# Civil Act of South Korea/CLAIMS
## CHAPTER Ⅰ GENERAL PROVISIONS
### SECTION 1 Subject of Claims
##### Article 373 (Subject of Claim)

Even something the value of which cannot be computed in money, may be the subject of a claim.

##### Article 374 (Duty of Obligor to Deliver Specific Thing with Good Manager’s Care)

If the delivery of a specific thing is the subject of a claim, the obligor is bound to preserve such thing with the care of a good manager until it is delivered.

##### Article 375 (Claim in Species)

(1) Where the subject of a claim is designated in species only, and its quality cannot be determined by the nature of the juristic act or by the intention of the parties, the obligor is bound to perform with a thing of medium quality. (2) If in the cases mentioned in the preceding paragraph the obligor has completed all acts that are necessary for the performance or has with the consent of the obligee designated a thing to be performed, such thing shall thenceforth constitute the subject matter of the claim. Article 376 (Pecuniary Claim) Where the subject of a claim is to be delivered in one kind of currency, and the currency has ceased to be legal tender at the time the claim becomes due, the obligor is bound to effect payment in another currency of legal tender. Article 377 (Pecuniary Claim in Foreign Currency) (1) Where the subject of a claim is to be delivered in foreign currency, the obligor may, at his option, effect payment in any kind of currency of the country. (2) When the subject of a claim is to be delivered in one kind of foreign currency, and the currency has ceased to be legal tender at the time when the claim becomes due, payment shall be effected in some other currency of the country. Article 378 (Pecuniary Claim in Foreign Currency) If the amount of a claim is designated in foreign currency, the debtor may effect payment in Korean currency at the current rate of exchange at the place of performance when the delivery is made. Article 379 (Legal Rate of Interest) The rate of interest of a claim bearing interest, unless otherwise provided by other Acts or agreed by the parties, shall be five percent per annum. Article 380 (Alternative Claim) Where the subject of a claim is to be determined according to option from among two or more acts, unless otherwise provided by other Acts or agreed by the parties, the right of option shall vest in the obligor. Article 381 (Transfer of Right of Option) (1) Where the period for the exercise of a right of option is specified, and the party having a right of option fails to exercise it within the period, the other party, having determined a reasonable period, may give peremptory notice to make an option; in a case where the party having a right of option fails to do so within the reasonably fixed period, the right of option shall be vested in the other party. (2) Where the period for the exercise of a right of option is not specified, after the claim has become due, the other party, having determined a reasonable period, gives peremptory notice to make an option, and the party having a right of option fails to do so within such period, then it becomes identical with the preceding paragraph. Article 382 (Exercise of Right of Option by Either Party) (1) Where an option is made by the one party, it shall be made by the declaration of intention to the other party. (2) The declaration of intention mentioned in the preceding paragraph cannot be revoked without the consent of the other party. Article 383 (Exercise of Right of Option by Third Person) (1) Where an option is made by a third person, it shall be made by the declaration of intention both to the obligor and to the obligee. (2) The declaration of intention mentioned in the preceding paragraph cannot be revoked without the consent of both the obligee and the obligor. Article 384 (Transfer of Right of Option Vested in Third Person) (1) In a case where a third person cannot make an option, the right of option shall be vested in the obligor. (2) Where a third person does not make an option, the obligee or the obligor may notify him to make an option within a reasonably fixed period, and if the third person fails to do so within the period, the right of option shall vest in the obligor. Article 385 (Specification of Alternative Claim Owing to Impossibility of Performance) (1) If, among two or more acts of performance which are to be made under an option, some of which have either been impossible to perform in the beginning or subsequently become impossible to perform, the subject of the claim shall exist in respect of the remaining acts. (2) The provisions of the preceding paragraph shall not apply, if any act of performance has become impossible by reason of the negligence of the party who does not have the right of option. Article 386 (Retroactive Effect of Option) The option shall be effective retroactively from the time the obligation arose: Provided, That the right of a third person may not be prejudiced thereby.

