The UNIDROIT Principles as Reference for the Uniform Interpretation of National Laws: The Case of Japan

Abstract

The UPICC has never been explicitly used by Japanese courts in interpreting or supplementing Japanese law. There is no institutional or legal barrier for using the UPICC for that purpose as far as the principles in the UPICC can be viewed as representing “customs” or “trade usages”. Nonetheless, that has not happened. One possible explanation for this is the general reluctance (or style of drafting judgments) of judges to refer to foreign laws in their judgments. Another possible explanation may be the lack of familiarity of judges with the UPICC, although this may change once the 2017 Revision of the Civil Code, which took into account modern contract law rules including the UPICC, comes into effect in 2020. Another possibility is the general consistency of Japanese law with the UPICC on the one hand, and the lack of ambiguity of Japanese law when they differ from the UPICC on the other. Many principles of the UPICC concerning interpretation, termination, interest etc. are largely compatible with Japanese contract law rules found either in the Codes or developed by case law.

This report also appeared in the Japanese Reports for the XXth International Congress of Comparative Law (ICCLP Publications No.14) (2019) pp. 13-35. This work was supported by JSPS KAKENHI Grant Number JP15H01908. Japanese law analyzed in this report is current as of November 2018. The 2017 revision of the Civil Code entered into force on April 1, 2020.

Appendices

Appendix: Texts of Relevant Code Provisions

The questionnaire (in Question 5) requests reproduction of the full text of counterpart provisions. English translations of some provisions are already set out in the relevant parts of Sects. 3.1–3.6 above. They are also reproduced here again for ease of reference. English translations of statutory provisions, except those of the 2017 Revised Code, are taken from the Japanese Law Translation website <http://www.japaneselawtranslation.go.jp/>. As for the 1890 Civil Code, the official French translation is provided.³¹

1.1 1890 Civil Code (the Old Civil Code [Kyu minpo]) (Act No. 28 of 1890)

Article 356

Dans l’interprétation des conventions, les tribunaux doivent rechercher l’intention commune des parties, plutôt que s’attacher au sens littéral des termes par elles employés.

Article 358

Toutes les clauses de la convention s’interprètent les unes par les autres, en donnant à chacune le sens qui s’accorde le mieux avec l’acte entier.

Si une clause peut s’interpréter de deux manières don une seule lui donne un effet utile, on doit l’entendre de cette manière et non de celle qui ne lui donne aucun effet.

1.2 1896 Civil Code [Minpo] (Act No. 89 of 1896)

(Fundamental Principles)

Article 1

• (1) Private rights must conform to the public welfare.

• (2) The exercise of rights and performance of duties must be done in good faith.

• (3) No abuse of rights is permitted.

(Custom Inconsistent with Default Rules)

Article 92

In cases there is any custom which is inconsistent with a provision in any law or regulation not related to public policy, if it is found that any party to a juristic act has the intention to abide by such custom, such custom shall prevail.

(Creation and Transfer of Real Rights)

Article 176

The creation and transfer of real rights shall take effect solely by the manifestations of intention of the relevant parties.

Article 403

When the amount of the claim is specified in the currency of a foreign state, the obligor may make the payment in the legal currency of Japan using the foreign exchange rate current in the place of the performance.

(Statutory Interest Rate)

Article 404

Unless the parties otherwise manifest their intention with respect to a claim which bears interest, the rate of such interest shall be 5% per annum.

(Time for Performance and Delay in Performance)

Article 412

• (1) If any specified due date is assigned to the performance of an obligation, the obligor shall be responsible for the delay on and after the time of the arrival of such time limit.

• (2) If any unspecified due date is assigned to the performance of a claim, the obligor shall be responsible for the delay on and after the time when he/she becomes aware of the arrival of such time limit.

• (3) If no time limit is assigned to the performance of an obligation, the obligor shall be responsible for the delay on and after the time he/she receives the request for performance.

(Special Provisions for Monetary Debt)

Article 419

• (1) The amount of the damages for failure to perform any obligation for the delivery of any money shall be determined with reference to the statutory interest rate; provided, however, that, in cases the agreed interest rate exceeds the statutory interest rate, the agreed interest rate shall prevail.

• (2) The obligee shall not be required to prove his/her damages with respect to the damages set forth in the preceding paragraph.

• (3) The obligor may not raise the defense of force majeure with respect to the damages referred to in paragraph 1.

