has remained unclear.

I. THE BACKGROUND OF THE RECENT REFORM MOVEMENT

While the background to Civil Code reform in Japan is not straightforward,
at least three factors are shaping reform: (1) the characteristics of the Civil
Code; (2) academic contributions; and (3) the role of the Ministry of Justice.
This section shows how and why these factors are driving law reform.

A. Characteristics of the Japanese Civil Code

1. Drafting Policies of the Civil Code

One characteristic of the Japanese Civil Code is simplicity. The Drafting
Policies of the Civil Code,'8 adopted in 1893 by the Code Investigation

1
6 See generally 'MBREj [Yoshida Kunihiko], idl~al ER Ej 1

- I'-O R I - 9M [Methodological and Theoretical Problems of the Recent Civil Code

Reform Movement] 1368 $-'. 9 7, [Jurist] io6 (2008).

" See also W14J* [Yamamoto Yutaka] et al., Rt ({ T-P) .E9HOfl®4 [Studies
on the Basic Reform Policy (Draft Proposals)], 72 VW- [J. PRIVATE L.1 103 (zolo).

18 A I / tif [Drafting Policies of the Civil Code], reprinted in (Eli'IAI : W)

5CIRO)Jf [RESEARCH ON THE LEGISLATIVE MATERIALS COLLECTED By HozUMI NOBUSHIGE)

120-121 (MAJE [Masao Fukushima] ed., 1998) [hereinafter Drafting Policies].

176 . Columbia fournal ofAsian Law, VOL 24, No. i (2oio)



Japanese Civil Code (Law of Obligations) Reform

Commission, provided that the Code should include only general rules and
those rules applicable to disputable cases, omitting details (Article ii). Further,
definitions and illustrative provisions would also be excluded (Article 13).
Thus, the Japanese Civil Code contains relatively few provisions. These
policies, which determined the essential character of the Japanese Civil Code,
were introduced because of two factors: time constraints and the drafters'
critical attitude toward the then-existing Civil Code, now known as the "Old
Civil Code."

The Old Civil Code was developed with the principal goal of creating a
social structure that would enable Japan to compete with Western powers.' 9

From the i88os, drafting of the Old Civil Code began with the invaluable
assistance of Professor Gustave Emile Boissonade, a Frenchman. Codification
in Japan was also connected with an attempt to abrogate "unequal treaties"
signed in the 185os by the Tokugawa Shogunate, which conferred
extraterritoriality to Western nations.2 o The introduction of a Western-style
legal system was a prerequisite for the abrogation, for it was asserted that the
lack of a modern legal system in Japan made extraterritoriality necessary to
safeguard the rights of Westerners in Japan.' Against this background, the Old
Civil Code was approved in 1890 and set to come into force on January 1, 1893.
Nevertheless, the Old Civil Code suffered criticism both for its premature
enactment, and also because it was colored by individualism.' In 1892, the
Imperial Diet suspended the enactment of the Old Civil Code until the end of
1896 and also voted to draft a new Civil Code by modifying the Old Civil
Code.23

'9 Just after the fall of the Tokugawa Shogunate in 1867, the newly established Japanese
government began to draft the Japanese Civil Code. Shinpei Eto (1834-74), the first
Minister of Justice, who considered the Civil Code the basis of modern civilized society,
commissioned his staff to translate the French Civil Code into Japanese.

20 See Michael Young & Constance Hamilton, Historical Introduction to the Japanese
Legal System, in JAPAN BUSINESS LAW GUIDE 1 1-700 (Mitsuo Matsushita ed., 1988).

2 In 1887, the draft of the Jurisdiction Treaty, which permitted the hiring of foreign
judges, evoked considerable controversy. Prime Minister Hirobumi Ito (1841-1909)
declared negotiation toward treaty revocation to be suspended after the completion of
the codification.

22 & ~ [ALUMNI ASSOCIATION OF THE UNIVERSITY OF TOKYO, FACULTY OF LAW], W)IAr&
= ;21L Jz / RA [OPINIONS ON THE CODIFICATION] (1889), reprinted in R JIA

MS WA [MATERIALS FOR THE CONTROVERSY OVER THE CIVIL CODE] 14 (~iffi [Hoshino
Toru] ed., 1969); 881(A0 [Hozumi Yatsuka], V R1152 'Pt7 [Collapse of Loyalty
and Devotion in Japanese Society as a Result of Enactment of the Civil Code],.5 &*0(r
8 ICHuo LAW REVIEW] xx (1891), reprinted in REARs WA [MATERIALS FOR THE
CONTROVERSY OVER THE CIVIL CODE] 82 ( A iB [Hoshino Toru] ed., 1969). This
controversy could also be explained by the distaste of the lawyers who studied English
law at Kaisei Gakko, the forerunner of the Imperial University of Tokyo, toward the
French characteristics of the Old Civil Code.

2 Drafting Policies, supra note 18, § 1.

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Columbia Journal ofAsian Law, Vol. 24, No. 1 (2010)

The drafters of the new Civil Code worked under immense time pressure.
They were initially given only three years during which to finalize their work,
though the Old Civil Code was available as a model from which to work. As a
result of this schedule, the drafters decided to make the provisions of the Civil
Code simple, leaving plenty of room for legal development through practice
and scholarship.

In addition to time constraints, there was also the issue of the drafters'
antagonistic attitude toward the policies that shaped the Old Civil Code.
Boissonade wrote explanatory provisions to help Japanese officials understand
the civil law tradition that Japan had previously lacked. The Old Civil Code
thus contained numerous definitions and illustrative provisions. The drafters
of the current Civil Code denounced this approach and sought to make the
new Civil Code more conceptually refined. For example, Masaakira Tomii, one
of the three main drafters, criticized the intricacy of the Old Civil Code, which
he attributed to French legal scholarship, and applauded the intellectual
sophistication of German jurisprudence. ' Thus, the Code Investigation
Commission decided to remove explanatory and axiomatic provisions from the
Civil Code. As a result, the Japanese Civil Code does not include such
provisions, which lawyers take for granted, making it difficult for people
without legal training to fully understand the structure of the legal system
based on the Civil Code.

2. Legal Development After the Enactment of the Civil Code

As anticipated by the drafters of the Civil Code, practitioners and
academics have played important roles in fleshing out the provisions of the
Code. As shown in the following subsection, in considering the social demands
of Japanese society, lawyers have developed legal rules and doctrines outside
the Civil Code, some of which were not taken into account when the Civil
Code was enacted. Some provisions of the Civil Code have been interpreted in
a manner that is inconsistent with the original meaning, and others have been
invalidated through interpretation.

These legal developments provide the motivation for the reform of
contract law. The Mission Statement of the Reform Commission states: "[The]
courts have created a vast array of norms outside of the Code through its
application. The diffusion of these norms has brought about uncertainty as to
how they should be applied."" The crystallization of legal development into
the Civil Code is one of the goals of law reform.

24& [i [TOmii Masaakira], AlR X1 IX31 XIVWig: P1- 6 & #% YE t ) igAro
[Professor Tomii Masakira's Speech in Support of the Act Postponing the Enactment of
the Old Civil Code in the House of Peers (1892)], in k i [MEMOIRS OF

PROFESSOR TOMii MASAAKIRA] 154, 158-63 (t9 OAi llfpIS [Sugiyama Naojiro]. et al. eds.,
1936).

25 R (t) k J [Japanese Civil Code (Law of Obligations) Reform
Commission], Mission Statement (Oct. 7, 2006), http://www.shojihomu.or.jp/saikenhou/

r78



3. Change in Principle Regarding Codification?

The crystallization of legal development, however, cannot in itself justify
legal reform, because if stability of legal administration can be achieved
through practice, codification is not essential. In this regard, exponents of
fundamental reform have proclaimed a new principle in codification: "the Civil
Code for Citizens."

Because the Civil Code depicts the basic framework of civil society, it
should address itself to ordinary citizens.26 Given this fundamental idea, it is
desirable that those legal rules currently in force should be codified as much as
possible and in plain language. Dispersing relevant provisions throughout the
Civil Code and in external sources of legislation should be avoided. Moreover,
the expression "citizens" is sometimes interchanged with "consumers" because
citizens often appear as consumers in modern society. This may lead to the
claim that the Civil Code should include consumer-friendly provisions,
thereby providing impetus for law reform.

In this way, the meaning of "the Civil Code for Citizens" is ambiguous.
However, it is the underlying idea behind the BRP. Indeed, some of the
proposals are difficult to understand without the benefit of this slogan.

B. The Underlying Legal Thought of Academic Activities

1. Continuous Efforts Toward Civil Code Reform

The second factor that is currently driving law reform is academic
contributions. Well into the 199os, law professors had organized working
groups to propose Civil Code reform.27 In 1998, the centenary of the Civil
Code, a symposium was held at the Annual Conference of the Japan
Association of Private Law, the largest academic association in Japan. The
research group conducting the symposium published collected papers,
highlighting those topics in need of reform.8 Even after the symposium, some
professors continued to work on the law reform, organizing a study group and

English/missionstatemente.html (last visited Oct. 21, 2010) [hereinafter Mission
Statement].
26 ifl l [UCHIDA TAKASHI], WAMOfIOM EfAiW1TGE tj O [THE
NEw ERA OF THE LAW OF OBLIGATIONS: AN OUTLINE OF THE BASIC REFORM POLICY (DRAFT
PROPOSALS)] 6-17 (2009) [hereinafter UCHIDA, DRAFT PROPOSALS].

' For the academic activities toward Civil Code reform, see generally 1IE ml A [Uchida
Takashi], 01± r{ f LWLcIiEj b, ? (-) [Why is it Necessary to Reform the Law
of Obligations Now? Part j], 871 mx * A/ [NEW BUSINESS LAW] 16, 17-18 (2009)

[hereinafter Uchida, Why Reform?].

z8 (1$( [KEIZO YAMAMOTO] et al, {AME IEO QW; L ttil [THE TOPICS OF REFORM

OF THE LAW OF OBLIGATION AND THEIR COURSE OF ACTION] (1998).

179Japanese Civil Code (Law of Obligations) Reform



publishing. reform proposals not only on the Law of Obligations, 9 but also on
the Law of Security Rights30 and Family Law." Moreover, in October 2oo6,
another academic group held a symposium on contractual liability at the
Annual Conference of the Japan Association of Private Law. 2 Two years later,
two symposia were held on the Civil Code reform and prescription, providing
the reform proposals referred to by the Working Group on the Civil Code (Law
of Obligations).33

These ongoing academic activities represent the basis of contract law
reform, and it is safe to assume that there are several current streams of legal
thought in Japanese legal scholarship that underlie these activities.

2. The Rise and Fall of Legal Realism in Japan

First, mention should be made of the role of legal realism in Japan. The
realist movement prevailed in Japan after World War II. In his presentation at
the Annual Conference of the Japanese Association of Private Law in 1953,
Professor Saburo Kurusu of the University of Tokyo confessed to harboring
deep suspicions toward lawyers and their activities.' This revelation ignited
controversy regarding the legitimacy of legal interpretations and the political
responsibilities of lawyers. 3 Echoing Kurusu's presentation, skepticism

2 9 [Uchida Takashi] et al., lJAAM { iko)&IOE AWfI [Special Forum,
Toward Reform of Law of Obligations], 1307 1 9 7 E [JURIST] 102 (2006), 1308 92 9
7 h [JURIST] 134 (zoo6).

30 NI [Uchida Takashi] et al., 453IIJAN -til t [Special Forum,

Toward Reform of Law of Security Rights], 1213 F 9 7 ' [JURIST] 48 (2001), 1214 92
9 7 B [JURIST] 36 (2001).

N IEI R [Uchida Takashi] et al., IJ1A $8 ®OlSEii'lft [Special Forum,
Toward Reform of Family Law], 1324 /91. 9 7 F [JURIST] 46 (zoo6), 1325 92 9 7 b
[JURIST] 148 (20o6).

' MJE*93 [Shiomi Yoshio] et al., i [Rebuilding Contract Liability
Theory], 1318 9.2. 9 7 F [JURIST] 81 (2oo6); [itti [Yamamoto Yutaka] et al., 9'/719
rY7A 9A) 0)i44#% [Symposium: Rebuilding Contract Liability Theory], 69 Uki
[J. PRIVATEL.] 3 (2007).