### SECTION 2 Effect of Claim

Article 387 (Time for Performance and Delay of Performance) (1) Where a definite time for the performance of a claim is fixed, the obligor shall be responsible for delay as from the commencement of such time. If an indefinite time for the performance of a claim is fixed, the obligor shall be responsible for any delay as from the time when the obligor has become aware of the arrival of the time for performance. (2) If a time for the performance of a claim is not fixed, the obligor shall be responsible for the delay as from the time when demand for performance has been made upon him. Article 388 (Forfeiture of Benefit of Time) The obligor cannot claim the benefit of time under the following circumstances:
Article 389 (Compulsory Performance of Obligation) (1) If an obligor does not perform his obligation voluntarily, the obligee may apply to a court for compulsory performance thereof: Provided, That this shall not apply to cases where the nature of an obligation does not so permit. (2) If the obligation mentioned in the preceding paragraph has a juristic act for its subject, application may be made to a court for a decision which shall act as a substitute for a declaration of intention by the obligor; if it has an act which is not entirely personal to the obligor for its subject, application may be made to a court to compel performance by a third person at the expenses of the obligor. (3) Where the obligation has nonfeasance for its subject, and the obligor has violated it, application may be made to a court to have that which has been violated by the obligor removed at the obligor’s expense, and that reasonable precautionary steps be taken against future repetition. (4) The provisions of the preceding three paragraphs shall not affect a demand of compensation for damages. Article 390 (Non-performance of Obligations and Compensation for Damages) If an obligor fails to effect performance in accordance with the tenor and purport of the obligation, the obligee may claim damages: Provided, That this shall not apply to cases where performance has become impossible and where this is not due to the obligor’s intention or negligence. Article 391 (Intention or Negligence of Performance Assistant) Where an Agent by law for the obligor effects performance in lieu of the latter or the obligor effects performance through the other person as an employee, the intention or negligence of the agent by law or the other person shall be deemed as that of the obligor. Article 392 (Compensation for Damages Arising from Delayed Performance) The obligor shall be responsible for damages during delay of the performance even where he is not at negligence: Provided, That this shall not apply to cases where the damage is inevitable even if he performed at the time when the time of performance became due. Article 393 (Scope of Compensation for Damages) (1) The compensation for damages arising from the non-performance of an obligation shall be limited to ordinary damages. (2) The obligor is responsible for reparation for damages that have arisen through special circumstances, only if he had foreseen or could have foreseen such circumstances. Article 394 (Method of Compensation for Damages) Unless otherwise agreed by the parties, the damages shall be recovered in money. Article 395 (Performance Delay and Compensatory Damages) Where the obligor has delayed the performance of an obligation, and the obligor fails to perform within a reasonably fixed time that the obligee has given notice, or performance after delay is no longer profitable for the obligee, the obligee may refuse to accept performance and claim damages in lieu of performance. Article 396 (Contributory Negligence) If there has been any negligence on the part of the obligee in regard to the non-performance of the obligation, the court shall take it into account in determining the liability for and assessing the amount of the damages. Article 397 (Special Rules as to Non-performance of Monetary Debt) (1) The amount of damages for non-performance of a monetary debt shall be determined by the legal rate of interest: Provided, That in a case where there exists an agreed rate of interest which does not exceed the limitation provided by Acts and subordinate statutes, that agreed rate of interest shall prevail. (2) With regard to the damages mentioned in the preceding paragraph, the obligee is not bound to prove the actual damages nor can the obligor set up the absence of negligence as a defense. Article 398 (Liquidated Damages) (1) The parties may determine in advance the amount of damages payable in the event of the non-performance of an obligation. (2) Where the amount of damages determined in advance is unduly excessive, the court may reduce the amount to a more reasonable and appropriate sum. (3) The determination in advance of the amount of damages shall not affect the obligee’s demand for performance or rescission of the contract. (4) The agreement of a penalty is presumed to be determined in advance of the amount of damages. (5) Even in a case where the parties have agreed beforehand that something other than money shall be applied as compensation for damages, the provisions of the preceding paragraphs shall apply mutatis mutandis. Article 399 (Obligor’s Subrogation to Obligee owing to Compensation for Damages) If an obligee has received by way of damages the full value of the thing or right which forms the subject of the claim, the obligor shall ipso jure be subrogated to the position of the obligee in respect of such thing or right. Article 400 (Mora Creditoris) If an obligee is unable to accept performance of an obligation or refuses to accept it, such obligee shall be responsible for the delay commencing from the time when the performance has been tendered. Article 401 (Mora Creditoris and Responsibility of Obligor) If the obligor has no intention or gross negligence in respect of non-performance, such obligor shall, during the obligee’s delay of acceptance, be free of all responsibility arising as a result of non-performance. Article 402 (Obligee’s Acceptance Delay and Responsibility of Obligor) During a period of delay on the part of the obligee, the obligor is not bound to pay the interest even though the obligation is accompanied by the interest. Article 403 (Mora Creditoris and Responsibility of Obligee) If the expense for the custody of the subject-matter or for performance is increased owing to the delay on the part of the obligee, the amount of the increased expense shall be deducted from the account of the obligee. Article 404 (Obligee’s Right of Subrogation to Obligor) (1) An obligee may, in order to preserve his claim, exercise the rights belonging to the obligor: Provided, That this shall not apply to such rights as are strictly personal to the obligor. (2) Before a claim becomes due, the obligee cannot exercise the rights mentioned in the preceding paragraph without the court’s permission: Provided, That this shall not apply to an act of preservation. Article 405 (Notice as to Exercise of Obligee’s Rights of Subrogation to Obligor) (1) If the obligee, according to the provisions of the paragraph (1) of the preceding Article, has exercised the rights, except the act of preservation, he is bound to give notice to the obligor. (2) After the obligor has received the notice under the preceding paragraph, even though he has disposed of his rights, this shall not be so set up against the obligee. Article 406 (Obligee’s Right of Revocation) (1) If the obligor has performed any juristic act which has a property right for its subject, with the knowledge that it would prejudice the obligee, the obligee may apply to the court for its revocation and restitution of its original status: Provided, That this shall not apply in a case where a person who has derived a benefit from such act or a subsequent purchaser was, at the time of the act or of the purchase, unaware of the fact that it would prejudice the obligee. (2) The action mentioned in the preceding paragraph shall be brought within one year from the time when the obligee became aware of the cause for revocation, or within five years from the time when the juristic act was done. Article 407 (Effect of Revocation by Obligee) The revocation and restitution of its original status according to the provisions of the preceding Article shall take effect for the benefit of all obligees.