(Right to Cancel³² for Delayed Performance)

Article 541

In cases where one of the parties does not perform his/her obligations, if the other party demands performance of the obligations, specifying a reasonable period and no performance is tendered during that period, the other party may cancel the contract.

(Right to Cancel for Delayed Performance where Time is of the Essence)

Article 542

In cases where, due to the nature of the contract or a manifestation of intention by the parties, the purpose of the contract cannot be achieved unless the performance is carried out at a specific time and date or within a certain period of time, if one of the parties has failed to perform at the time that period lapses, the other party may immediately cancel the contract without making the demand referred to in the preceding Article.

(Right to Cancel for Impossibility of Performance)

Article 543

If performance has become impossible, in whole or in part, the obligee may cancel the contract; provided, however, that this shall not apply if the failure to perform the obligation is due to reasons not attributable to the obligor.

(Seller’s Warranty when Selling Rights of Others)

Article 561

In the cases set forth in the preceding Article, if the seller cannot acquire and transfer to the buyer the rights the seller has sold, the buyer may cancel the contract. In such cases, if the buyer knew, at the time of the contract, that the rights did not belong to the seller, the buyer may not demand compensation for damages.

(Seller’s Warranty in cases of Superficies or Other Rights)

Article 566

• (1) In cases where the subject matter of the sale is encumbered with for the purpose of a superficies, an emphyteusis, an easement, a right of retention or a pledge, if the buyer does not know the same and cannot achieve the purpose of the contract on account thereof, the buyer may cancel the contract. In such cases, if the contract cannot be cancelled, the buyer may only demand compensation for damages.

• (2) The provisions of the preceding paragraph shall apply mutatis mutandis in cases where an easement that was referred to as being in existence for the benefit of immovable property that is the subject matter of a sale, does not exist, and in cases where a leasehold is registered with respect to the immovable property.

• (3) In the cases set forth in the preceding two paragraphs, the cancellation of the contract or claim for damages must be made within one year from the time when the buyer comes to know the facts.

(Seller’s Warranty in cases of Mortgage or Other Rights)

Article 567

• (1) If the buyer loses his/her ownership of immovable property that is the object of a sale because of the exercise of an existing statutory lien or mortgage, the buyer may cancel the contract.

• (2) If the buyer preserves his/her ownership by incurring expenditure for costs, he/she may claim reimbursement of those costs from the seller.

• (3) In the cases set forth in the preceding two paragraphs, the buyer may claim compensation if he/she suffered loss.

(Seller’s Warranty against Defects)

Article 570

If there is any latent defect in the subject matter of a sale, the provisions of Article 566 shall apply mutatis mutandis; provided, however, that this shall not apply in cases of compulsory auction.

1.3 Revised Civil Code [Minpo] (Revision of Act No. 89 of 1896)

Article 1 (Fundamental Principles)

No change from the 1896 Code.

Article 92 (Custom Inconsistent with Default Rules)

No change from the 1896 Code.

Article 176 (Creation and Transfer of Real Rights)

No change from the 1896 Code.

Article 403

No change from the 1896 Code.

(Statutory Interest Rate)

Article 404

• (1) Unless the parties otherwise manifest their intention with respect to a claim which bears interest, the rate of such interest shall be the statutory interest rate of the time when the interest has accrued.

• (2) The statutory interest rate shall be 3% per annum.

• (3) Notwithstanding with the provisions of the preceding paragraph, the statutory interest rate shall fluctuate in each interest period according to the provisions of the next paragraph. An interest period shall be for a period of 3 years as determined by the provisions of an ordinance of the Ministry of Justice.

• (4) The statutory interest rate in each interest period shall be the rate obtained by adding (i) the difference of (a) the Standard Interest Rate in the most recent interest period in which the change of the statutory interest rate occurred according to the provisions of this paragraph (the “Most Recent Interest Period with Fluctuation”) and (b) the Standard Interest Rate in the current interest period (a fraction smaller than 1% is truncated) to (ii) the statutory interest rate of the Most Recent Interest Period with Fluctuation (in case (a) is lower than (b)), or by deducting (i) from (ii) (in case (a) is higher than (b)).

• (5) The Standard Interest Rate in the preceding paragraph shall be the rate announced by the Ministry of Justice as the rate obtained by dividing the sum of the average interest rate of short term lending of each month (the average of interest rate of bank loans that are newly made in the month and whose loan period is less than one year) from January of 6 years prior to the first year of the interest period to December of the year prior to the first preceding year by 60, which is calculated pursuant to the provisions of an ordinance of the Ministry of Justice.