"See R&1EF [Research Group on the Reform of the Civil Code], KMIiE El
I* * ff [Japanese Civil Code Reform Proposals (Book I, II and III)

Drafted by the Interested Parties], supra note 5; see also 114tiffRL= [Research Group
on Prescription], lit@6fRA 5 J 6 1 &IEE [Reform Proposals by the Research Group
on Prescription], supra note 5.

' *t iBIS [Saburo Kurusul, iO$$ Lif# [Legal Interpretation and Lawyers], ni
UM.[J. PRIVATE L.] 16 (1954), reprinted in i [COLLECTED PAPERS OF

KURUSU SABURO] 73 (2004).

" Kurusu, advocating sociological jurisprudence, later investigated business customs
inherent in Japanese society to demarcate the range of appropriate legal interpretations.

Columbia Journal ofAsian Law, Vol. 24, No. i (2olo)18o



Japanese Civil Code (Law of Obligations) Reform

regarding legal rules and doctrines dominated Japanese legal scholarship in
the 196os, centering on the University of Tokyo. Takeyoshi Kawashima
(perhaps best known as the author of Japanese Legal Consciousness),36

seemingly influenced by American legal realism,' downplayed the importance
of judicial construction-the technique of how to rationalize the case outcome
based on the letter of the law or legal doctrines.38 These critical attitudes
toward judicial construction were shared with the dominant legal theories of
this time. Well into the 1970s, it was widely accepted that balancing the
interests of the concerned parties is of greater importance than judicial
construction when solving legal issues. 9 This realist movement contributed to
revealing the social values and economic demands of Japanese society, which
were not captured in provisions of the Civil Code.

The pendulum has since swung back the other way. Writing in the late
1980s, Yoshio Hirai, Professor at the University of Tokyo, criticized the
dominant theories at that time by emphasizing. the importance of legal
argumentation as a process through which statements on a legal issue are
continuously subjected to critical discussion, with statements evaluated under
legal tests and discussed.40 As a result of Hirai's polemic articles and ensuing

For a compilation of the research he undertook, see AfiE39:IS [KURUSU SABURO], V0

[THE LAW OF CONTRACTS] (1974).

,6 )lIaI [KAWASHIMA TAKEYOSHI], N *AADER [JAPANESE LEGAL CONSCIOUSNESS]

(Charles R. Stevens trans., 1974) (1967).

3 Tsuneo Matsumoto, Anglo-American Law Research in the Study of Civil Law in Japan,
in THE IDENTITY OF GERMAN AND JAPANESE CIVIL LAW IN COMPARATIVE PERSPECTIVES 125
(Zentaro Kitagawa & Karl Riesenhuber eds., 2007).

38 Kawashima had insisted that the task of legal scholarship was to forecast the future
development of judicial precedent by determining the correlation between the
standardized facts of a case and its outcome. He later acknowledged the limits of
forecasting case outcomes and his proposed sociological jurisprudence. For the
development of his methodology, see )II iaTL [KAWASHIMATAKEYOSHI], E & L. UC
O) Wt#li L -7 OR)I ["JURISPRUDENCE ASA SCIENCE" AND ITS LATER DEVELOPMENT] (1987).

" Two pioneering advocates were Ichiro Kato and Eiichi Hoshino. l#-1 [Kato
Ichiro], l [Logic and Balancing of Interests in Legal
Interpretation], 15 1ft&L [MODERN LAW] (V4@-' [Aomi Junichi] ed.) 25 (1966),
reprinted in M M (L I1 6 'on I L -1J J4 1 [LOGIC AND BALANCING INTERESTS IN

INTERPRETATION OF PROVISIONS IN CIVIL CODE] 3 (1974); _5RW - [Hoshino Eiichi], RA
ATJYrTR [Introduction to Interpretation of Provisions in Civil Code], in M * 1

9 6 7 [ANNUAL OF LEGAL PHILOSOPHY 1967] (Japan Association of Legal Philosophy ed.)

75 (1967), reprinted in I R [COLLECTED PAPERS OF HOSHINO EllCHI] I (1970). They
differed in their opinions regarding the degree of importance to be attached to judicial
construction. For a comparison of the two works, see Matsumoto, supra note 37, at 125-
26.

40 For the leading article, see 'A#TL*t [Hirai Yoshio], $94. pfO [Memoranda
on the Foundation of Jurisprudence] 916 $-9 _= 9 7 b [JURIST] 96 (1988), 918 -:; -- 9 7 h
[JURIST] 102 (1988), 919 -a;-,. 9 A F [JURIST) 70 (1988), 920 - _. 9 7 [JURIST] 82 (1988),



discussions, the realist movement in Japan received a severe blow." Although
a wide range of interpretive theories still exists, scholars of the succeeding
generation generally came to pay more attention to legal concepts and
doctrines than did those of the previous generation, which contributed to
enhancing the falsifiability of the legal argument. Based on the achievements
of the legal realist movement, scholars of the new generation have made
efforts to renew legal concepts and doctrines or create new ones to grasp the
realities of contemporary society. It is the scholars of this generation who
established the Reform Commission in an attempt to codify the rules and
doctrines developed by court judgments and academic research. This
transition in legal thought is one of the reasons that contract law reform has
recently been initiated.

3. The Harmonization of Contract Laws

The second characteristic of the legal thought underlying academic
contributions to contract law reform is consideration of international trends.
Law reform in European countries and the emergence of international treaties
and model laws have influenced Japanese jurisprudence.

With the introduction of Western legal systems, Japanese legal scholars
have paid considerable attention to legal developments in Western Europe
and the United States. In particular, they have attached great importance to
the laws of Germany and France, as shown by several leading articles in the
196os." A series of legal reforms enacted in these Western counties have been
introduced into Japan. For instance, from the 198os, Japanese scholars

921 Z 9 7b [URIST] 79,923 1 9 A 1 [JURIST] 72 (1988), 926 92-'. ± 9 A l [JURIST] 73

(1989), 927 9 9 -A b [JURIST] 86 (1989), 928 $2 9 1 [JURIsT] 94 (1989), reprinted in
Af$kAMf'u [MEMORANDA ON THE FOUNDATION OF JURISPRUDENCE] (1990). Hirai's
idea of legal argumentation was profoundly influenced by Karl Popper's view on science.

' For a response to Eiichi Hoshino, see T#4# [Hirai Yoshio], o
AM_-J;t [Toward a Rational Foundation for Legal Dogmatics], 107 Ef [
JURISPRUDENCE Ass'N, UNIv. TOKYO] 727, reprinted in r * VEf4KWER& [FoLLow-
UP TO MEMORANDA ON THE FOUNDATION OF JURISPRUDENCE] 5 (1991). JI [Hirai
Yoshio], J [Reexamining the Methodology of Research on
Judicial Precedents], 956 9K 9 U [JURIST] 6i (1990), 960 -;;'. 9 7 h [JURIST] 41(1990),
962 $2 9 A F [JURIST] 136 (1990), reprinted in RE - Af#*AMAR [FOLLOW-UP TO
MEMORANDA ON THE FOUNDATION OF JURISPRUDENCE] 44 (1991).

' Notably, 111f*-- [Hoshino Eiichi], El & REAt 4 it 7
[Influence of the French Civil Law on the Japanese Civil Code], 3 F1 fLW* [ANNUAL OF

FRANCO-JAPANESE LAw ASsoCIATION] 1 (1965), reprinted in I lM W & [COLLECTED

PAPERS OF HOSHINo EIlCHI] 69 (1970). See also IL)lIcGtIS [KITAGAWA ZENTARO], . H' W
08 M L [HISTORYAND THEORIES OF JAPANESE JURISPRUDENCE] (1968).

Columbia journal ofAsian Law, Vol. 24, No. i (2020)182



investigated reform proposals regarding the German Civil Code,' and the
enactment of the new German Civil Code in 2002 stimulated a number of
academic studies." In the 1990s, scholars paid much attention to the new Civil
Code of the Netherlands, 45 and recently, the innovative draft proposals
regarding French contract law arouse their interest.46 These legal reforms in
Europe have given scholars in Japan the impression that the traditional regime
of contract law, as introduced in Japan more than one. hundred years ago, has
become unable to grasp the reality of modern economic society and should
therefore be reviewed and modernized.

International treaties and model laws have also attracted special attention
from Japanese scholars. In particular, the United Nations Convention on
Contracts for the International Sales of Goods (CISG) 47 and the UNIDROIT
Principles of International Commercial Contracts (PICC) 4 are frequently
referred to in discussions on contract law reform. In addition, the Principles of
European Contract Law (PECL),49 which was later dissolved and absorbed into

a A H4 1-17f v1A T-ioER O hW5 [STUDIES ON EXPERT OPINIONS ON AND PROPOSALS

FOR REFORM OF THE LAW OF OBLIGATIONS IN WEST GERMANY] (TA# [Shitamori Sadamu]
et al. eds., 1988) investigates the reform proposals in GUTACHTEN UND VORSCHLAGE ZUR

OBERARBEITUNG DES SCHULDRECHTS [EXPERT OPINIONS ON AND PROPOSALS FOR REFORM OF

THE LAW OF OBLIGATIONS] (Bundesminister der Justiz [Minister of Justice] ed., 1981-1983)

(3 vols.), and Ki ! gM kAlcE ='80 3L [STUDIES ON THE FINAL REPORT OF THE

REFORM COMMISSION ON THE LAW OF OBLIGATIONS] (T7t [Shitamori Sadamu] & IMIS
[Oka Takashi] eds., 1996) introduces the draft in ABSCHLU9BERICHT DER KOMMISSION ZUR

OBERARBEITUNG DES SCHULDRECHTS [FINAL REPORT OF THE REFORM COMMISSION ON THE LAW

OF OBLIGATIONS] (Bundesminister der Justiz [Minister of Justice] ed., 1994).

'See, e.g., * 9 ?'M [HANDA YOSHINOBU], 14( f t 1 [OVERVIEW OF

THE ACT OF MODERNIZING THE LAW OF OBLIGATIONS] (2003).

45 See, e.g., MR99 [Shiomi Yoshio], F - *Mol
19 [Development of the Contractual Liability and Remedies for Non-Performance in

Europe], 47 INA$2" [OSAKA L. REV.] 205, 211-43 (1997), reprinted in $@#I3 0Y4
[SYSTEM OF LAW ON CONTRACTUAL LIABILITY] 1 (2000).

46 AVANT-PROJET DE REFORME DU DROIT DES OBLIGATIONS ET DE LA PRESCRIPTION [DRAFT

PROPOSALS FOR REFORM OF LAW OF OBLIGATIONS AND PRESCRIPTION] (Pierre Catala ed.,
2oo6). Even before these draft proposals were published, Japanese scholars paid close
attention to the reform movement in France. See, e.g., 4-ljilt#1 [Kanayama Naoki], 7
5 '/E l1l [Movement for the Civil Code Reform in France], 1294 '- 9

I [JURIST] 92 (zoo5).

47 United Nations Convention on Contracts for the International Sale of Goods, Apr. 11,

1980, 1489 U.N.T.S. 3, 19 I.L.M. 671 [hereinafter CISG].

48 INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, UNIDROIT PRINCIPLES

OF INTERNATIONAL COMMERCIAL CONTRACTS (2004) [hereinafter PICC].

4 PRINCIPLES OF EUROPEAN CONTRACT LAw (Ole Lando & Hugh Beale eds., 2000-2003) (3
vols.) [hereinafter PECLI.

183Japanese Civil Code (Law of Obligations) Reform



ColumbiaJournal ofAsian Law, Vol. 24, No. 1 (2oo)

the Draft Common Frame of Reference (DCFR),'o was thoroughly examined
because of its influence on law reform in Europe. To some scholars, these
treaties and model laws appear to give direction to the harmonization of
contract laws. For example, one speaker at the 1998 Annual Conference of the
Japan Association of Private Law proposed a new system for the cancellation of
contracts, referencing CISG, PICC, and PECL.' The Mission Statement of the
Reform Commission also expressly mentions harmonization of contract laws
as a possible justification for contract law reform in Japan." In this context,
the fact that Japan finally ratified CISG in 2oo8 can be counted as a factor
necessitating legal reform, because the existence of considerable inconsistency
between legal rules governing international and domestic transactions is not
ideal.