### SECTION 3 Several Obligees and Obligors

Sub-Section 1 General Provisions
Article 408 (Relationship of Divisible Claims) Where there are several obligees or obligors, they shall, in the absence of any other agreement, have rights or assume duties in equal proportions.
Sub-Section 2 Indivisible Claims and Indivisible Obligations
Article 409 (Indivisible Claim) Where the subject of a claim is indivisible by its nature or by a declaration of intention by the parties, and there are several obligees, each obligee may demand performance on behalf of all the obligees, and the obligor may effect performance to any obligee on behalf of all the obligees. Article 410 (Effect of Facts Arisen to One of Obligees) (1) Among the obligees having indivisible claims, an act done by, or any fact concerning any one of the obligees, except the fact which has an effect upon all the obligees according to the preceding Article, shall have no effect upon the other obligees. (2) Where a novation or a release has been effected between one of the obligees having indivisible claims and the obligor, other obligees who have received performance of the entire obligation must reimburse the obligor that which would have been allocated to such obligee if he had not lost his right. Article 411 (Indivisible Obligations and Provisions Applied Mutatis Mutandis) Where several persons assume an indivisible obligation, the provisions of Articles 413 through 415, 422, and 424 through 427 as well as those of the preceding Article shall apply mutatis mutandis. Article 412 (Conversion into Divisible Claim and Divisible Obligation) Where an indivisible claim or obligation is converted into a divisible one with respect to the obligees or the obligors, each obligee may demand performance only in respect of his own share, and each obligor shall be liable for the performance only in respect of the share incumbent upon himself to perform.
Sub-Section 3 Joint and Several Obligation
Article 413 (Content of Joint and Several Obligation) If each of the several obligors has the responsibility to perform the entire obligation, and the performance by one of the obligors discharges the other’s obligation, the obligation shall be a joint and several obligation. Article 414 (Demand for Performance against Each of Obligors Jointly and Severally Liable) The obligee may demand performance, in whole or in part of the obligation, against one of the obligors jointly and severally liable or all of them simultaneously or in succession. Article 415 (Nullity or Voidance in Respect of Obligors) The ground for nullifying or avoiding a juristic act in regard to one of the obligors jointly and severally liable, shall not affect the others’ obligation. Article 416 (Absolute Effect of Demand for Performance) A demand for performance made upon one of the obligors jointly and severally liable shall be effective as against the others. Article 417 (Absolute Effect of Novation) If a novation has been effected between one of the obligors jointly and severally liable and the obligee, the claim shall be extinguished in favor of all the obligors. Article 418 (Absolute Effect of Set-off) (1) Where one of the obligors jointly and severally liable has a counter claim against the obligee, and the obligor makes a set-off, the claim shall be extinguished in favour of all the obligors. (2) If the obligor who has a counter claim does not make a set-off, the other obligors can make a set-off only to the extent of his share of the obligation. Article 419 (Absolute Effect of Release) A release of an obligation given to one of the obligors jointly and severally liable, shall be effective in favour of the other obligors jointly and severally liable only to the extent of his share of the obligation. Article 420 (Absolute Effect of Merger) If a merger has taken place as between one of obligors jointly and severally liable and the obligee, the other obligors jointly and severally liable shall also be relieved of their obligation only to the extent of the share incumbent upon such obligor. Article 421 (Absolute Effect of Extinctive Prescription) If extinctive prescription has been completed for one of the obligors jointly and severally liable, the other obligors jointly and severally liable shall also be relieved of their obligation only to the extent of the share incumbent upon such obligor. Article 422 (Absolute Effect of Mora Creditoris) The obligee’s acceptance delay against one of the obligors jointly and severally liable, shall be effective upon the other obligors jointly and severally liable. Article 423 (Principles as to Relativity of Effect) Except for matters mentioned in the preceding seven Articles, all other matters relating to one of the obligors jointly and severally liable shall not be effective on the other obligors. Article 424 (Equality of Contribution) The extent of the share incumbent upon the obligors jointly and severally liable to contribute, shall be presumed as equal. Article 425 (Right of Reimbursement of Obligor Who has Performed at His Own Expense) (1) If one of the obligors jointly and severally liable has, by performance of the obligation or otherwise at his own expense, procured a discharge for common profit, he is entitled to reimbursement from the other obligors jointly and severally liable in proportion to their respective shares. (2) The right of reimbursement mentioned in the preceding paragraph shall include legal interest as from the day of discharge, and the expenses or other losses which were unavoidable, or other compensation for damages. Article 426 (Notice as Requisite for Reimbursement) (1) Where one of the obligors jointly and severally liable has, without notifying the other obligors jointly and severally liable, procured a common discharge by performance or otherwise at his own expense, and one of the other obligors had a defense available against the obligee, he may set it up against such obligor as has done an act for discharge only to the extent of the share incumbent upon himself, and if the ground for defense so set up is a set-off, the claim which is to be extinguished by a set-off, shall be transferred to such obligor as has done an act for discharge. (2) Where one of the obligors jointly and severally liable fails to notify the other obligors jointly and severally liable that he has procured a common discharge by performance or otherwise at his own expense, and one of the other obligors jointly and severally liable has in good faith effected performance or otherwise procured a discharge for value, he shall insist upon the effectiveness of his own act for discharge. Article 427 (Share Incumbent upon Obligor who is Insolvent) (1) If one of the obligors jointly and severally liable has no sufficient means to make reimbursement, the part which he is unable to pay shall be borne by the person demanding reimbursement and the other solvent obligors in proportion to their respective shares: Provided, That if the party demanding reimbursement is at negligence, he cannot demand the other obligors jointly and severally liable to bear their proportionate shares. (2) In the case of the preceding paragraph, if one of the other obligors who are to bear the part for reimbursement of the obligor, who is insolvent, has obtained a release by the obligee from his joint and several liability, the obligee shall bear the part incumbent upon the obligor.
Sub-Section 4 Surety Obligation
Article 428 (Contents of Surety Obligation) (1) A surety is liable to perform the obligation upon which the principal obligor has defaulted. (2) A suretyship may be made for a future obligation. Article 429 (Extent of Surety Obligation) (1) The surety obligation shall include interest on the principal obligation, penalty, damages, and all other charge incidental to the principal obligation. (2) A surety may stipulate in advance the amount of penalty or other liquidated damages in regard to his own surety obligation. Article 430 (Appendant Nature of Surety Obligation) If the burden of a surety is greater than that of the principal obligor either as to its subject or its terms, it shall be reduced to the extent of the principal obligation. Article 431 (Requisite as to Surety) (1) Where an obligor is bound to furnish surety, such surety must be a person who has full capacity and sufficient means to effect performance. (2) If the surety ceases to have sufficient means to effect performance, the obligee may demand substitution of another for such surety. (3) Where the obligee has designated the surety, the provisions of the preceding two paragraphs shall not be applicable. Article 432 (Furnishing Other Security) The obligor may be released from liability to furnish a surety by furnishing other reasonable security in lieu thereof. Article 433 (Surety and Defense of Principal Obligor) (1) A surety may avail himself of any defense against the obligee which the principal obligor has against the obligee. (2) A waiver of a defense by the principal obligor shall not be effective as against a surety. Article 434 (Surety and Right to Set-off of Principal Obligor) A surety may avail himself of any claim which the principal obligor has against the obligee as a set-off against the latter. Article 435 (Surety and Right to Revocation, etc. of Principal Obligor) So far as the principal obligor has the right of revocation, rescission or termination against the obligee, the surety may refuse to perform the obligation against the obligee. Article 436 (Surety as to Voidable Obligation) Where a surety has guaranteed an obligation which is voidable and of which he was aware at the time of entering into the suretyship, and there exists non-performance or revocation of the principal obligation, he is presumed to have assumed an independent obligation of the same tenor as the principal obligation. Article 437 (Defense by Surety of Peremptory Notice and Inquiry) If an obligee has demanded performance of the obligation from the surety, upon proving that the principal obligor has sufficient means to effect performance and that the execution would be easy, the surety may enter a plea as a defense that the obligee must demand from the principal obligor and that he must first levy execution on the property of the principal obligor: Provided, That if the surety has assumed an obligation jointly and severally liable with the principal obligor, this shall not be apply. Article 438 (Effect of Laches as to Peremptory Notice or Inquiry) Notwithstanding that a defense has been made by a surety in accordance with the provisions of the preceding Article, and the obligee has, owing to his laches, been unable to obtain partial or full performance from the obligor, the surety shall be relieved of his liability to the extent that the obligee would have received performance, if he had not been negligent. Article 439 (Benefit of Division by Co-sureties) Even where several sureties have assumed their liabilities for one obligation by separate acts, the provisions of Article 408 shall apply. Article 440 (Effect of Interruption of Prescription against Surety) An interruption of prescription against the principal obligor shall also be effective as against the surety. Article 441 (Right of Reimbursement of Fiduciary Surety) (1) If a surety who has become such at the request of the principal obligor has, without negligence on his part, caused the principal obligation to be extinguished by performance or at his own expense, such surety shall have a right to be indemnified by the principal obligor. (2) The provisions of Article 425 (2) shall apply mutatis mutandis to the cases mentioned in the preceding paragraph. Article 442 (Right of Preliminary Reimbursement of Fiduciary Surety) (1) A surety who has become such at the request of the principal obligor may exercise in advance his right of reimbursement against the principal obligor in one of the following subparagraphs:
(2) In the case of subparagraph 4 of the preceding paragraph, no time granted by the obligee to the principal obligor after the conclusion of the contract of suretyship can be set up against the surety. Article 443 (Demand for Discharge by Principal Obligor) Where a principal obligor indemnifies the surety in accordance with the provisions of the preceding Article, he may demand of the surety to discharge the obligation for him or request of the surety to furnish security, or he may relieve himself of his liability of indemnification by making a deposit of the amount of indemnification, furnishing security or procuring a discharge of the surety. Article 444 (Right of Reimbursement of Nonfiduciary Surety) (1) In a case where a person who has become surety without the request of the principal obligor, has performed the obligation or has otherwise, at his own expense, procured the discharge of the principal obligor, the latter is liable to indemnify the surety to the extent that he was enriched as of the time of discharge. (2) In a case where a person has become surety against the will of the principal obligor, has performed the obligation or has otherwise at his own expense procured the discharge of the principal obligor, the latter is liable to indemnify the surety only to the extent that the latter is still being enriched. (3) If, in the preceding paragraph, the principal obligor claims that he had, prior to the demand for indemnification, a good cause for set-off against the obligee, the claim, which would have been extinguished by such set-off, shall be transferred to the surety. Article 445 (Notice as Requisite for Reimbursement) (1) Where a surety has, without notifying the principal obligor, performed or otherwise procured a discharge of the principal obligation at his own expense, and the principal obligor had a defense available against the obligee, he may set it up against the surety, and in a case where the defense so set up is a set-off, the claim which would be extinguished by the set-off shall be transferred to the surety. (2) Where a surety has not notified the principal obligor that he had performed the obligation or otherwise procured at his own expense a discharge, and the principal obligor has in good faith effected performance to the obligee or otherwise procured a discharge for value, the principal obligor may treat his act of discharge as effective. Article 446 (Duty of Notice of Discharge to Surety of Principal Obligor) Where the principal obligor has not notified the person who has become a surety at the request of the principal obligor that he has obtained a discharge by his own act, and the surety has in good faith effected performance to the obligee or otherwise has procured a discharge for value, the surety may treat his act of discharge as effective. Article 447 (Right of Reimbursement of Person Who has Become Surety for One of Obligors Jointly and Severally Liable or of Indivisible Obligation) A person who has become surety for one of the obligors jointly and severally liable or of an indivisible obligation is entitled to be indemnified from the other obligors only in proportion to their respective shares. Article 448 (Right of Reimbursement among Co-sureties) (1) Where there are several sureties, one of whom has effected performance in excess of the share incumbent on him, the provisions of Article 444 shall apply mutatis mutandis. (2) Where the principal obligation is indivisible or each surety has assumed the obligation for which they are jointly and severally liable to each other or with the principal obligor, and one of the sureties has effected performance in excess of the share incumbent on him, the provisions of Articles 425 through 427 shall apply mutatis mutandis.