(Time for Performance and Delay in Performance)

Article 412

• (1) If any specified due date is assigned to the performance of an obligation, the obligor shall be responsible for the delay on and after the time of the arrival of such time limit.

• (2) If any unspecified due date is assigned to the performance of a claim, the obligor shall be responsible for the delay on and after the time when he/she receives demand to perform after the due date has come or when he/she becomes aware of the arrival of such time limit, whichever comes first.

• (3) If no time limit is assigned to the performance of an obligation, the obligor shall be responsible for the delay on and after the time he/she receives the request for performance.

(Impossibility)

Article 412-2

• (1) If, in light of the contract […] and general sense of trade, it is impossible to perform an obligation, the obligee may not demand performance.

• (2) The fact that a contractual obligation was impossible to perform at the time of contract does not prevent a claim of damages under the provisions of Article 415 for loss caused by such impossibility to perform.

(Special Provisions for Monetary Debt)

Article 419

• (1) The amount of the damages for failure to perform any obligation for the delivery of any money shall be determined with reference to the statutory interest rate of the time when the obligor has become liable for non-performance for the first time.

• (2) The obligee shall not be required to prove his/her damages with respect to the damages set forth in the preceding paragraph.

• (3) The obligor may not raise the defense of force majeure with respect to the damages referred to in paragraph 1.

(Termination after Demand for Performance)

Article 541

In cases where one of the parties does not perform his/her obligations, if the other party demands performance of the obligations, specifying a reasonable period and no performance is tendered during that period, the other party may terminate the contract. However, this does not apply if the non-performance at the time of expiration of such period is minor in light of the contract […] and general sense of trade,

(Termination without Demand for Performance)

Article 542

• (1) The obligee may immediately terminate the contract without demanding performance under the preceding Article:

  • (i) if performance has become impossible in whole;

  • (ii) if the obligor has clearly expressed his/her intention to repudiate performance in whole;

  • (iii) in cases where performance has become partially impossible or where the obligor has clearly expressed his/her intention to partially repudiate the performance, if the purpose of the contract cannot be achieved by the remaining portion alone;

  • (iv) in cases where, due to the nature of the contract or a manifestation of intention by the parties, the purpose of the contract cannot be achieved unless the performance is carried out at a specific time and date or within a certain period of time, if the obligor has failed to perform at the time that period lapses; or

  • (v) in cases other than those provided in subparagraphs (i) to (iv), if the obligor has not performed, and if it is clear that there is little prospect of a performance sufficient to achieve the purpose of the contract will be given even when the obligee demands performance in accordance with the preceding Article.

• (2) The obligee may immediately partially terminate the contract without demanding performance under the preceding provision:

  • (i) if performance has become impossible in part; or

  • (ii) if the obligor has clearly expressed his/her intention to repudiate performance in part.

(Agreement on Standard Terms)

Article 548-2

• (1) Parties that agreed to enter into standardized transactions (hereinafter meaning transactions, entered into by a specific person with more than one unspecific persons, in which it is reasonable for both parties that the terms are wholly or partially uniform) are deemed to have agreed to the individual clauses of the standard terms (hereinafter meaning a set of terms prepared by a party with the purpose of constituting the content of a contract in a standardized transaction), if

  • (i) they agreed to incorporate the standard terms as a whole into their contract; or

  • (ii) the party who prepared the standard terms indicated to the other party before entering into the contract that the standard terms will be incorporated into the contract.

• (2) Notwithstanding para 1, it is deemed that there is no agreement on any standard clause that restricts the rights or expands the duties of the other party, and that unilaterally impairs the interests of the other party, in violation of the fundamental principle provided in the second paragraph of Article 1 of the Civil Code in light of the manner and circumstances of the standardized transaction and the of general sense of trade.

1.4 Act Against Unjustifiable Premiums and Misleading Representations [“Futo Keihinrui oyobi Futo Hyoji Boshi Ho”] (Act No. 134 of 1962)

(Prohibition of Misleading Representations)

Article 5

No Entrepreneur may make a Representation as provided for in any one of the following items in connection with the transaction of goods or services which the Entrepreneur supplies:

• (i) Any Representation where the quality, standard or any other particular relating to the content of goods or services is portrayed to general consumers as being significantly superior to that of the actual goods or services, or are portrayed as being, contrary to fact, significantly superior to those of other Entrepreneurs who supply the same kind of or similar goods or services as those supplied by the relevant Entrepreneur, thereby being likely to induce customers unjustly and to interfere with general consumers’ voluntary and rational choice-making;

• (ii) Any Representation by which price or any other trade terms of goods or services could be misunderstood by general consumers to be significantly more advantageous than the actual goods or services, or than those of other Entrepreneurs who supply the same kind of or similar goods or services as those supplied by the relevant Entrepreneur, thereby being likely to induce customers unjustly and to interfere with general consumers’ voluntary and rational choice-making; or

• (iii) Beyond what is listed in the preceding two items, any Representation by which any particular relating to transactions of goods or services is likely to be misunderstood by general consumers and which is designated by the Prime Minister as such, and considered likely to induce customers unjustly and to interfere with general consumers’ voluntary and rational choice-making.