Not surprisingly, however, this rationale is not widely accepted in Japan.
The introduction of a new regime, even if theoretically valid and conceptually
refined, is not sufficiently justified yet, as it may impose considerable costs on
those who are familiar with the current system and may cause confusion in
society. In fact, practicing lawyers had already argued against the necessity of
harmonization before the BRP was published."

However, this criticism does not represent an insurmountable obstacle to
the proponents of reform, who consider international trends alone insufficient
reason for legal reform, and who emphasize the importance of investigating
the rules adopted by foreign legislatures, treaties, and model laws when
considering law reform. According to these advocates, foreign rules should be
adopted by Japanese law if and only if they offer a solution reflecting the
actuality of life in Japan.' In this sense, the BRP contains proposals that
conform to international trends.

4. Supplying the Japanese Model

Closely connected with harmonization, although possibly arguing against
its consideration, is the claim that the new legislation should aim to supply a
model of the Civil Code independent from the European tradition. According
to the Mission Statement of the Reform Commission, "While the 'Civil Law'
which Japan inherited through the process of 'Rezeption' was predominantly

o PRINCIPLES, DEFINITIONS, AND MODEL RULES OF EUROPEAN PRIVATE LAw: DRAFT COMMON
FRAME OF REFERENCE (Christian von Bar et al. eds., 2008) [hereinafter DCFR].

' iPiNA [Nomi Yoshihisa], WlRI?| [Remedies for Non-Performance], in 0J *a E
[YAMAMOTO KEizO] et al., supra note 28, at 132-33.

Mission Statement, supra note 25.

5 A3 ~il±t [TOKYO BAR AsS'N], KiiEE I ILI, [OPINIONS ON THE REFORM
OF THE CIVIL CODE] (2008), available at http://www.toben.or.jp/news/opinion/2008_12/
izo8.html (last visited Jan. 17, 2010).

' For the requirements of contract cancellation, see UCHIDA, DRAFT PROPOSALs, supra
note 26, at 96.

184



Japanese Civil Code (Law of Obligations) Reform

founded on and rooted in European society, the Japanese assimilation of civil
law over the past century has resulted in the development of original theories
and practices. It should be worthwhile to attempt a projection of the future
model of the Law of Obligations based on the particular experience of this
Asian country." " Although the Mission Statement emphasizes "the
development of original theories and practices," it does not fully explain the
necessity of presenting a Japanese model.

One ,explanation for the necessity of a Japanese model involves the
character of Japanese law as one of mixed jurisdictions. Over more than one
hundred years, Japan was introducing not only the legal institutions and
concepts of the European civil law jurisdictions, but also those of common law
countries, while at the same time making efforts to synthesize them. This
experience may provide a model that is useful when considering a legal system
appropriate for a contemporary borderless society.

Moreover, the presence of Japanese law on the international scene should
be mentioned. 6 In addition to law reforms in Europe, new Civil Codes have
been emerging in Far East Asia. For example, the Chinese Contract Act was
enacted in 1999, and the Law of Property in 2007. In South Korea, although an
attempt at Civil Code reform was stymied because of criticism from academic
lawyers, discussion on law reform, which would have been completed within
four years, resumed in 2009. Against the background of these movements,
motivation has grown for presenting the Japanese model in the legal reform
process of other states."

The assertion regarding the presence of Japanese law is not implausible
when considering the state of Japanese legal scholarship in Asia. From the end
of the twentieth century, the Ministry of Justice, in cooperation with the
Ministry of Foreign Affairs and the Japan International Cooperation Agency,
has provided legal assistance to developing Asian countries in order to
establish modern legal systems.' These activities were successful in assisting
with the drafting of basic private laws in Vietnam and Cambodia, with the
close involvement of Japanese scholars. 9 Legal developments in Japan were
important in these codification processes, and Japanese law, largely derived
from the European legal tradition, has come to represent the mother system
for these Asian countries. This experience has confirmed the importance of

5 Mission Statement, supra note 25.

56 UCHIDA, DRAFr PROPOSALS, supra note 26, at 31-34.

" Takashi Uchida, Senior Advisor of the Ministry of Justice and Secretary General of the
Reform Commission, emphasized the importance of enhancing the "brand power" of
the Japanese Civil Code. Uchida, Why Reform?, supra note 27, at 22-23.

58 For international cooperation activities conducted by the Ministry of Justice, see
International Cooperation Department, Ministry of Justice, http://www.moj.go.jp/
ENGLISH/MEOM/meom-o-o 5 .html (last visited Nov. io, 2010).

" Three members of the Reform Commission were engaged in drafting the Cambodian
Civil Code.

185



Japanese law in Asia and may support the assertion regarding the presence of
Japanese law on the international scene.

However, presenting the Japanese model gives rise to several problems.
The necessity of maintaining a Japanese presence in the international scene
may be questioned. Practitioners engaged primarily in domestic transactions
are not sympathetic to such ideas. More importantly, however, the exact
meaning of the Japanese model is itself a point of controversy. On one hand,
legal institutions based in the Civil Code have taken root in Japanese society.
In this sense, although they were inherent in the European legal tradition, they
may be said to have become elements of the Japanese model. On the other
hand, legal concepts and doctrines that developed outside the Civil Code
indicate the singularity of Japanese law. However, they were often affected by
foreign jurisprudence, given its influence on Japanese jurisprudence.
Therefore, the factors influencing the Japanese model are not immediately
clear.

C. The Role of the Ministry of Justice

In addition to academic contributions, the Ministry of Justice has played
an important role in the reformation of the Law of Obligations. Beginning in
the 199os, the ministry embarked on a program to amend and consolidate the
basic laws on civil matters.O The legal reform began with procedural law. The
new Code of Civil Procedure was enacted in 1996, the Civil Rehabilitation Act
in 1999, the Corporate Reorganization Act in 2002, and finally the Bankruptcy
Act in 2004. In parallel, the Ministry of Justice sought to reform substantive
laws. For instance, in 2003, provisions in Book II of the Civil Code were
amended to make the enforcement of security rights more efficient. The
Companies Act was enacted in 2005, and in 2oo6 the new Trust Act was
established, modernizing the Japanese trust system. The reform of contract
law is regarded as an integral factor in a series of reforms concerning civil
affairs. '

Over time, the Civil Affairs Bureau, which was responsible for these
reforms, increased the size of its workforce to respond to legislative demands.
The Ministry of Justice has appointed young practitioners and researchers as
attorneys or research fellows with responsibility for drafting legislation and
negotiating with political parties or other ministries and agencies of
government. The increase in staff numbers at the Civil Affair Bureau enabled
the Ministry of Justice to launch a reform of the Law of Obligations.

6o See generally Consolidation of Basic Laws on Civil Matters, Ministry of Justice,
http://www. moj.go.jp/ENGLISH/issues/issueso8.htm (last visited Nov. n1, zoo).
6 UCHIDA, DRAFT PROPOSALS, supra note 26, at 16-17.

Columbia journal ofAsian Law, VOL. 24, No. i (20jo)186



D. Guiding Principles of the BRP

Based on the above observations, we now seek to answer the following
questions: First, why has the process of law reform started recently? Second,
on what principles is the BRP based?

The need for reform of contract law was primarily justified by the nature
of the Japanese Civil Code, as well as by legal developments following its
enactment. In this sense, the necessity of reform may have existed for some
time. This potential necessity for reform was propelled forward by two groups:
a body of scholars supportive of re-codification and the Ministry of Justice,
which has achieved a series of legal reforms and increased its staff numbers.
The coincidence of these factors actualized the movement for contract law
reform.

An investigation of the background to law reform leads to several guiding
principles behind the BRP. First, crystallization of legal development after
enactment of the Civil Code is one of the goals of law reform. In this regard,
the need for legal transparency is emphasized under the slogan, "Civil Code for
Citizens." The new Civil Code is expected to enable ordinary citizens to
understand the framework of contract law. Ideally, an examination of the Civil
Code will enable those people with basic legal knowledge to determine the
relevant rules applied to the legal issues that they confront in their daily lives.
Second, the harmonization of contract laws was taken into account in a
discussion about the new Civil Code. Assuming an international trend toward
the harmonization of contract law, it is claimed that the provisions of
international treaties and model laws should be referred to when arguing the
case for law reform; furthermore, if Japan should deviate from its provisions,
this deviation should be justified. Finally, also mentioned was a model of the
Civil Code as independent from the European tradition. It was encouraged
that a unique model, based on the particular experience in Japan, would be
presented in the discussion regarding contract law reform.

The above considerations, which may contradict each other, are reflected
in the proposals of the BRP, thereby making it difficult to grasp the overall
picture of the BRP. The following section considers how these guiding
principles apply to the BRP, with reference to specific examples.

II. MAJOR PROPOSALS OF THE BRP

A. Clarification of Legal Principles and Concepts

To enhance legal transparency, the Reform Commission suggests
codifying legal principles that are fundamental to Japanese contract law but
that are not provided for in the present Civil Code. For example, the BRP
includes a proposal on the freedom of contract, which acknowledges the right

6oof citizens to conclude a contract and to determine its contents. The

BRP, supra note 8, 3.1.1.01 (Principle of freedom of contract).

Japanese Civil Code (Law of Obligations) Reform 187



principle of consensualism is also expressed in order to clarify that there are in
principle no other requirements than the parties' agreement, 6 and the BRP
explains the contents of an agreement that is sufficient to form a contract.6 4
Regarding contractual remedies, the BRP confirms that specific performance is
considered a principal remedy. These proposals aim to elucidate generally
accepted principles;6 6 consequently, they are unlikely to draw practical criticism.

Moreover, the BRP contains many definitions of legal concepts; the
necessity of such definitions was rejected by the drafters of the current Civil
Code. In addition to "consumer," "business operator," and "economic
operation," which are considered below, the BRP defines legal concepts
relating to the formation and effect of contracts,6 8 causes for extinguishing
obligations,69 special contracts,7

o and others .7 These definitions are intended
to help people understand the basic Japanese legal framework. 7

Parties may freely conclude a contract and determine its contents.

63 Id. 3.1.1.02 (Principle of consent).

A contract shall be entered into simply when the parties reach an agreement
except when otherwise provided for in laws and regulations or where
otherwise agreed by the parties.

64 Id. 3.1.1.07 (Agreement forming the contract).

(i) A contract comes into existence when an agreement has been reached on
the matters that should be stipulated in light of the intention of the
parties and the nature of the contract.

(2) Notwithstanding the provision of the preceding paragraph, if an
additional agreement is required to form the contract pursuant to the
intention of the parties, the contract comes into existence when such
agreement has been reached.

65 Id. 3.1.1.53 (Claims and the power of demand).

The obligee may make a demand to an obligor for the performance of an
obligation.

2 COMMENTARIES, supra note 14, at 4-5, 8-9, 187-88.
67See OSAKA BAR AssocIATION, supra note 15, which includes no objection to these
proposals.
68 For example, writing, 3.1.1.04, defect in things delivered, 3.1.1.05, offer, 3.1.1.12, and
acceptance, 3.1.1.21.

69 Setoff, 3.1.3.21, novation, 3.1.3.33, central counterparty settlement, 3.1-3-37, and release,

3.1.3.40. Also, impediments to prescription, 3.1.3-51.

7o Sales, 3.2.1.01, exchange, 3.2.2.01, gifts, 3.2.3.01, lease, 3.2.4.01, loan for use, 3.2-5.01,
loan for consumption, 3.2.6.01, finance lease, 3.2-7.01, service contract, 3.2.8.o, contract
for work, 3.2.9.01, mandate, 3.2.1o.o, quasi-mandate, 3.2.10.02, mediated contract,
3.2.10.19, intermediary contract, 3.2.10.20, deposit, 3.2.11.o, employment, 3.2.12.01,

partnership, 3.2-13.01, life annuity contract, 3.2.14.01, and settlement, 3.2.15.01.