### SECTION 4 Assignment of Claim

Article 449 (Assignability Nature of Claim) (1) A claim may be assigned, except in cases where its nature does not so permit. (2) Where the parties have declared a contrary intention, a claim shall not be assigned: Provided, That such declaration of intention, cannot be set up against a third person acting in good faith. Article 450 (Requisite for Setting up Assignment of Nominative Claim against Obligor) (1) The assignment of a nominative claim cannot be set up against the obligor or any other third person, unless the assigner has given notice thereof to obligor or the obligor has consented thereto. (2) The notice or consent mentioned in the preceding paragraph cannot be set up against a third person other than the obligor, unless it is put in writing with a certified fixed date. Article 451 (Effect of Consent or Notice) (1) If the obligor has given his consent as mentioned in the preceding Article without reservation, he cannot set up against the assignee any defense that he could have set up against the assignor: Provided, That if the obligor has paid anything to the assignor for the discharge of his obligation, he may recover it, and if he had incurred a new obligation to him, he may treat it as if it had not been incurred. (2) Where the assignor has merely given notice of the assignment, the obligor may set up against the assignee any defense which has arisen against the assignor prior to the receipt of the notice. Article 452 (Notice of Assignment and Estoppel) (1) If an assignor has given notice of assignment of a claim to the obligor, even in a case where assignment has not been made or the assignment is null and void, an obligor acting in good faith may be set up a defense which can set up against the assignee, against the assignor. (2) The notice mentioned in the preceding paragraph cannot be withdrawn without the consent of the assignee.

### SECTION 5 Assumption of Obligation

Article 453 (Assumption of Obligation by Contract with Obligee)
(1) A third person may assume an obligation by contract entered into with the obligee and thereby discharge the obligation for the obligor, except in a case where its nature does not so permit.
(2) A third person who has no interest in the obligation cannot assume an obligation against the will of the obligor.
Article 454 (Assumption of Obligation by Contract with Obligor)
(1) Where a third person has taken over a debt by contract entered with the obligor, it shall be effective as from the time when the obligee has given consent thereto.
(2) The other party to whom the obligee’s consent or refusal shall have effect upon, shall be the obligor or a third person.
Article 455 (Peremptory Notice to Confirm of Whether to Consent or not)
(1) In the case of the preceding Article, the third person or the obligor may request the obligee to answer whether he will consent or not within a reasonably fixed period.
(2) If the obligee has not sent a definite answer within such reasonable period specifying whether to consent or not, it shall be deemed as a refusal.
Article 456 (Withdrawal or Change of Assumption of Obligation)
The parties may withdraw or change the assumption of an obligation according to a contract between a third person and the obliger by the time of the obligee’s consent.
Article 457 (Retroactive Effect of Assumption of Obligation)
The consent of the assumption of the obligation by the obligee shall, if there exists no different declaration of intention, be effective retroactively as from the time of such assumption: Provided, That the retroactive effect may not harm the rights of a third person.
Article 458 (Ground for Defense of Former Obligor)
A person assuming an obligation may set up a defense against the obligee which the former obligor could have set up.
Article 459 (Assumption of Obligation and Extinguishment of Suretyship or Security)
A suretyship for the obligation of the former obligor or the security furnished by a third person shall be extinguished by virtue of assumption of the obligation, unless the surety or the third person has given consent thereto.

### SECTION 6 Extinction of Claim
#### Sub-Section 1 Performance

Article 460 (Method of Tender of Performance) Performance must be effected by way of actual tender in strict accordance with the tenor of the obligation: Provided, That in a case where the obligee previously refused its acceptance or where an act of the obligee is required for the performance of the obligation, it shall be sufficient to inform the obligee that all preparations have been made for performance, and give a peremptory notice to him of its acceptance. Article 461 (Effect of Tender of Performance) A tender of performance shall relieve the obligor from responsibility for non-performance as from the time of such tender. Article 462 (Delivery of Specific Thing in its Existing Condition) If the delivery of a specific thing is the subject of the obligation, the obligor must deliver the thing in the condition in which it exists at the time when the delivery thereof is due. Article 463 (Delivery of Thing Belonging to Another as Performance of Obligation) An obligor who has delivered a thing belonging to another by way of performance of an obligation cannot demand the recovery of such thing, unless he effects a valid performance anew. Article 464 (Delivery of Thing by its Owner Who has No Capacity to Dispose of It) Where the owner of a thing who has no capacity to dispose of it has delivered it by way of performance, and then such performance has been avoided, he cannot demand the recovery of such thing unless he effects a valid performance anew. Article 465 (Consumption or Assignment in Good Faith by Obligee and Right of Reimbursement) (1) If, in the cases mentioned in the preceding two Articles, the obligee has consumed or disposed of in good faith the thing which he had received by way of performance, the performance shall be effective. (2) If, in the cases of the preceding paragraph, the obligee has been demanded by a third person to pay damages, he may exercise the right of reimbursement against the obligor. Article 466 (Accord and Satisfaction) Where an obligor has, with the consent of the obligee, done an act of performance different from, and in substitution for the one originally intended, such act shall be deemed a valid performance. Article 467 (Place of Performance) (1) If the place of performance has not been decided by the nature of the obligation or the declaration of intention of the parties, the delivery of a specific thing must be made at the place where the thing existed when the obligation arose. (2) In the cases of the preceding paragraph, performance of the obligation other than the delivery of a specific thing must be effected at the present domicile of the obligee: Provided, That the performance of the obligation in regard to the business shall be effected at the present business place of the obligee. Article 468 (Performance Prior to Time for Performance) In the absence of the declaration of special intention by the parties, the obligor may effect performance even prior to the time when performance becomes due: Provided, That he must compensate for the damage of the other party.