Article 7

• (1) The Prime Minister may, in the event that an Entrepreneur acts in violation of the limitations or prohibition under the provisions of Article 4 or the provisions of Article 5, order the relevant Entrepreneur to cease committing the violation, or to take the measures necessary to prevent the reoccurrence of the violation, or to take any other necessary measures including public notification of the particulars relating to the implementation of the measures. Such an order may be issued to the following persons even when the violation has already ceased to exist:

  • (i) The Entrepreneur who committed the violation;

  • (ii) Where the Entrepreneur who committed the violation is a corporation and has ceased to exist as a result of a merger: the corporation which continues to exist after the merger takes place or the corporation which becomes incorporated upon the merger taking place;

  • (iii) Where the Entrepreneur who committed the violation is a corporation: another corporation which has taken over the whole of or part of the business pertaining to the violation from the corporation as a result of a split; and

  • (iv) the Entrepreneur who has acquired the whole or part of the business pertaining to the violation from the Entrepreneur who committed the violation.

• (2) With regard to the order prescribed in the preceding paragraph, when the Prime Minister finds it necessary in order to evaluate whether any Representation falls under Article 5, item (i), the Prime Minister may designate a period of time and require the relevant Entrepreneur to submit data as reasonable grounds for the Representation the Entrepreneur has made. In such cases, if the Entrepreneur fails to submit the data, the Representation concerned is deemed to fall under the same item for the purpose of applying the provisions of the same paragraph.

(Payment Order for Surcharge)

Article 8

• (1) If an Entrepreneur has acted in violation of the provisions of Article 5 (excluding acts pertaining to Representations that fall under item (iii) of the same Article; hereinafter referred to as the “Acts Subject to Surcharge”), the Prime Minister must order the Entrepreneur to pay to the National Treasury a surcharge equivalent to three percent of proceeds from sales, which is calculated by a method prescribed by Cabinet Order pertaining to the Acts Subject to Surcharge, for goods or services transacted during the subject period when the Acts Subject to Surcharge are committed; provided, however, the Prime Minister may not order the payment if it is determined that the Entrepreneur was unaware that their Representations pertaining to Acts Subject to Surcharge fell under any of the following items throughout the time period when the Acts Subject to Surcharge were committed, and that they did not fail to exercise due caution about their lack of awareness, or if the amount of the surcharge is one million five hundred thousand yen or less:

  • (i) Any Representation where the quality, standard or any other particular relating to the content of goods or services is portrayed as being significantly superior to that of the actual goods or services, or are portrayed as being, contrary to fact, significantly superior to those of other Entrepreneurs who supply the same kind of or similar goods or services as those supplied by the relevant Entrepreneur; or

  • (ii) Any Representation indicating that the price and other trade terms for goods or services are significantly more favorable to the other party in a transaction than they actually are, or that, contrary to fact, they are significantly more advantageous to the other party in a transaction than those of other Entrepreneurs who supply the same kind of or similar goods or services as the relevant Entrepreneur.

• (2) The “Subject Period” as prescribed in the preceding paragraph means the period during which the Acts Subject to Surcharge are committed (if the Entrepreneur makes transactions of goods or services through the Acts Subject to Surcharge between the day when the Acts Subject to Surcharge are discontinued and the day on which a period of six months has elapsed after the discontinuation thereof (or the day on which the Entrepreneur takes measures prescribed by Cabinet Office Order as measures to eliminate the risk of Representations pertaining to the Acts Subject to Surcharge, unjustly inducing customers and interfering with general consumers’ voluntary and rational choice-making, if the Entrepreneur does so prior to the day), the time period from the time when the Acts Subject to Surcharge are discontinued to the day when the last of the transactions is made is to be added to the Subject Period and if this period exceeds three years, the Subject Period is to retroactively start three years from the last day of this period.).