Columbia Journal ofAsian Law, VOL 24, No. i (2olo)188



Japanese Civil Code (Law of Obligations) Reform

B. Embodiment of the Good Faith Clause

From the viewpoint of legal transparency, it is important to codify the
legal rules developed outside the Civil Code. In this respect, the BRP contains
proposals that put the principle of good faith in concrete form. Because of the
simplicity of current provisions in the Civil Code, judicial precedents have
been established via interpretation of the good faith clause, Article 1.2 of the
Civil Code.7 3 The Reform Commission proposes codifying these judicial
precedents into the Civil Code.

First, the BRP formulates the principle of good faith as follows:

3.1.1.03 (Relations of claims and obligations and the principle of good

faith)
(1) An obligor must act in accordance with good faith when
performing an obligation.
(2) An obligee must act in accordance with good faith when exercising
the right.

(3) Other than (i) and (2), with regard to the relations of claims and
obligations, the parties shall assume the duty of acting in accordance
with good faith.

For example, contracts through general conditions, 3.1.1.25, transfer of the contractual
status, 3.1.4.14, and guarantee, 3.1.7.01.

7 In this regard, it is worth remarking that some definitions of the BRP intend not just
to define legal concepts, but to purify them. For example, novation, one of the causes
for extinguishing obligations, is defined as "a contract which changes the object of the
obligation" concluded by parties who manifest intention to extinguish the obligation.
This definition excludes the extinguishment of obligation by changing of the parties,
which has been considered as a subcategory of novation under the current law. Under
the BRP, this operation is expected to be achieved by the assignment of claims or
assumption of obligations. BRP, supra note 8, 3.1.3-34 (Effect of a contract in
substituting the obligor or the obligee). By rearranging the scope of legal concepts, the
BRP aims to establish reasonable categorization between adjacent legal institutions. 3
COMMENTARIES, supra note 14, at 90-93.

Definitions of special contracts also reveal the inclination toward purifying legal
concepts. Because of the variety of service contracts in real life, the four named
contracts in the current Civil Code, contract for work, mandate, deposit, and
employment, are not sufficient to cover all types of service contracts. To fill the gap,
judicial precedent has enlarged the concept of quasi-mandate in order to apply
provisions of mandate to contractual relationships which do not fall into the four types
of special contracts. While the BRP clarifies the concept of four existing contract types,
it introduces a new category of contract, service, which is expected to cover other
relationships. COMMENTARIES, supra note 14, at Vol. 5, 4-7. For details on criticism, see

TOKYO BAR ASSOCIATION, supra note 15, at 22-23.

7 MINPO, supra note i, art. i, para. 2. Paragraph 2 provides that "[tihe exercise of rights
and performance of duties must be done in good faith." The English translation of the
Japanese Civil Code is available at Japanese Law Translation, http://www.japaneselaw
translation.go.jp/law/detail/?id=1928&vm=o4&re=o2&new= (last visited Nov. n1, zo0o).

189



190 Columbia journal ofAsian Law, Vol. 24, No. 1 (2010)

On the presumption that both parties to the contract have a duty to act in
accordance with good faith, the BRP then sets down individual rules.

As a corollary to the freedom of contract, one is free to decide whether to
enter into a contract and is not liable for failure to reach an agreement. If she
violates the principle of good faith however, she incurs liability for damages."
Under the influence of German law, Japanese scholars have discussed this
liability as an application of culpa in contrahendo, and the Japanese Supreme
Court has acknowledged this liability for some time." The BRP suggests the
necessity of codifying these established precedents' 6 consistent with the new
German Law of Obligations and international model laws.7

Parties in contract negotiations also have a duty to provide information
and give an explanation regarding those matters that might influence the
contract decision of the other party, in accordance with good faith.78 Based on
an analysis of court judgments, the BRP enumerates factors that should be
taken into account when deciding whether there has been a breach of duty:
"the nature of the contract, the status of each party, the conduct in the

74 BRP, supra note 8, at 3.1.1.09 (Liability for damages caused by persons unfairly
breaking off negotiations).

(i) A party is not liable solely on the grounds of having broken off the
contract negotiations.

(2) Notwithstanding the provision of the preceding paragraph, if contrary to
good faith a party either continues negotiating even when there is no
prospect of the contract being concluded or rejects conclusion of the
contract, the party is liable for the damage incurred through the other
party trusting in the contract being formed.

7 See K.K. Osawa Horo Seisakusho v. K.K. Fuji, 1o82 HANREI JIHO 47 (Sup. Ct., 1983);
Sumiya v. Ikeda, 1137 HANREIJIHO 51 (Sup. Ct., 1984); K.K. Sokai Tsusho v. Teikyo Heisei
Daigaku, 1949 HANREI JIHO 30 (Sup. Ct., 2oo6); K.K. Kanamori Seisakusho v. K.K. Nihon
Shuppan Hanbai, 1964 HANREI JIHO 45 (Sup. Ct., 2007).

7Although the issue of the nature of this liability, whether contractual or delictual, has
been discussed animatedly among scholars, the BRP does not mention this discussion.
COMMENTARIES, supra note 14, at 40.

' Bilrgerliches Gesetzbuch [BGB] [Civil Code] Jan. 2, 2002, § 311 2; PICC, supra note

48, art. 2.1.15; DCFR, supra note 50, art. II.-3:3o1.
78 BRP, supra note 8, 3.1.1.10 (Duty of provision of information/duty of explanation of
the negotiating parties).

(i) If in the contract negotiations, there is a matter relating to the contract
which will influence the decision of the other party as to whether or not
to conclude the contract, the parties shall, in light of factors such as the
nature of the contract, the status of each party, the conduct in the
negotiations, or the existence and contents of an arrangement between
the parties reached in the process of negotiations, provide information
and give an explanation in accordance with the principle of good faith.

(2) A person who violates the duty in (1) is liable for the damage which would
not have been incurred had the other party not concluded such contract.



Japanese Civil Code (Law of Obligations) Reform

negotiations, or the existence and contents of an arrangement between the
parties reached in the process of negotiations." In this light, the BRP aims to
crystallize legal developments in Japan. 9

One consequence of the requirement that a creditor must act in good faith
is apparent in the case of a creditor failing to accept the delivery of goods or
services. The debtor may make a claim for damages caused by the failure of
acceptance, or may cancel the contract itself, not only where a creditor bears
the duty of acceptance, but also where she violates the principle of good
faith.8 Although there exists a difference of opinion regarding the nature of
the creditor's liability, this type of liability is widely accepted in Japan. The
BRP seeks to enhance the degree of legal transparency by codifying this
liability.

C. New System of Contractual Remedies

On the subject of contractual remedies, which traditionally have been
profoundly influenced by German law and jurisprudence, the BRP proposes a
new system, apparently taking into account the harmonization of contract
laws. However, this proposal does not indicate that the BRP intends to
reproduce provisions in treaties or model laws. While sharing the fundamental
ideas of such provisions, the BRP advances proposals that reflect legal practice
in Japan.

1. Initial Impossibility

First, as with the PICC"' and DCFR, the BRP advances the idea that initial
impossibility does not in itself invalidate a contract.8 ' Despite the absence of

79 2 COMMENTARIES, supra note 14, at 44-45.
BRP, supra note 8, at 3.1.1.88 (Damages and cancellation caused by violation of duty

by the obligee).

In cases where the obligee bears the duty of acceptance or any other duty to
act in accordance with the principle of good faith, if the obligee violates this
duty the obligor may make a claim for damages to the obligee in accordance
with the rules relating to non-performance of an obligation and may cancel
the contract which incurred the obligation.

PICC, supra note 48, art. 3.3.
82 DCFR, supra note 50, art. I1.-7:1o2.

83 BRP, supra note 8, 3.1.1.08 (Impossibility of performance/impossibility of expectation
existing at the time of conclusion of the contract).

Even if the performance of the contractual obligation was already impossible
to perform at the time of conclusion of the contract or it was otherwise
unreasonable to expect the obligor to perform as such in light of the intent of

191



192 Columbia journal ofAsian Law, Vol. 24, No. i (2010)

an express provision, Japanese legal scholarship received the doctrine of initial
impossibility from German law and jurisprudence, according to which a
contract is invalid where at the time of the contract's formation, performance
of an obligation is impossible. 8 When a party takes on the risk of
impossibility, however, it is difficult to justify invalidating the contract simply
because of its initial impossibility.8 In fact, the new German Civil Code, 8
influenced by international model laws, has already adopted this idea.8 7 The
BRP clearly states that initial impossibility by itself does not affect the validity
of a contract, although initial impossibility prevents the creditor from
demanding that the debtor meet the stated obligation," and instead enables
the creditor to claim for damages or rescind the contract on the grounds of
mistake.8

2. Damages

The BRP proposes to introduce a new regime of debtor's liability for
damages composed of two phases: (i) judging the requirements for liability;
and (ii) deciding the scope of damages according to the foreseeability rule.

i. Requirements for Liability

According to the BRP, the party in breach is liable for damages caused by
"non-performance of obligation."'o This proposal initially appears to set down

the contract, such contract is valid provided that the parties have not agreed
otherwise.

4 For the Japanese assimilation of initial impossibility from German law, see Zentaro
Kitagawa, Japanese Civil Law and German Law: From the Viewpoint of Comparative Law,
in THE IDENTITY OF GERMAN AND JAPANESE CIVIL LAW IN COMPARATIVE PERSPECTIVES 19-21

(Zentaro Kitagawa & Karl Riesenhuber eds., 2007).

8 COMMENTARIES, supra note 14, at 37-38; UCHIDA, DRAFT PROPOSALS, supra note 26, at
65-66.

8 Biirgerliches Gesetzbuch [BGB] [Civil Code] Jan. 2, 2002, § 31ia.

87See REINHARD ZIMMERMANN, THE NEW GERMAN LAW OF OBLIGATIONS, HISTORICAL AND

COMPARATIVE PERSPECTIVE 62-66 (2005).

8 BRP, supra note 8, 3.-1-56 (Cases where a demand for performance may not be
made).

In cases where performance is impossible or, in light of the intent of the contract,
the obligor cannot reasonably be expected to make the performance, the obligee
may not make a demand to the obligor for performance.

' Although there is no proposal, the BRP acknowledges the rescission of contract on
the ground of the initial impossibility. COMMENTARIES, supra note 14, at 38.

90 BRP, supra note 8, 3.1.1.62 (Damages caused by non-performance of an obligation).



Japanese Civil Code (Law of Obligations) Reform 193

a self-explanatory rule, although there are several important implications.
Under this proposal, there is no distinction among subcategories of non-
performance, and all forms of non-performance are subject to a single rule.
This idea has already been adopted in the current Civil Code:

Article 415 (Damages due to Default)

If an obligor fails to perform consistently with the purpose of its
obligation, the obligee shall be entitled to demand damages arising
from such failure. The same shall apply in cases it has become
impossible to perform due to reasons attributable to the obligor.

The first sentence provides that the failure "to perform consistently with
the purpose of its obligation" as a unitary requirement for the damages, and
the second sentence applies it to the case of impossibility. Nonetheless,
Japanese jurisprudence introduced the trichotomy of non-performance from
German law: impossibility, delay in performance, and imperfect performance,
or positive breach of contract ("positive Vertragsverletzung"),"' which then
thoroughly permeated Japanese practice.

However, subsequent research into the Japanese reception of German
dogma revealed no clear reason for the attribution of absolute priority to
German doctrines, and now this view is widely accepted in academia.9 2 Based
on academic achievement and following recent international trends,9 3 the
Reform Commission suggests adopting "non-performance of obligation" as a
unitary concept.

The BRP would then create a two-step analysis for finding "non-
performance of obligation": first, identifying the scope of obligation, and
second, judging the exemption from damages. The scope of the obligation is
demarcated by the amount of risk the debtor accepted in the contract. To
decide this, a court can evaluate whether the debtor promised to achieve a
given result or simply to use reasonable care and skill.

The second stage is concerned with exemptions from the requirement to
perform. The BRP states two kinds of exemptions:

3.1.1.63 (Grounds for exemption from damages)

The obligee may demand compensation from the obligor for damage incurred
through non-performance of an obligation.

9' For Japanese reception of the trichotomy of non-performance from German law, see
Kitagawa, supra note 84, at 21-23.