##### Article 469 (Performance by Third Person)

(1) The performance of an obligation may also be effected by a third person: Provided, That if its nature does not so permit, or the parties have declared a contrary intention, this shall not apply.
(2) A third person who has no interest in the obligation cannot effect performance against the will of the obligor.
Article 470 (Performance to Quasi-Possessor of Claim) A performance made to a quasi-possessor of the claim is effective only if it was done in good faith and without negligence. Article 471 (Performance to Bearer of Receipt) A performance made to the bearer of a receipt shall be effective even where he is not authorized to accept performance: Provided, That this shall not apply to cases where the person effecting performance was aware or should have been aware of the fact that the bearer did not have such authority. Article 472 (Performance to Unauthorized Person) Except in the cases mentioned in the preceding two Articles, a performance made to a person who is not authorized to accept it is effective only to the extent that the obligee has been enriched thereby. Article 473 (Bearing Expenses of Performance) In the absence of a special agreement, the expenses of performance shall be borne by the obligor: Provided, That in a case where the expenses of performance is increased by changing the obligee’s domicile or by his any other act, the amount of such increase shall be borne by the obligee. Article 474 (Claim of Receipt) A person effecting performance may demand a receipt from the person accepting the performance. Article 475 (Claim of Return of Document Evidencing Obligation) If there exists a document evidencing the obligation, the person effecting performance in full may demand the return of such document. This shall also apply in a case wheres where the obligation has been extinguished in full by any cause other than performance. Article 476 (Designated Appropriation of Performance) (1) If an obligor owes to the same obligee several obligations whose subject is of the same kind, and the tender of performance is insufficient to discharge them all, the person effecting performance may, at the time of performance, designate the obligation to be discharged by appropriating performance for it. (2) If the person effecting performance makes no such designation as mentioned in the preceding paragraph, the person accepting the performance may at the time of acceptance designate an obligation to be discharged by appropriation of performance: Provided, That this shall not apply if the person effecting performance immediately objects to such designation and appropriation. (3) The appropriation of performance mentioned in the preceding two paragraphs shall be effected by a declaration of intention made to the other party. Article 477 (Constructive Appropriation of Performance by law) If the parties have not designated the obligation to be discharged by appropriation, it shall be done in accordance with the provisions of the following subparagraphs:
Article 478 (Appropriation of Insufficient Performance) The provisions of the preceding two Articles shall apply mutatis mutandis to cases where two or more acts of performance are necessary for the discharge of one obligation, and those acts for performance which have been effected are insufficient to satisfy the entire obligation. Article 479 (Order of Appropriation of Performance to Expenses, Interest and Principal Obligation) (1) If the obligor is to pay expenses and interest of one or more obligations, and the person effecting performance has effected insufficient performance to satisfy the entire obligation, such performance shall be appropriated in the order of the expenses, the interest and the principal. (2) The provisions of Article 477 shall apply mutatis mutandis to the case mentioned in the preceding paragraph. Article 480 (Voluntary Subrogation by Person Who has Performed Obligation) (1) A person who has performed an obligation on behalf of the obligor may be subrogated to the rights of the obligee with the consent of the latter, which should be obtained simultaneously with the performance. (2) The Articles 450 through 452 shall apply mutatis mutandis to the case mentioned in the preceding paragraph. Article 481 (Constructive Subrogation by Act of Person Who has Performed Obligation) A person who has a legitimate interest to effect performance shall be by operation of law subrogated to the rights of the obligee by effecting the performance. Article 482 (Effect of Subrogation by Person Who has Performed Obligation, Relations among Subrogators) (1) A person who has been subrogated to the rights of the obligee in accordance with the provisions of the preceding two Articles may exercise the claim and the right in respect to its security to the extent to which he may be reimbursed by virtue of his own right. (2) The exercise of the right mentioned in the preceding paragraph shall be subject to the provisions of the following subparagraphs:
Article 483 (Partial Subrogation) (1) Where a person has performed a part of the obligation on behalf of the obligor by subrogation, he may exercise his right concurrently with the obligee in proportion to the value of the performance effected by him. (2) In the case mentioned in the preceding paragraph the rescission or termination of contract by reason of non-performance must be done by the obligee only, and he must reimburse the person subrogated for the value of the performance effected together with the interest thereon. Article 484 (Performance by Subrogation, Documents Relating to Obligation, and Security) (1) An obligee who has obtained full satisfaction of the obligation by performance by subrogation must deliver to the subrogee all the documents relating to the obligation and the Article held in possession as security. (2) Where performance by subrogation has taken place in respect to a part of the obligation, the obligee must enter the fact of subrogation in the documents relating to the obligation, and must allow the subrogee to supervise the preservation of the Article held in his possession as security. Article 485 (Loss or Diminution of Security by Obligee and Discharge of Person Entitled to Constructive Subrogation) Where there is a person entitled to the rights of subrogation in accordance with the provisions of Article 481, and the security is lost or diminished by the obligee’s intention or negligence, such person shall be relieved of his liability in so far as it has become impossible for him to be reimbursed by reason of loss or diminution. Article 486 (Extinguishment of Obligation Otherwise than by Means of Performance and Subrogation) The provisions of the preceding six Articles shall apply mutatis mutandis to the case where a third person has made the obligor’s obligation extinguished by the deposit or at his own expenses.
Sub-Section 2 Deposit
Article 487 (Requisite and Effect of Deposit for Performance) If the obligee refuses to accept performance or is unable to accept it, the person effecting performance may relieve himself of his obligation by depositing the subject matter of performance for the obligee. The same shall apply where the obligee cannot be ascertained without any negligence on the part of the person effecting performance. Article 488 (Method of Deposit) (1) The deposit must be made with the Deposit Office in the place for the performance of the obligation. (2) If there are no special provisions of Acts in respect of the Deposit Office, the court must, on the application of the person effecting performance, designate a Deposit Office and appoint a custodian of the deposited article. (3) The depositor must, without delay, give notice of the deposit to the obligee. Article 489 (Recovery of Deposited Article) (1) Until the obligee has given his consent to the deposit or has notified the Deposit Office of the receipt of the deposited article or a judgment declaring the deposit effective has become final and conclusive, the depositor may recover the deposited article and, in such case, the deposit is deemed not to have been made. (2) The provisions of the preceding paragraph shall not apply where a pledge or a mortgage has been extinguished by making a deposit. Article 490 (Deposit of Proceeds) If the subject matter of performance is unfit for deposit, or there is any danger of its perishing or being damaged, or excessive expense is required for deposit, the person effecting performance may, with the permission of the court, sell the subject matter by official auction or for value at the market price and deposit the proceeds. Article 491 (Acceptance of Deposited Article and Performance of Reciprocal Obligations) Where the obligor is to effect performance concurrently with the counter performance of the obligee, the obligee cannot take delivery of the deposited article unless he effects his performance.
Sub-Section 3 Set-off