• (3) When the Prime Minister finds it necessary in order to evaluate whether any Representation falls under Article 5, item (i) with regard to the order prescribed under paragraph (1) (hereinafter referred to as the “Payment Order for a Surcharge.”), the Prime Minister may designate a period of time and require the relevant Entrepreneur to submit data as reasonable grounds for the Representation the Entrepreneur has made. In such cases, if the Entrepreneur fails to submit the data, the Representation is presumed to fall under the same item for the purpose of applying the provisions of the same paragraph.

1.5 Act on General Rules for Application of Laws [Ho no Tekiyo ni kansuru Tsusoku Ho] (Act No. 78 of 2006)

(Customs Having the Same Effect as Laws)

Article 3

Customs which are not against public policy shall have the same effect as laws, to the extent that they are authorized by the provisions of laws and regulations, or they relate to matters not provided for in laws and regulations.

1.6 Arbitration Act [Chusai Ho] (Act No. 138 of 2003)

(Applicable Law to be Applied in Arbitral Award)

Article 36

• (1) The law which the Arbitral Tribunal should comply with in making an Arbitral Award shall be as provided by the agreement of the parties. In this case, if laws and regulations of a given State have been designated, such designation shall be deemed as designating the laws and regulations of the State which shall be directly applied to the case and not the laws and regulations of the State providing the application of conflicting domestic and foreign laws and regulations, unless a contrary intention has been clearly indicated.

• (2) If an agreement set forth in the preceding paragraph has not been reached, the Arbitral Tribunal shall apply the laws and regulations of a State which has the closest relationship to the civil dispute that has been referred to the arbitration procedure and which should be directly applied to the case.

• (3) Notwithstanding the provisions of the preceding two paragraphs, if a clearly indicated request has been made by both of the parties, the Arbitral Tribunal shall decide ex aequo et bono.

• (4) An Arbitral Tribunal shall decide in accordance with the terms of the contract pertaining to the civil dispute which has been referred to the arbitral procedure, if said contract exists, and take into account the usages applicable to the relevant civil dispute, if any usages exist.

1.7 Commercial Code [Shoho] (Act No. 48 of 1899)

(Purpose, etc.)

Article 1

• (1) The business of Merchants, commercial transactions, and other commercial matters are governed by the provisions of this Code, except as otherwise provided by other laws.

• (2) A commercial matter not provided for in this Code is governed by commercial custom, and if there is no commercial custom, it is governed by the provisions of the Civil Code (Act No. 89 of 1896).

(Statutory Interest Rate for Commercial Matters)

Article 514

The statutory interest rate applicable to obligations arising from commercial transactions is six percent per annum.

(Cancellation Due to Delay in Performance in Sales Transaction if Time is of the Essence)

Article 525

In a sales transaction between Merchants in which, due to the nature of the sale or the manifestation of intention of the parties, the purpose of the contract cannot be achieved unless the obligation is performed at a specified date and time or within a fixed period of time, if one of the parties fails to perform the obligation before the date and time or period passes, the other party is deemed to have canceled the contract unless it immediately demands that the non-performing party perform the obligation.

1.8 Consumer Contract Act [Shohisha Keiyaku Ho] (Act No. 61 of 2000)

(Nullity of Clauses that Impair the Interests of Consumers Unilaterally)

Article 10

Any Consumer Contract clause that restricts the rights or expands the duties of the Consumer more than the application of provisions unrelated to public order in the Civil Code, the Commercial Code (Act No. 48 of 1899) and any other laws and regulations, and that unilaterally impairs the interests of the Consumer, in violation of the fundamental principle provided in the second paragraph of Article 1 of the Civil Code, is void.

List of Cases

Supreme Court Decision, June 2, 1921, Minroku, Vol. 27, p 1038

Supreme Court Decision, November 21, 1961, Minshu, Vol. 15, p 2507

Supreme Court Decision, October 11, 1973, Hanrei Jiho, Vol. 723, p 44

Supreme Court Decision, December 18, 1980, Minshu, Vol. 34, p 888

Supreme Court Decision, September 18, 1984, Hanrei Jiho, Vol. 1137, p 51

Supreme Court Decision, November 18, 2004, Minshu, Vol. 58, No. 8, p 2225

Supreme Court Decision, February 27, 2007, Hanrei Jiho, Vol. 1964, p 45

Supreme Court Decision, April 22, 2011, Minshu, Vol. 65, p 1405

Osaka District Court Decision, February 8, 1990, Hanrei Jiho, Vol. 1351, p 144