92 For a general outline, see -YilIA-01 [Hayakawa Shinichiro], TTEAIft i
*tffMF [Imperfect Performance and Positive Breach of Contract], in 4 1xi)IJA [PAPER

SERIES ON THE CIVIL CODE] 49 (AW1- [Hoshino Eiichi] et al. eds., 1985).

9 CISG, supra note 47, art. 79; DCFR, supra note 5o, art. 1II.-3:701.



Columbia journal ofAsian Law, Vol. 24, No. i (2010)

(i) If an obligation is not performed due to causes which had not been
accepted by the obligor with regards to the contract, the obligor shall
not be liable for damages under 3.1.1.62.
(2) If the obligor has the right of defense provided for in 3.1.1.54 or

3.1.1.55, the obligor shall not be liable for the damages provided for in

3.1.1.62. The two defenses mentioned above are simultaneous
performance, 3.1.1.54, and insecurity, 3.1.1.55.

Section 1 reveals an important aspect of the BRP: fault by the debtor is not
required.

As we have seen, the first sentence of the Article 415 of Japanese Civil Code
does not mention the debtor's fault. The second sentence certainly provides
the "attribution" to the debtor as a requirement for damages, but it is not clear
what "attribution" means. In an attempt to clarify the word's meaning, Japanese
scholars introduced fault-based liability doctrine ("Verschuldungsprinzip")
from German jurisprudence, under which a debtor is liable only for damages
attributable to her fault. Moreover, scholars did not limit this doctrine to the
case of impossibility of performance but expanded it to all kinds of non-
performance. The fault-based liability doctrine was thus established as a
general principle for damages.

Although this doctrine is generally accepted in practice, it may not be
easily administrable in the judicial process." If the obligation is to achieve a
given result, failure to do so would be sufficient to require the debtor to pay
damages, and there would be no need to consider the debtor's fault. On the
other hand, if the debtor is obliged merely to use reasonable care and skill, she
is liable if she has not exercised such reasonable care and skill. Based on these
considerations, the BRP intends to introduce rules reflecting the actual
judgment process, under which the exemption from the damages is allowed,
only when the causes, which the debtor had not accepted, hampered the
performance of obligation. Exemptions in this sense need not be judged when
the debtor's obligation is to use reasonable cares and skill because judgment
on the exemptions is absorbed into judgment on the debtor's obligation.95

ii. Scope of Damages

In deciding the scope of damages, the BRP suggests a revival of the
foreseeability rule. Article 416 of the Japanese Civil Code,"6 which descended

94 UCHIDA, DRAFr PROPOSALS, supra note 26, at 83.

95 2 COMMENTARIES, supra note 14, at 253.
96 MINPO, supra note i, art. 416 (Scope of damages) provides as follows:

(i) The permissible scope of the demand requirement for damages arising
from failure to perform an obligation shall be the damages which would
ordinarily arise from such failure.

194



Japanese Civil Code (Law of Obligations) Reform 195

from the famous English case Hadley v. Baxendale," contains a foreseeability
rule, but Japanese legal scholars introduced the German "adequate causation"
principle, under which recoverable losses are those caused by non-performance
that would have occurred in the ordinary course of events. To avoid confusion
in the interpretation of Article 416, the BRP proposed that the scope of
damages be limited to the foreseeable consequences of failure to perform.98

Although this rule has also been adopted by international. model laws,99

the BRP deviates slightly from these laws regarding the point in time when the
damages should be foreseen. For example, according to the Article 7.4.4 of
PICC, the scope of damages is decided "at the time of the conclusion of the
contract." In contrast, whereas damages triggering compensation must
generally have been foreseen by the contract parties at the time of conclusion
of the contract, the BRP allows the creditor to demand compensation from the
debtor for damages if the debtor foresaw or should have foreseen the damages
"after the conclusion of the contract up until the point of non-performance of
the obligation" unless she took reasonable measures to prevent them. For
more than ninety years, the Japanese Supreme Court has followed the rule that
the scope of damages is judged at the time of non-performance; the BRP
intends to codify this interpretation into the Civil Code.00 This rule is
supported by the idea that once parties have entered into the contract, they
should be responsible for those losses revealed after conclusion of the
contract. It has been pointed out that this idea corresponds to the reality of
Japanese legal practice.'" Considered in this light, the BRP's proposals on
damages aim to establish a new regime that conforms to practice in Japan by
referring to international trends.

(2) The obligee may also demand compensation for damages which arise
from any special circumstances if the party did foresee, or should have
foreseen, such circumstances.

* Hadley v. Baxendale, 156 Eng. Rep. 145 (Ct. Exch. 1854).

9 BRP, supra note 8,3.1.1.67 (Scope of damages).

(i) With regard to a claim accruing based on the contract, the obligee may
make a demand to the obligor for compensation of damage as the result
of non-performance which, at the time of conclusion of the contract,
both parties foresaw or should have foreseen.

(2) Even in cases where the obligor foresaw or should have foreseen the
damage after the conclusion of the contract up until the point of non-
performance of the obligation, if the obligor did not take reasonable
measures to avoid the damage, the obligee may make a demand to the
obligor for such compensation.

' PICC, supra note 48, art. 7.4.4; DCFR, supra note 5o, art. 111-3:703.

Enu Emu Webu Nawara v. Kurohara, 24 DAIAN MINROKU 1658, 1666-67 (Sup. Ct., 1918).

'0' UCHIDA, DRAFr PROPOSALS, supra note 26, at 92-93.



However, this regime has been bitterly criticized by practitioners, who are
concerned that it will undermine the stability of legal practice.'0 2 Even though
the doctrines to which the practitioners are accustomed do not precisely
reflect standard legal practice, they can operate under these doctrines;
therefore, they see no immediate need for law reform.

This type of objection reveals that legal development in academia is not
identical to that in practice. Even a doctrine that is widely supported by
scholars will not necessarily receive the approval of practitioners. This
difference results in varying degrees of enthusiasm for law reform among
practitioners and academics, creating a potential obstacle for law reform.

3. Cancellation of Contract

In the proposed provisions on cancellation of contract, the BRP suggests a
new set of rules in an attempt to reflect both the state of legal practice in Japan
and international trends. First, the BRP agrees with CISG, PICC, and DCFR
that cancellation is a legal mechanism that allows a contract party to be
released from the contract when it becomes unreasonable to bind her to it.
Hence, even if non-performance is excused and the breaching party is not
liable for damages, the aggrieved party has the right to terminate the contract
if there is "serious non-performance of the contract."'o3 This proposal and the

102 OSAKA BAR ASSOCIATION, supra note 15, at 94-99; TOKYO BAR ASSOCIATION, supra note

15, at 14-15.

'03 BRP, supra note 8, at 3.1.1.77 (Requirements of accrual of the right to cancellation).

(i) If there is a serious non-performance of the contract on the side of one of
the parties to the contract, the other party may cancel the contract.

(a) A serious non-performance of the contract shall be when one of the
parties to the contract does not perform an obligation and as a result the
other party loses reasonable expectation with regard to the contract.

(b) In cases where, through the nature of the contract or manifestation of
intention of the parties, the object of the contract cannot be achieved
unless the obligation is performed by a specified date or within a certain
period, when that time has passed without one of the parties performing
the obligation, this shall fall under a serious non-performance of the
contract.

(2) In cases where one of the parties to the contract does not perform an
obligation, if the other party has demanded performance stipulating a
reasonable period of time and non-compliance with the demand
constitutes a serious non-performance of the contract, the other party
may cancel the contract.

(3) With regard to a contract concluded between business operators, in cases
where one of the parties to the contract does not perform an obligation, if
the other party demands performance stipulating a reasonable period of
time and no performance is made within this period, the other party may
cancel the contract. This shall not apply if non-compliance with the
demand does not constitute a serious non-performance of the contract.

196 Columbia Journal ofAsian Law, Vol. 24, No. i (2olo)



Japanese Civil Code (Law of Obligations) Reform

proposal on damages both reject a distinction between non-performance and
fault-based liability doctrine.o4 The BRP defines "serious non-performance of
the contract" as occurring "when one of the parties to the contract does not
perform an obligation and as a result the other party loses reasonable
expectation with regard to the contract." This concept closely resembles
"fundamental breach of contract" in the CISG0o and "fundamental non-
performance" in the PICCo 6 and DCFR.'0

On the other hand, the BRP intends to retain the two types of cancellation
stated in the current Civil Code: cancellation with demand (Article 541) and
without demand (Articles 542, 543). Correspondingly, the BRP allows the
aggrieved party to cancel the contract "[i]n cases where one of the parties to
the contract does not perform an obligation, if the other party has demanded
performance stipulating a reasonable period of time and non-compliance with
the demand constitutes a serious non-performance of the contract." Here, in
judging whether cancellation is permissible, courts can take into account the
circumstances after non-performance ("non-compliance with the demand").
Unlike CISG Article 49 (1) (b), cancellation with demand in the BRP is not
limited to the case of a delay in performance, but is also allowed in the case of
imperfect performance. Because this stance is widely accepted in Japan, the
BRP intends to deviate from the model supplied by the CISG.o 8

Some practitioners appear to favor the introduction of "serious non-
performance of the contract" as a requirement for cancellation while
maintaining the two types of cancellation.o 9 However, some have raised
concerns that the scope of contract cancellation would be limited by these
suggested revisions because they seem to impose an aggravation requirement
for cancellation.1 o In addition, the revisions have potential for confusion.
Critics claim that because of the potential for manipulation, it is difficult to
foresee how the revisions would be interpreted in court judgments."

1o4 2 COMMENTARIES, supra note 14, at Vol. 2, 299, 312-14. Hence, the BRP proposes at the
same time to abolish provisions concerning the risk allocation which are applied to the
case where performance becomes impossible on a ground for which the debtor is not
responsible. See BRP, supra note 8, at 3.1.1.85 (Deletion of the provisions concerning the
assumption of risk).

Article 534, Article 535, and Paragraph i of Article 536 of the present Civil Code
shall be abolished.

105 CISG, supra note 47, art. 64.

' PICC, supra note 48, art. 7.3.1.

" DCFR, supra note 50, art. 111-3:502.

1oS 2 COMMENTARIES, supra note 14, at 299-300.

'09 OSAKA BAR ASSOCIATION, supra note 15, at 1o5-o6.

"0 TOKYO BAR ASSOCIATION, supra note 15, at 15.

' OSAKA BAR ASSOCIATION, supra note 15, at 1o5-o7; TOKYO BAR ASSOCIATION, supra note

15, at 15.

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Columbia Journal ofAsian Law, Vol. 24, No. i (2010)

D. Shorter Periods and Simpler Regimes of Prescription

While the Reform Commission is cautious regarding negative effects on
practice that may arise with the introduction of the new system, it also sees
the need for improvement. By abolishing some of the provisions in the Civil
Code and rejecting current practice, the Reform Commission intends to
establish new legal institutions, an appropriate goal of law reform. In this light,
reform proposals on extinctive prescription and assignment of claims merit
mention.

Under the influence of the French Civil Code, Japanese law has adopted a
unitary concept of prescription that covers both acquisitive and extinctive
prescription. Provisions concerning prescription are grouped together in Book
I of the Civil Code. The Japanese Civil Code retains a ten-year period as the
regular period of extinctive prescription for obligations in Article 167
Paragraph i but recognizes shorter periods of one to five years for many
important claims in Articles 169 to 174 and 724."2 Nonetheless, because the scope

of a shorter period is not necessarily definite, the relevant period is sometimes
difficult to determine."' Moreover, the justification for such a distinction is
said to be untenable.'" Therefore, the BRP includes fundamental reform
proposals under the new concept of "prescription for a claim,"" which appears
to conform to the "trend towards shorter periods and simpler regimes.""6

The BRP suggests abolishing the existing shorter periods of prescription"
and sets general periods of prescription that consist of two types,"' although

n1 The Japanese Commercial Code also lays down the five-year period for obligations
arising from commercial relationships. iM.f [COMMERCIAL CODE], Law NO. 48 of 1899,
art. 522.

"1 3 COMMENTARIES, supra note 14, at 159-60.

"4 Id. at 16o-62.