Article 492 (Requisite for Set-off) (1) If two persons are bound to each other by obligations whose subject is of the same kind and both of which have become due, each obligor may make a set-off to the extent of the amount corresponding to that of his obligation: Provided, That this shall not apply where the nature of the obligations does not so permit. (2) The provisions of the preceding paragraph shall not apply to cases where the parties have declared an intention to the contrary: Provided, That such declaration of intention cannot be so set up against a third person acting in good faith. Article 493 (Method and Effect of Set-off) (1) A set-off be effected by means of a declaration of intention to the other party. No condition may be attached, nor a time be fixed, to such declaration of intention. (2) The declaration of intention for a set-off shall be deemed to extinguish the obligation to the extent of the same amount when each obligation is eligible for a set-off. Article 494 (Set-off of Obligations Which Are to be Performed at Different Places) A set-off may be effected even where each obligation is to be performed at different places: Provided, That the party who effects the set-off must compensate the other party for any damages which have arisen therefrom. Article 495 (Set-off by Claim with Completed Extinctive Prescription) A claim with completed extinctive prescription may be used for a set-off if it had been able to be used therefor prior to the completion of prescription. Article 496 (Prohibition of Set-off against Obligation Arisen from Intentional Unlawful Act) Where the obligation has arisen from an intentional unlawful act, the obligor cannot avail himself of a set-off against the obligee. Article 497 (Prohibition of Set-off against Obligation of Which Attachment is Prohibited) If the claim is one of which an attachment cannot be effected, the obligor may not set up against the obligee any defense of set-off. Article 498 (Prohibition of Set-off against Obligation under Garnishment Order) A third obligor under garnishment order may not set up against his obligee who requested such order any defense of set-off subsequently acquired by him. Article 499 (Provisions to be Applied Mutatis Mutandis) The provisions of Articles 476 through 479 shall apply mutatis mutandis to a set-off.
Sub-Section 4 Novation
Article 500 (Requisite for and Effect of Novation) If the parties have entered into a contract by which the essential elements of the obligation are modified, such obligation shall be extinguished by novation. Article 501 (Novation by Change of Obligor) A novation by change of an obligor may be effected by a contract between the obligee and the new obligor: Provided, That it shall not be effected against the intention of the original obligor. Article 502 (Novation by Change of Obligee) A novation by change of an obligee cannot be set up against a third person, unless it is done by a document with a certified fixed date. Article 503 (Novation Changing Obligee and Effect of Consent of Obligor) The provisions of Article 451 (1) shall apply mutatis mutandis to a novation by change of an obligee. Article 504 (Case of Non-extinguishment of Original Obligation) If the new obligation arisen from a novation does not come into existence or has been avoided by reason of illegality of its cause or of any circumstance of which the parties were not aware, the original obligation shall not be extinguished. Article 505 (Transfer to New Obligation of Security) The parties to a novation may transfer the security for the original obligation to that of the new obligation, within the limit of its objective: Provided, That if the security has been furnished by a third person, his consent must be obtained.
Sub-Section 5 Release
Article 506 (Requisite for and Effect of Release) If the obligee declares to the obligor an intention to release the obligor from the obligation, such obligation shall be extinguished: Provided, That a release cannot be set up against a third person who has a reasonable interest.
Sub-Section 6 Merger
Article 507 (Requisite for and Effect of Merger) If a claim and the corresponding obligation become vested in one and the same person, the claim shall be extinguished: Provided, That this shall not apply if such claim itself is a subject of a third person’s right.
Sub-Section 7 Debts Payable to Order
Article 508 (Form of Assignment of Debt Payable to Order) A debt payable to order may be assigned by means of endorsement on and delivery of the instrument. Article 509 (Endorsement to Party Liable on Instrument) (1) A debt payable to order may be assigned even to its obligor by means of endorsement. (2) An obligor who has been assigned the debt payable to order by means of endorsement may assign it by means of re-endorsement. Article 510 (Form of Endorsement) (1) An endorsement must be written on the instrument or on a slip affixed thereto and the endorser must sign or write his name and affix his seal on it. (2) The endorsement may be made by means of leaving the endorsed unspecified, and it may be made by means of simply a signature of the endorser or the name and seal of an endorser. Article 511 (Form of Disposition of Informal Endorsement) If an endorsement has been made in an informal way according to paragraph (2) of the preceding Article, the holder may dispose of it in the form of each of following subparagraphs.
Article 512 (Effect of Endorsement Payable “To Bearer”) An endorsement payable to bearer is equivalent to an informal endorsement. Article 513 (Effect of Establishing Title by Endorsement) (1) The possessor of an instrument is deemed to be the lawful holder if he establishes his title to the instrument through an uninterrupted series of endorsements. The same shall apply even if the last endorsement is in an informal way. (2) If an informal endorsement is followed by another endorsement, the endorser of this last endorsement is deemed to have acquired the instrument by the informal endorsement. (3) Cancelled endorsements are deemed not to be written in connection with the uninterrupted series of endorsements. Article 514 (Effect of Establishing Title-a bona fide Purchase) No person can require the lawful holder of an instrument to give it up: Provided, That this shall not apply if, the holder acquired it, he was aware that the assignor did not have title, or was not aware of it owing to gross negligence. Article 515 (Endorsement Transferring Rights and Personal Defenses) The debtor of a debt payable to order cannot set up against the holder defenses arising from his personal relations with the previous holders: Provided, That this shall not apply if the holder has knowingly acquired the debt payable to order to the detriment of the debtor. Article 516 (Place of Performance) If the place of performance is not determined by the instrument, the present place of business of the obligor shall be the place of performance. If he has not the place of business, his present domicile shall be the place of performance. Article 517 (Presentation of Instrument and Performance Delay) Even in a case where the time for performance is determined by the instrument, the obligor shall be in default only when the holder has presented the instrument and demanded performance after the time for performance has commenced. Article 518 (Right and Duty of Debtor to Verify) The debtor is bound to verify the regularity of the series of endorsements, and he has the right, but is not under any duty, to verify the genuineness of the signature or name and seal of the endorser, or the identity of the holder: Provided, That if, when the debtor effected payment, he was aware that the holder is not the person having the right or fails to know it owing to gross negligence, the payment shall be null and void. Article 519 (Performance and Delivery of Instrument) The debtor is bound to effect performance only in exchange for the instrument. Article 520 (The Claim to Subscribe Receipt of Instrument) (1) The debtor, when he effects performance, may require the instrument to be receipted by the holder. (2) In the case of partial payment, if the debtor requires, the obligee is bound to make mention of this payment on the instrument. Article 521 (Lapse of Instrument by Procedure of Public Summons) The instrument which has been destroyed, or has become separated from the possession of the holder may be voidable by the procedure of public summons. Article 522 (Deposit or Performance by Procedure of Public Summons) When there exists a cause for application for a public summons, it may cause the obligor to deposit the subject matter of the obligation, and it may cause the obligor to effect performance, if the holder furnishes adequate security.
Sub-Section 8 Debts Payable to Bearer
Article 523 (Form of Assignment of Bearer Security) A debt payable to bearer may be assigned by means of delivery of the instrument. Article 524 (Provisions to be Applied Mutatis Mutandis) The provisions of Articles 514 through 522 shall be applied mutatis mutandis to a debt payable to bearer. Article 525 (Debt Payable to Named Obligee or to Bearer) The instrument in which the obligee is named with an additional statement that the payment is to be made to the holder, is equivalent to a debt payable to bearer. Article 526 (Instrument for Discharge) The provisions of Articles 516, 517 and 520 shall be applied mutatis mutandis to the instrument issued by the obligor in order to escape from the responsibility by means of effecting performance to the holder of the instrument.

## CHAPTER Ⅱ CONTRACT
### SECTION 1 General Provisions
#### Sub-Section 1 Formation of Contract

Article 527 (Binding Force of Offer of Contract) An offer of a contract may not be withdrawn.
Article 528 (Offer of Contract Specifying Period for Acceptance) (1) An offer of a contract specifying a period for acceptance shall lose its effect if the offerer does not receive a notice of acceptance within the period specified. (2) In a case where a notice of acceptance had arrived after the expiration of the period mentioned in the preceding paragraph, if it was dispatched at such a time that under normal circumstances it would have arrived within such period, the offerer shall dispatch, without delay, to the other party a notice of the delayed arrival: Provided, That this shall not apply in a case where a notice of the delay has already been dispatched by the offerer before its arrival. (3) If the offerer has neglected to give the notice mentioned in the preceding paragraph, the notice of acceptance shall be deemed not to have been delayed.
Article 529 (Offer of Contract not Specifying Period for Acceptance) An offer of a contract which does not specify a period for acceptance loses its effect if the offerer does not receive a notice of acceptance within a reasonable period.
Article 530 (Effect of Delayed Acceptance) The offerer may regard a delayed acceptance as a new offer in the cases of the preceding two Articles.
Article 531 (Time when Contract inter absentes Comes into Existence) A contract inter absentes shall come into existence at the time when a notice of acceptance is dispatched.
Article 532 (Formation of Contract by Realization of Intention) In a case where no notice of acceptance is necessary either by reason of declaration of intention to that effect by the offerer, or by reason of custom, the contract shall come into existence upon the occurrence of an event which may be taken as a declaration of intention to accept.
Article 533 (Crossed Offer) Where offers of the same content, are sent to each other the contract shall come into existence at the time when each of the two offers has reached each other party.
Article 534 (Acceptance with Modification) If the offeree has accepted an offer but subject to a condition or with any other modification, he shall be deemed to have rejected the original offer and thereby simultaneously made a new offer.
Article 535 (Culpa in Contrabendo) (1) In a case where a contract, whose objective is unattainable, is concluded, a party to the contract who was aware of, or should have been aware of such unattainability, shall be liable for damages suffered by the other party who relied upon the contract as valid: Provided, That the amount of damages to be recovered may not exceed the profit which would have occurred if the contract was valid. (2) The provisions of the preceding paragraph shall not apply in a case where the other party was aware of, or should have been aware of such unattainability.

#### Sub-Section 2 Effect of Contract

Article 536 (Exceptio non adimpleti contractus) (1) One of the parties to a bilateral contract may refuse performance of his own obligation until the other party tenders performance of his obligation: Provided, That this shall not apply where the obligation of the other party is not due. (2) If one of the parties to a contract is bound to tender performance of his own obligation first to the other party, and if there is any significant cause existing by which the other party’s performance becomes difficult, the body of the preceding paragraph shall apply. Article 537 (Obligor’s Burden to Bear Risk) If the performance of an obligation of one of the parties to a bilateral contract becomes impossible by any cause for which neither of the parties is responsible, the obligor may not be entitled to counter-performance. Article 538 (Impossibility of Performance due to Cause for Which Obligee is Responsible) (1) If the performance of an obligation of one of the parties to a bilateral contract becomes impossible by any cause for which the obligee is responsible, the obligor may demand counter-performance. The same applies to cases where performance becomes impossible by any cause for which neither of the parties is responsible in the case of mora creditoris. (2) In the cases of the preceding paragraph if the obligor has received any benefit by being relieved of his own obligation, he shall return such benefit to the obligee. Article 539 (Contract in Favour of Third Person) (1) Where a party to a contract has agreed therein to effect an act of performance in favour of a third person, the person may demand such act of performance directly from the obligor. (2) In the case of the preceding paragraph the right of the third person shall come into existence from the time when he declares to the obligor his intention to accept the benefit of the contract. Article 540 (Obligor’s Right to Demand Third Person’s Answer) In the case of the preceding Article the obligor may, with a reasonable period fixed, demand the third person to answer whether or not he will receive and enjoy the benefit stipulated in the contract. If the obligor has not received a definite answer from the third person within such period, it shall be deemed that the third person has refused to receive the benefit stipulated in the contract. Article 541 (Establishment of Third Person’s Right) The right of the third person which has come into existence in accordance with the provisions of Article 539, shall not be altered or extinguished by the parties. Article 542 (Obligor’s Right to Defend) Defences incidental to the contract mentioned in Article 539 may be set up by the obligor against the third person who is to receive the benefit of the contract.

#### Sub-Section 3 Rescission for the Future and Rescission of Contract

Article 543 (Right of Rescission for Future or of Rescission) (1) If, pursuant to the contract or the provisions of Acts, one of the parties or both parties have a right of rescission for the future, or a right of rescission, either right of rescission shall be effected by a declaration of intention made to the other party. (2) The declaration of intention mentioned in the preceding paragraph may not be withdrawn.
Article 544 (Delay of Performance and Rescission) If one of the parties does not perform his obligation, the other party may fix a reasonable period and give peremptory notice demanding its performance, and may rescind the contract, if no performance is effected within such period: Provided, That if the obligor declares in advance his intention that he will not effect such performance, no peremptory notice shall be required.
Article 545 (Periodic Acts and Rescission) If, according to the nature of the contract or by a declaration of intention of the parties, the objective for which the contract has been entered is unattainable unless it is performed at a designated time and date or within a designated period, and one of parties has not effected performance on his part, the other party may, without giving the notice mentioned in the preceding Article, rescind the contract.
Article 546 (Impossibility of Performance and Rescission) If performance has become impossible for any cause for which the obligor is responsible, the obligee may rescind the contract.
Article 547 (Indivisibility of Right of Rescission for Future or of Rescission) (1) Where there are several persons as parties to each side of a contract, a right of rescission for the future or a right of rescission of the contract shall only be effected by or against all of them. (2) If, in the case mentioned in the preceding paragraph the right of rescission for future or the right of rescission has lapsed against one of the parties, it shall also lapse as against the others.
Article 548 (Effect of Rescission and Restitutio in Integrum) (1) If one of the parties has rescinded the contract, each party shall be liable to restore his other party to his original position: Provided, That the rights of third persons shall not be prejudiced thereby. (2) Interest shall be paid upon any money to be repaid in the case mentioned in the preceding paragraph as from the day on which such money has been received.
Article 549 (Restitutio in Integrum and Exceptio non Adimpleti Contractus) The provisions of Article 536 shall apply mutatis mutandis to the case mentioned in the preceding Article.
Article 550 (Effect of Rescission for Future) If one of the parties rescinds a contract for the future, the contract shall lose its effect for the future.
Article 551 (Rescission for Future or Rescission and Claims for Damages) Rescission for the future or rescission of a contract shall not affect any claim for damages.
Article 552 (Right of Peremptory Notice as to Whether Other Party Exercises Right of Rescission or not) (1) If no period is fixed for the exercise of a right of rescission, the other party may demand of the person entitled to rescission to make a definite answer by fixing a reasonable period as to whether he rescinds the contract or not. (2) If no notice of rescission has been received within the period mentioned in the preceding paragraph, the right of rescission shall lapse. Article 553 (Extinction of Right of Rescission due to Injury, etc.) If a person entitled to a right of rescission has by his intentional act or negligence, materially damaged the subject matter of the contract, or has become unable to return it, or has caused it to be converted into a different kind of object by processing or altering it, the right of rescission shall be extinguished.