"s The reason that the Reform Commission introduced the new concept instead of
extinctive prescription involved two proposals as to the effect of the expiration of the
prescription period, as discussed below. According to one proposal, the expiration of
the prescription period does not mean the extinction of an obligation; rather, it allows
a debtor to refuse the performance of the obligation. 3 COMMENTARIES, supra note 14, at
155.

"6 DCFR, supra note 50, art. IllI.-7:2o n.III.

" BRP, supra note 8, 3.1.3.45 (Handling of the provisions on short-term extinctive
prescriptions).

(i) Articles 169 to 174 of the present Civil Code shall be abolished.
(2) Article 724 of the present Civil Code shall be abolished.
(3) With regard to other provisions of the present Civil Code stipulating

provisions which differ from 3.1.3.44, the Commission considers that it is
preferable to abolish them in principle, but it reserves a room for further
consideration on each provision.

(4) With regard to provisions relating to extinctive prescription in the
Commercial Code, the Commission considers that it is preferable to
abolish Article 522 and other related provisions of the Commercial Code

198



Japanese Civil Code (Law of Obligations) Reform

the special periods are retained in some cases."9 The relatively long ten-year
period begins from the date on which a creditor is able to exercise a claim. The
shorter period commences at the date on which a creditor knows of the debtor
and the cause for accrual of a claim and is able to exercise the claim. The BRP
proposes three choices for the shorter period: three, four, or five years. The
BRP regime-a combination of a longer period with objective commencement
and shorter periods with subjective commencement"'-corresponds overall to
the trend of law reform in Europe... and an international model law.'

insofar as possible, but these revisions shall be left to later consideration
for the reform of the Commercial Code.

n1 BRP, supra note 8, 3.1.3-44 (Principles on the commencement time of the
prescription for a claim and the prescription period).

(i) Unless otherwise provided in the Civil Code or other laws, the
prescription period for a claim shall expire after [io years] have elapsed
since the time of being able to exercise the claim.

(2) Even before the lapse of the period in (i), if the obligee (or in cases where
the obligee is a minor or an adult ward, the legal representative) comes to
know of a cause for accrual of a claim and identifies the obligor, the
prescription period for the claim shall expire through the lapse of [3
years/4 years/5 years] since the time of knowing of the fact or being able
to exercise the claim, whichever comes later.

[In cases where the prescription period of (2) is three years:]

(3) Notwithstanding (i), if the obligee (in cases where the obligee is a minor
or an adult ward, the legal representative) comes to know of a cause for
accrual of a claim and identifies the obligor within [io years] of the time
of being able to exercise the claim, the period of claim prescription shall
not expire until [3 years] have passed since knowing of such fact.

"' The BRP contains the following exceptions for prescription period: 3.1-3-46 (Special
provisions on calculation of commencement times in cases where the obligor is
required to draft records on the claim or comply with inquiries); 3.1.3-47 (Exceptions to
claims recognized through final and binding judgments and suchlike); 3.1.3.48
(Prescription period for a claim of periodic payments); and 3.1.3.49 (Prescription period
of a claim for damages owing to infringement of personal interests). BRP, supra note 8.

z0 One deviation of the BRP from the international trend is that the BRP requires
actual knowledge of the accrual of a claim and the debtor. This is supposed to clarify
when the shorter prescription period starts. COMMENTARIES, supra note 14, at Vol. 3, 171.
' New provisions of the French Civil Code lay down the five-year general period and
the twenty-year maximum period while recognizing exceptions for several claims. C.
CIV., arts. 2224, 2232. The German Civil Code, on the other hand, has a general
prescription period of three years, which starts at the end of the year when the creditor
should become aware of the facts giving rise to the right and the identity of the debtor.
It is limited to a maximum period of ten or thirty years. Birgerliches Gesetzbuch [BGB]
[Civil Code] Jan. 2, 2002, §§ 195, 199.
122 According to the DCFR , the shorter period begins to run from the time when a
debtor has to effect performance or the time of the act which gives rise to the claim.
DCFR, supra note 50, arts. III.-7:201, 203. Nonetheless, since the running of the period
is suspended as long as the creditor could not reasonably know of the identity of the

199



Columbia Journal ofAsian Law, Vol. 24, No. i (201o)

On the other hand, postponement of the prescription period is permitted
on various grounds in order to protect the interest of the creditor.' 3 First,
contract parties may change the length of the prescription period and the time
when it commences within a certain range." Both shortening and lengthening
of the prescription period are allowed. Second, three types of impediments to
prescription are stated: renewal of the prescription period, suspension of the
running of the prescription period, and extension of the expiry date of the
prescription period.' In particular, when parties agree to negotiate a claim,
the running of the prescription period is suspended. ,6 Through these

debtor or the facts giving rise to the claim (art. III-7:301) and there are caps on the
length of periods that are not in principle subject to the suspension (art. III.-7:307), the
regime resembles that of the BRP on the whole.

'2 COMMENTARIES, supra note 14, at Vol. 3, 162, 164.

12 BRP, supra note 8, 3.1.3-50 (Setting a prescription period through agreement).

(1) The obligee and the obligor may, through an agreement, change the
commencement time of the prescription period or the length of the
prescription period provided for in 3.1.3.44(2) up until the time of accrual

of the claim.
(2) The commencement time stipulated through the agreement of (i) shall

be from after the time the claim could be exercised.

(3) The prescription period stipulated through the agreement of (1) shall be
for more than [6 months/i year] of the time of being able to exercise the
claim but less than [io years] (the same period as 3.1.3.44(1)); provided,

however, that this does not apply if otherwise provided for by law.

(4) The agreement in (i) made between a business operator and consumer is
void if it has contents which are more disadvantageous to the consumer
than in cases according to the provisions of law.

125 BRP, supra note 8, at 3-1-3.51 (Types and definitions of prescription impediments
relating to prescription of claims).

The impediments to prescriptions of claims shall be divided into the three
types of renewal of the prescription period, suspension of the running of the
prescription period, and extension of the expiry of the prescription period.
(a) "Renewal of the prescription period" means that the previous prescription

period terminates through the occurrence of certain grounds and the
running of a new prescription period commences.

(b) The suspension of the running of the prescription period means that the
running of the prescription period is temporarily suspended through the
occurrence of certain grounds and after the grounds have terminated, the
running of the prescription period recommences and the prescription
period expires through the passing of the remaining period.

(c) The extension of the expiry of the prescription period means that, in
cases of there being certain grounds, the expiry of the prescription period
is extended from the time of the grounds terminating or being
extinguished until a certain period has passed.

126 BRP, supra note 8, at 3.1.3.60 (Suspension of the running of the prescription period
of a claim due to an agreement on discussions).

200



Japanese Civil Code (Law of Obligations) Reform 201

arrangements, it is expected that the prescription period be applied differently
according to individual circumstances; this fundamental idea is consistent
with recent international trends in law on prescription.'

As to the effect of expiry of the prescription period, the BRP advances two
proposals: to extinguish an obligation, and to allow a debtor to refuse the
performance of an obligation.' Although the latter proposal has been adopted
by international model laws,' 9 the majority of the BRP members supported

(1) If an agreement is reached between the obligee and the obligor to the
effect of holding discussions relating to the claim, the running of the
prescription period of the claim shall be suspended from such time.

(2) If a notification reaches the obligee from the obligor to the effect of
rejecting the continuation of the discussions or [3 months/6 months]
have passed since the last discussion (excluding cases where an
agreement has been reached on continuing the discussions), the running
of the prescription period shall recommence from such point.

(3) In cases of (2), the prescription period shall not expire until [6 months/i
year] have passed since the time of recommencement of the running. A
demand notice for performance made within the [6 months/i year] shall
not have the effect of extending the expiry of the prescription period.

'2 For instance, the change of prescription period within a certain range by agreement
is allowed under the French Civil Code, German Civil Code, and the DCFR. C. civ., art.
2254; Bilrgerliches Gesetzbuch [BGB] [Civil Code] Jan. 2, 2002, § 202(2); DCFR, supra
note 50, arts. III.-3:703, I-I.-7:6o1. The postponement of expiry of prescription period is
stipulated in the German Civil Code and DCFR. Bilrgerliches Gesetzbuch [BGB] [Civil
Code] Jan. 2, 2002,§ 203; DCFR, supra note 50, art. III.-7:304.

1s BRP, supra note 8, 3.1.3.68 (Effect of the expiry of the prescription period of a claim).

[Proposal A]
(i) If the prescription period pertaining to a claim expires, the obligor may

invoke the claim prescription.
(2) The invocation in (i) may be made either in or out of court.
(3) If the invocation in (i) is made, it may not be revoked.

(4) If the invocation in (i) is made, the claim shall be extinguished
retroactively from the day of commencement of calculation.

[Proposal B]
(i) If the prescription period pertaining to a claim expires, the obligor may

refuse the performance of the obligation relating to the claim and the
performance of the obligation of interest, the obligation of compensatory
damages for delay, and any other obligation which accrues incidentally to
the claim.

(2) The refusal of performance in (i) may be made either in or out of court.

(3) If the refusal of performance in (i) is made, it may not be revoked.
(4) If the refusal of performance in (i) is made, a request may not be made

for performance or any other method of actualizing the claim. Any
guarantee claim, real-right security or any other right to secure the
performance of the obligation which was refused shall be extinguished.

129 PICC, supra note 48, art. io.9; DCFR, supra note 5o, art. 1I.-7:501. See also
Biirgerliches Gesetzbuch [BGB] [Civil Code] Jan. 2, 2002, § 214.



202 Columbia journal ofAsian Law, Vol. 24, No. 1 (2oo)

the former, which maintained the status quo in the current Civil Code. There
were several reasons for this decision,'3 o but the basic idea was to avoid any
confusion and negative side effects that might arise from changes to existing
rules.

Practitioners have objected to these proposals because they doubt the
need to simplify and shorten the prescription periods on the grounds that the
current system is firmly established in Japan.'3' In contrast, some legal
practitioners feel the need to lengthen the prescription periods. In this light,
the proposal regarding suspension due to agreement on discussions has
attracted support from practitioners, although they insist that the criteria
should be clarified.' As to the subjective commencement applied to the
shorter period, concerns have been raised regarding the negative impact on
non-contractual claims, claims accrued on the basis of negotiorum gestio or
unjust enrichment.'33 As expected, the practitioners object to the proposal to
change the effect of prescription. '" Again, we see varying degrees of
enthusiasm for law reform among practitioners and academics.

E. Registration System for the Assignment of Monetary Claims

In addition to proposals on prescription, the BRP includes reform
proposals on assignment of claims; this reform may require considerable
changes in practice. Notably, a registration system is proposed for the
assignment of monetary claims.

Under the current Civil Code, the assignment of a claim is deemed
effective with regards to third parties only if-notice to or acknowledgment by a
debtor is made with a written document bearing a fixed date. Although this

130 3 COMMENTARIES, supra note 14, at 252.

131 OSAKA BAR ASSOCIATION, supra note 15, at 138-39.

' Id. at 144-45.

'3 TOKYO BAR ASSOCIATION, supra note 15, at zo.

' OSAKA BAR ASSOCIATION, supra note 15, at 146-47; TOKYO BAR ASSOCIATION, supra note

15, at 20-21.

3 MINPO, supra note i, art. 467.

Article 467 (Requirement for assertion of assignment of nominative claim
against third parties)

(i) The assignment of a nominative claim may not be asserted against the
applicable obligor or any other third party, unless the assignor gives
notice thereof to the obligor or the obligor has acknowledged the same.

(2) The notice or acknowledgement set forth in the preceding paragraph may
not be asserted against a third party other than the obligor unless the
notice or acknowledgement is made using an instrument bearing a fixed
date.



Japanese Civil Code (Law of Obligations) Reform

rule is derived from the French Civil Code,'16 Japanese law lacks a system by
which the date of arrival of a document to a debtor is publicly authenticated.
The date on the document evidences only the date when the document was
notarized. As a result, when deciding the order of priority between the
assignee and competing claimants, this rule does not work as well as the
original system.'37 For this reason, judicial precedents have been established
that in the case of multiple assignments of the same claim, the assignee whose
assignment is first made known to the debtor has priority over other
assignees.38

This system is based on the presumption that an intending assignee can
ask the debtor whether she has received prior notice. But the debtor is not
obliged to answer the assignee's inquiry, in which case the system fails. In
addition, even if a debtor is cooperative, if more than two notices arrive at the
same time 39 or when the sequence of arrival of notices cannot be verified, 140

she will be unable to determine which assignee has priority. The precedents
for such cases seem to favor prorating the sum of the claims,' but the overall
picture regarding the order of priority remains vague.

In criticizing the present situation, the Reform Commission proposes to
establish a registration system for the assignment of monetary claims.' It is
expected to clarify the order of priority among competing claimants, thereby
facilitating the transactions of claims. Indeed, a registration system has already
been introduced in part by special legislation for the assignment of monetary
claims made by judicial persons such as corporations, 43 achieving measurable

'36 C. CIV, art. 1690. For the history of Japan's reception of the French system, see
generally ?tfifAQ) [Ikeda Masao], R®P{MAA if 6-J =L hO) [The
Relationship between Section I and 2 ofArticle 467 of the Civil Code], 139 & Wf [ J. L.
POL. & Soc'Y, KEIO UNIV.] 25 (1978), reprinted in 1 i M fR O [STUDIES ON THE
ASSIGNMENTOF CLAIMS] 51 (2d ed. 2004).

13 3 COMMENTARIES, supra note 14, at 290-91.

138 Nakamura v. Nikko Shin-yo Kinko, 28 MINSHU 174 (Sup. Ct., 1974).

'3 Wada v. K.K. Hitachi Seisakusho, 34 MINSHU 42 (Sup. Ct., 1980).

140 Japan v. K.K. Ikko, 47 MINSHU 3334 (Sup. Ct., 1993).

' Id. at 3337.

'4 BRP, supra note 8, 3.1.4.04 (Perfection requirements against a third party other than
the obligor with regard to the assignment of a claim).

(i) An assignment of a monetary claim may not be asserted against a third
party other than the obligor unless the assignment of the claim is
registered.

(2) An assignment of a non-monetary claim may not be asserted against a
third party other than the obligor unless a fixed date is acquired for the
assignment contract.

143 @ RT ONt) MME W1,Pt6 E K W'JS 4iM t7 fJ [Act on Special
Provisions of the Civil Code in Relation to Requirements for Perfection of Transfer of
Movables and for Assertion of Assignment of Claims], Law No. 104 of 1998, art. 4. On

203



success. The Reform Commission expands this system to the assignment of
monetary claims in general,' noting the need to establish "measures to make
registration of the assignment of a monetary claim with a natural person as the
assignor possible" and to alleviate "the burden for procedures in the case of
applying for multiple registrations and on methods of responding to other
practical requests."

Although a filing system for notice of assignment was one of the three
substantive priorities suggested by the United Nations Convention on the
Assignment of Receivables in International Trade," 6 recent international model
laws have not followed this course. For example, the DCFR adopted a rule that
gives priority to the assignee of whose assignment a debtor is first notified if
she neither knew, nor ought to have known, of the prior assignment.' While
recognizing these situations, the Reform Commission ventures to endorse the
registration system in an attempt to develop an advanced model for the
future.' 8 One advocate argues that Japan's advanced technology makes possible
the introduction of this unprecedented system." Here, the. uniqueness of
Japanese law, rather than harmonization, comes to the fore.

Practitioners recognize the problems in the current system and feel the
need for law reform."'o Nonetheless, they have criticized the registration

the other hand, because this act does. not rule out the application of the Civil Code,
there emerged the possibility that provisions both of the Civil Code and of the special
act are applied to the assignment of claims made by judicial persons. This possibility
also justifies law reform. 2 COMMENTARIES, supra note 14, at Vol. 3, 291.

144 3 COMMENTARIES, supra note 14, at Vol. 3, 293-94. The reason that non-monetary
claims are excluded is that they are not frequently assigned; requiring registration is a
severe burden on their assignments. Id.

145 BRP, supra note 8, 3.1.4.07 (Registration of a claim assignment).

(i) The claim assignment shall generally be registered based on the
provisions of law relating to the special provisions of the Civil Code
concerning perfection requirements of the assignment of movables and
claims. But the Commission concluded that, aside from establishing
measures to make registration of the assignment of a monetary claim
with a natural person as the assignor possible, consideration shall be
given to methods of alleviating the burden for procedures in the case of
applying for multiple registrations and on methods of responding to
other practical requests.

(2) The attachment of a claim does not require registration.

146 United Nations Convention on the Assignment of Receivables in International
Trade, Annex, Sec. i, Dec. 12, 2001, 41 I.L.M. 776.

147 DCFR, supra note 50, art. III.-5:121.

1 3 COMMENTARIES, supra note 14, at Vol. 3, 289-90.

149 UCHIDA, DRAFT PROPOSALS, supra note 26, at 156.

150 OSAKA BAR ASSOCIATION, supra note 15, at 155; +frab[# [Nakane Toshikatsu], iT4V
' if g * V.ZT1J* [The Influence of Basic Reform

2o4 Columbia journal ofAsian Law, VOL 24, No. I (2olo)



Japanese Civil Code (Law of Obligations) Reform

system for being impractical. It is difficult to establish a system that enables
citizens to register their assignment of claims given the initial costs and
privacy concerns. "' Even if a registration system were possible, costs of
registration would soar, hampering the assignment of claims. In this respect, it
is sufficient to add provisions relating to discharge from a debtor,"' which the
BRP also advances in an elaborate proposal. It may be safely concluded that
practitioners are skeptical about the introduction of a new registration system
at the cost of the convenience afforded by the current system.

F. Consolidation of Provisions in the Commercial Code and the Consumer
Contract Act

An investigation of individual legal institutions led the Reform
Commission to reconsider the structure of the Civil Code. This reconsideration

Policy (Draft Proposals) on Practice, Assignment of Claims and Legal Rate of Interest],
1874 420LT#$#i# [J. FIN.& LEGALAFF.] 140 (2009); ToKYo BARASSOCIATION, supra note
15, at 11-12.

151 OsAKA BAR ASSOCIATION, supra note 15, at 155.
152 OsAKA BAR ASSOCIATION, supra note 15, at 155-56; Nakane, supra note 150, at 140.

5 BRP, supra note 8, at 3.1.4.06 (Payment of an assigned claim).

(i) In cases where neither the notification of (i) nor the notification of (2) in

3.1.4.05 was made with regard to the assignment of a claim, the obligor
shall make a payment to the assignor as its obligee.

(2) In cases where the notification of 3-1-4.o5(1) or (2) was made with regard
to the assignment of a claim, the obligor shall make a payment to the
assignee of the assignment; provided, however, that if there is a conflict
in the notification, the rules in the following items shall be followed:
(a) In cases where there is a conflict in the notification prescribed in

3.1.4.05(1), the obligor shall make a payment according to the

chronological order ofthe registration and the fixed date.
(b) In cases where there is a conflict in the notification prescribed in

3.1.4.05(1) and it is not possible to decide the chronological order of

the registration and the fixed date, the obligor may make a payment
to either of the assignees. In such case, the obligor may also be
exempted from the obligation by depositing the part of the conflict
in the assignment.

(c) In cases where there is a conflict in the notification of 3-i4.o5(1) and
the notification of 3.1.4.05(2), the obligor shall make a payment to
the assignee of the assignment associated with the notification
prescribed in (i) as the obligee.

(d) In cases where there is a conflict in the notification prescribed in

3.1-4.05(2), the obligor may also make a payment to either of the
assignees. In such case, the obligor may also be exempted from the
obligation by depositing the part of the conflict in the assignment.

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ColumbiaJournal ofAsian Law, Vol. 24, No. i (2oo)

also involved the enhancement of legal transparency. In this regard, we
consider two topics: (1) the scope and (2) the compilation of the Civil Code.

As with the French Civil Code, the Japanese Civil Code presumes the
existence of a person with a certain amount of wealth who is able to make
rational judgments regarding whether to deal with others as a constituent of
civil society. This concept of the abstract person demarcates the scope of the
Civil Code. Rules applicable only to relationships among merchants are
provided in the Commercial Code,'" not in the Civil Code. In addition,
because the actors in civil society are assumed to have a generally equal
capacity, it is not the objective of the Civil Code to protect consumers from
asymmetry of information and imbalance of bargaining power with business
operators. Provisions aiming at consumer protection are included in special
legislation such as the Consumer Contract Act.' As a result, provisions
applicable to daily transactions are dispersed throughout various pieces of
legislation. Given the idea that the Civil Code should address itself to ordinary
citizens, this situation is not desirable. The Civil Code should include all the
important provisions and provide citizens with a basic legal framework.' 6

Accordingly, the Reform Commission seeks to consolidate those provisions in
special legislation with those of the Civil Code, employing two strategies to
achieve this goal.

The first strategy is to widen the scope of the Civil Code. In order to
introduce into the Civil Code rules governing commercial relationships and
those aimed at consumer protection, it is necessary to define "consumer" and
"business operator" in the Civil Code. According to the BRP, a consumer is "an
individual who concludes a contract for activities other than a business
activity (or a professional activity)" and a business operator is "a juridical
person or other organization" or "an individual who concludes a contract for a
business activity (or professional activity)."' A consumer contract is characterized

15 illi [Commercial Code], Law No. 48 of 1899.

155 i, I JO [Consumer Contract Act], Law No. 61 of 2000.

156 1 COMMENTARIES, supra note 14, at 14-16.

'5 BRP, supra note 8, 1.5.07 (Definition of consumer/business operator).

(i) In order to distinguish the applicable subjects of the special provisions
relating to consumer contracts, the provisions for the definitions of
consumer and business operator shall be placed together as a pair.

(2) With respect to the definitions of consumer/business operator, they shall
be based on the following standpoints.
(a) Consumer: an individual who concludes a contract for activities

other than a business activity (or a professional activity).
(b) Business operator: a juridical person or other organization. An

individual who concludes a contract for a business activity (or
professional activity).

(3) When utilizing the concept of a business operator for a contract other
than a consumer contract, the above definition shall be used, and when
there is a necessity to narrow down the requirements, the wording "as a
commercial (operation)," "within the scope of a commercial (operation),"

2o6



Japanese Civil Code (Law of Obligations) Reform

as a contract concluded between a consumer and a business operator.' Based
on these definitions, the BRP suggests consolidating all the relevant provisions
in the Consumer Contract Act; for example, a consumer is allowed to claim
particular causes to rescind the manifestation of intention'59 and special

or other wording shall be added.
158 BRP, supra note 8, 1.5.08 (Definition of consumer contract).

(i) As used in this Act, a "consumer contract" is a contract concluded
between a consumer and a business operator.

(2) The provisions prescribed with regard to a consumer contract do not
apply to labor contracts.

15 BRP, supra note 8, 1.5.18 (Special provisions on consumer contracts - misconception
based on the provision of a conclusive evaluation).

(1) At the time of the business operator soliciting for the conclusion of a
consumer contract, if through providing the consumer with a conclusive
evaluation on uncertain items with regard to ihe goods, rights, services or
other things which were the object of such consumer contract, the
consumer was under the misconception that the details of the conclusive
evaluation so provided were definite and, through such misconception,
manifested an intention to offer or accept the consumer contract, such
manifestation of intention may be rescinded.

(2) If a third party provided the consumer with the conclusive evaluation in
(i), the manifestation of intention to offer or accept such consumer
contract may be rescinded only when falling under one of the following
items:
(a) Such third party serves as the representative or some other person of

such business operator and the business operator is the person who
should bear responsibility for such act; or

(b) At the time of the consumer manifesting the intention to offer or
accept the consumer contract, the business operator knew or could
have known that the third party had provided a conclusive
evaluation.

(3) A representative for the consumer pertaining to the conclusion of the
consumer contract (including sub-agent and those persons who are
appointed as sub-agents through two or more layers) is deemed to be the
consumer with regard to the application of (i) and (2).

(4) The rescission of the manifestation of intention for the offer or
acceptance of a consumer contract pursuant to (1), (2), and (3) may not
be asserted against a third party without knowledge or fault.

BRP, supra note 8, 1.5.19 (Special provisions on consumer contracts - distress).

(i) When a business operator solicits the conclusion of a consumer contract,
unless it falls under one of the following acts, if the business operator
continued - solicitation despite the consumer's indication that the
solicitation was unwanted, and if the solicitation forced the consumer to
offer or accept such contract, such manifestation of intention may be
rescinded.
(a) The consumer indicated a desire to the business operator to the

effect that the business operator leave the residence or the place

2o7



defenses in the case of credit granted by a third party. 6 o On the other hand,
the concept of "business operator" is too broad to substitute for the defining
concept of the current Commercial Code. Therefore, the BRP propounds a
stricter requirement: economic operation, which is defined as "repeated
continuous operation whose object is to obtain income equal to or larger than
expenditure.""' By using these concepts, the BRP suggests inserting provisions
of the Commercial Code into the Civil Code, some of which grant business
operators rights, 6 ' and others that impose obligations. 6 3

where the business was being conducted but the business operator
did not leave such place; or

(b) The consumer indicated a desire to the effect that it wished to leave

the place where such business operator was soliciting for conclusion
of the consumer contract but the business operator did not allow the
consumer to leave such place.

(2) 1.5.18 (2), (3), and (4) shall apply mutatis mutandis to ().

BRP, supra note 8, 3.2.6.10 (Requirements for linking of defense).

In cases where the consumer concludes a contract to purchase goods or a
right or a contract to receive the provision of onerous services (hereinafter
referred to as a "supply contract") with a business operator (hereinafter
referred to as "supplier") and concludes a contract for a loan for consumption
with a third party which is a business operator different from the supplier
(lender), if the supply contract and the contract for the loan for consumption
are [financially] effectuated as a unity and, if such an agreement existed
beforehand between the supplier and the lender as the one where the supply
contract and the contract for the loan for consumption would be effectuated
as a unit, the purchaser and other such persons may assert the grounds which
accrue vis-A-vis the supplier against the lender.

,6t BRP, supra note 8, 3.1.1.06 (Concept stipulating the scope of application of the

provisions to be applied to the designated business of business operators).

With regard to the scope of application of the proposals in Book III where the
application shall be limited to certain kinds of acts out of the activities of the
business operators, the application shall be demarcated by the concept of
"economic operation." "Economic operation" means repeated continuous
operation whose object is to obtain income equal to or larger than
expenditure.

162 The BRP adopted claims for remuneration of a business operator, which is now

provided in Commercial Code art. 512. BRP, supra note 8, 3.2.8.04 (Claim for
remuneration of the business operator).

If a business operator agrees to render a service for the other party within the
scope of its economic operation, the other party is presumed to have agreed to
pay reasonable remuneration for the service.

16 Additional obligations are imposed on business operators in the case of deposits
without remuneration. BRP, supra note 8, 3.2.11.04 (Duty of care of the depositary
relating to retention).

(i) The depositary shall assume the duty of retaining the deposited thing

208 Columbia~ournal ofAsian Law, VOL 24, No. i (2020)



Japanese Civil Code (Law of Obligations) Reform

The second device employed to consolidate special legislation with the
Civil Code is the generalization of the consumer protection clauses. As some
provisions in the Consumer Contract Act are considered to embody the values
that should be held true for contracts in general, they should be consolidated
without limitation into the Civil Code. For example, the BRP proposes that the
provisions on misrepresentation (Consumer Contract Act art. 4) should be
generalized and added to the Civil Code to be applicable to all contracts.,6 4

Although these proposals are supported by the new conception of the Civil
Code, practitioners engaged in consumer contracts have raised doubts. They
fear that the provisions consolidated in the Civil Code would be interpreted in
a different way from their original meanings and that the level of consumer
protection would be reduced,165 whereas generalization of the consumer
protection clauses would enable business operators to enjoy protection with
regard to transactions with consumers." Moreover, because consumer protection
clauses should be revised according to changes in the social situation, their
consolidation into the Civil Code would hinder frequent reforms.', In this
regard, it is noted that the Consumer Affairs Agency was established on
September 1, 2009, to centralize the administration of consumer protection,

with the due care of a prudent manager.
(2) If a person has received a deposit gratuitously, it shall assume the duty of

retention of the deposited thing with the same care as it would have
towards its own property; provided, however, that this shall not apply if a
business operator received the deposit within the scope of its economic
operation.

164 BRP, supra note 8, 1.5.15 (Misrepresentation).

(1) With regard to a manifestation of intention made to the other party, in
cases where the other party made a representation which differed from
fact regarding matters which would ordinarily influence the decision of
the person manifesting the intention as to whether or not to make the
manifestation of intention, and such person manifested an intention

based on an incorrect understanding of the facts, such manifestation of
intention may be rescinded.

(2) ..

(3) ..

* Cases falling under Article 4, paragraph 2 of the Consumer Contract Act (failure of
notification of a disadvantageous fact) would constitute the "misrepresentation"
denoted here, and therefore rescission would be permitted in accordance with 1.5-15.
One individual noted that it would be preferable to explicitly state this.

65 OSAKA BAR ASSOCIATION, supra note 15, at 5-6, io; TOKYO BAR ASSOCIATION, supra note

15, at 2.

, OSAKA BAR ASSOCIATION, supra note 15, at n.

167 OSAKA BAR ASSOCIATION, supra note 15, at 6; TOKYO BAR ASSOCIATION, supra note 15, at

2-3. On the other hand, Uchida argued that the Civil Code should undergo frequent
reform in the future. UCHIDA, DRAFT PROPOSALS, supra note 26, at 24-25.

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Columbia Journal ofAsian Law, Vol. 24, No. i (2010)

being responsible for revising the Consumer Contract Act.'6 However, if the
provisions of the Consumer Contract Act were consolidated into the Civil
Code, they would come under the purview of both the Consumer Affairs
Agency and the Ministry of Justice, and this would reverse the policy of
centralized administration of consumer affairs and inhibit necessary law
reform.'6

G. Compilation of the Civil Code

The final topic to be addressed is that of the compilation of the Civil Code.
The Reform Commission investigated the rearrangement of provisions to
enhance legal transparency and improve the Civil Code.

Emulating the Saxonian Civil Code,"o the Japanese Civil Code has adopted
a five-book "Pandekten" system that consists of General Provisions (Book 1),
Law of Property (Book II), Law of Obligations (Book III), Law of Family (Book
IV), and Law of Succession (Book V). A distinctive feature of the Pandekten
system is that it provides abstracts of the general principles common to
individual legal relationships at the beginning of each section. As a result,
provisions relevant to sales contract are dispersed throughout the Civil Code.
For instance, mistake, fraud, and duress are covered in Book 1, Chapter 5,
Section 2; contractual remedies, such as expectation damages and specific
performance, are listed in Book III, Chapter i, Section 2, Subsection i;
cancellation of contract is detailed in Book III, Chapter 2, Section i, Subsection

3; and the duties of the seller are located in Book III, Chapter 2, Section 3. This
kind of compilation makes it difficult for nonprofessionals to understand the
framework of contract law. 7' Accordingly, the Reform Commission discussed
abandoning the Pandekten system and grouping the provisions of contract law
under one section.

Although there are several relevant issues,72 the main concern was the
arrangement of provisions for judicial acts in Book I of the Civil Code.'"
Because these provisions are assumed to be primarily applied to contracts, it
was originally proposed that they should be in the section on the formation of
contracts. This proposal was based on the history of legal education in Japan.

168 MfRii' [Consumer Affairs Agency], http://www.caa.go.jp/en/index.html (last visited
Nov. 12, 2oo).
169 OSAKA BAR ASSOCIATION, supra note 15, at 8; TOKYO BAR ASSOCIATION, supra note 15, at 3.
170 Das Birgerliche Gesetzbuch fir das Konigreich Sachsen [Civil Code for Saxony
Kingdom], Mar. 1, 1865.

'7 1 COMMENTARIES, supra note 14, at Vol. 1, 131.

' The arrangement of provisions for consumer contracts, agencies, and claim
prescriptions was also discussed. 1 COMMENTARIES, supra note 14 19-20, 34-35; UCHIDA,
DRAFr PROPOSALS, supra note 26, at 231-34.

17 1 COMMENTARIES, supra note 14, at Vol. 1, 32-34.

21o0



Japanese Civil Code (Law of Obligations) Reform 211

Because the shortcomings of the Pandekten system have been apparent for
some time, Japanese scholars have devoted considerable efforts to explaining
the legal rules of the Civil Code in a functional way. They have published
textbooks and treatises aimed at reconciling the structure of the Civil Code
with the functional explanation of legal rules; these academic efforts constitute
the centerpiece of legal education in Japan. 74

The proposal to recompile the Civil Code prompted considerable
discussion among members of the Reform Commission. Opponents emphasized
the doctrinal and practical value of judicial acts as a legal concept. First, while
assuming mainly a contractual relationship, the legal concept of judicial acts
has a wider scope, covering unilateral manifestation of intent such as
cancellation of contract and testament. Therefore, in light of the systematic
consistency of the Civil Code, provisions for judicial acts belong in Book I of
the Civil Code in order to govern the various legal relationships."' Second, and
more importantly, no years after the enactment of the Civil Code, attorneys in
Japan are accustomed to judicial acts as a general concept. In addition, there
exists other legislation premised on the existence of provisions for judicial acts
in Book I of the Civil Code. The removal of provisions for judicial acts from
Book I of the Civil Code would have a profound effect on legal practice in
Japan. It has been argued that the current structure of the Civil Code has taken
root in Japanese legal practice and that the concept of judicial acts has become
a significant part of the Japanese legal culture.' The Reform Commission
ultimately decided to document the opinions of both sides of the argument.'

These arguments illustrate the dualism of legal development in Japan and
reveal the basic difficulty in supplying a model for the Civil Code. Japanese law
was established and developed on the basis of the European concept of a civil
code. Leaving aside reform proposals on individual legal institutions, it is
therefore difficult to present Japanese uniqueness by forming a new
conception of the Civil Code.

CONCLUSION

The investigation in the previous parts of this article reveal how three
guiding principles of the BRP influenced the individual reform proposals, how
these proposals became intertwined with each other, and how they are
evaluated by practitioners. The crystallization of legal development in Japan,
which underpinned all the proposals of the BRP, was supported by the idea

174 Id. at 32.

1' Another solution under consideration was to insert provisions for unilateral judicial
acts separately. Lacking sufficient studies on the uniqueness of unilateral manifestation
among judicial acts, the Reform Commission elected not to adopt this solution.
1761 COMMENTARIES, supra note 14, at Vol.1, 18, 33.

17 Three possibilities of the compilation are included in 1 COMMENTARIES, supra note 14,

at 21-25.



that the Civil Code should describe the basic framework of civil society and be
understandable to ordinary citizens. Codification of this kind also serves to
demonstrate the originality of Japanese law. Practitioners recognized the
necessity of law reform in this sense and appreciated proposals to codify the
legal rules developed by court judgments outside the Civil Code. However,
they were reluctant to go further. Practitioners are generally skeptical of
proposals introducing a new legal system and changing the structure of the
Civil Code, even though these proposals could present the uniqueness of
Japanese law. In addition, the course of legal development in academia is
different from that in practice. This discrepancy is most vividly demonstrated
by the criticism of proposed reforms promoting harmonization. Academic
research supported certain legal rules and doctrines adopted by international
treaties and model laws abroad. These academic achievements constituted
legal development in Japan; however, not all of these achievements were
shared with practitioners.

Based on these considerations, it seems reasonable to conclude that some
of the proposals of the BRP are infeasible. However, this does not mean that
the efforts of the Reform Commission were in vain. Leaving aside the fact that
its research results would probably be exploited in the legislative process, the
Reform Commission provides a forum for the exchange of opinions among
lawyers and academics on what the Civil Code is, what it should be, and why
and the degree to which the Japanese legal system differs from foreign
systems. It is this kind of argument which the Japanese people, who received
the concept of the Civil Code for political reasons more than one hundred
years ago, need to pursue.

Although it remains unclear when the legislative process will be finalized,
the Working Group on the Civil Code (Law of Obligations) is scheduled to
publish a list of topics requiring reform in the spring of 2o and to call for
public submissions. At that time it will be known, at least in part, the extent to
which the fundamental ideas of the BRP have been met with approval.

Columbia Journal ofAsian Law, Vol. 24, No. i (2olo)212