### SECTION 2 Gift

Article 554 (Meaning of Contract of Gift) A contract of gift shall become effective when one of the parties declares his intention to transfer property of his own gratuitously to the other party and the other party agrees to accept it. Article 555 (Contract of Gift not in Writing and its Rescission) A contract of gift which is not in writing may be rescinded by either party. Article 556 (Acts of Donee and Rescission of Contract of Gift) (1) The donor may rescind a contract of gift in favor of the donee for the reasons as prescribed in the following subparagraphs:
(2) The right of rescission mentioned in the preceding paragraph shall be extinguished after the lapse of six months from the day on which the donor was aware of the occurrence of any cause of rescission or at the time when he has declared an intention of acquiescence. Article 557 (Change of Donor’s Property Status and Rescission of Contract of Gift) The donor may rescind a contract of gift, if after the conclusion of a contract of gift the donor’s property status has been adversely changed and the donor’s living has become gravely affected by the performance of contract of gift. Article 558 (Rescission and Portion as to Which Performance of Contract has been Completed) Rescission of a contract of gift in accordance with the provisions of the preceding three Articles shall not have any effect in respect of any portion as to which performance has been completed. Article 559 (Donor’s Liability for Warranty) (1) A donor shall not be liable for any defect or deficiency in the thing or right which forms the subject of his gift: Provided, That this shall not apply to cases where he was aware of such defect or deficiency and has nevertheless failed to inform the donee thereof. (2) In respect of a gift subject to a charge, the donor shall assume the same liability in respect of warranty as that of a seller to the extent of such charge. Article 560 (Gift for Periodical Performance and Lapse due to Death) A contract of gift for periodic performance shall lose its effect upon the death either of the donor or of the donee. Article 561 (Gift subject to Charge) The provisions relating to bilateral contract shall apply to a gift subject to a charge, in addition to the provisions of this Section. Article 562 (Gift Effective upon Death) The provisions relating to testamentary gifts shall apply mutatis mutandis to a contract of gift which is to become effective upon the death of the donor.

### SECTION 3 Sale

Sub-Section 1 General Provisions
Article 563 (Definition of Sale) A sale shall become effective when one of the parties agrees to transfer a property right to the other party and the other party agrees to pay the purchase-price to the former. Article 564 (Unilateral Promise to Sell or Purchase) (1) A unilateral promise to sell or purchase shall become effective as a sale from the time when the other party declares his intention to complete the sale. (2) Where no period is fixed for the declaration of intention mentioned in the preceding paragraph, the person who has made a unilateral promise may give a peremptory notice to the other party to give a definite answer within a reasonably fixed period as to whether he will or will not complete the sale. (3) If the other party fails to give an answer within that period, the unilateral promise shall become void. Article 565 (Earnest Money) (1) If one of the parties to a contract of sale has delivered, at the time of entering into the contract, money or other things under the name of down payment, assurance deposit, etc. to the other party, unless otherwise agreed upon between the parties, the deliverer by giving up such money, and the receiver by repaying double such money, may rescind such contract before one of the parties has initiated performance of the contract. (2) The provisions of Article 551 shall not apply to the case mentioned in the preceding paragraph. Article 566 (Burden of Expenses Relating to Contract of Sale) The expenses relating to a contract of sale shall be borne by both parties in equal shares. Article 567 (Mutatis Mutandis Application to Contract for Value) The provisions of this section shall apply mutatis mutandis to contracts for value other than sales: Provided, That this shall not apply in the case where the nature of such contracts does not so permit.
Sub-Section 2 Effect of Sale
Article 568 (Effect of Sale) (1) The seller shall transfer a right which has been made the object of a sale to the buyer, and the buyer shall pay the purchase-price to the seller. (2) The duties of both parties mentioned in the preceding paragraph shall, unless there exists any specific agreement or custom, be performed concurrently by both parties. Article 569 (Sale of Right Belonging to Another Person) In the case where a right, which has been made the object of a sale, belongs to another person, the seller shall acquire such right and transfer it to the buyer. Article 570 (Sale of Right Belonging to Another Person-Seller’s Liability for Warranty) If, in the case mentioned in the preceding Article the seller is unable, by acquiring the right he has sold, to transfer it to the buyer, the buyer may rescind the contract: Provided, That if he was aware, at the time the contract was made, that the right did not belong to the seller, he may not claim damages. Article 571 (Sale of Right Belonging to Another Person-bona fide Seller’s Liability for Warranty) (1) If the seller was unaware, at the time the contract was made, that the right which has been made the object of a sale did not belong to him, and the seller is unable, by acquiring the right he has sold, to transfer the right to the buyer, the seller may, paying damages suffered by the buyer, rescind the contract. (2) If, in the case of the preceding paragraph, the buyer was aware at the time the contract was entered that the right did not belong to the seller, the seller may, by giving notice that he is unable to transfer the right to the buyer, rescind the contract. Article 572 (Case Where Part of Right Belongs to Another Person and Seller’s Liability for Warranty) (1) If the seller is unable to acquire and transfer the right to the buyer by reason of the fact that a part of the right which forms the object of a sale belongs to another, the buyer may demand a reduction of the purchase-price in proportion to the part. (2) If in the case of the preceding paragraph the buyer would not have bought the remaining part, had such alone been the object of the sale, the buyer acting in good faith may rescind the whole of the contract. (3) The bona fide buyer may claim damages besides claiming for a reduction of the purchase-price or the rescission of a contract. Article 573 (Period during Which Right Mentioned in Preceding Article is to be Exercised) The right mentioned in the preceding Article shall be exercised within one year from the time when the buyer became aware of the fact, if the buyer was acting in good faith, and from the time when the contract was entered if the buyer was acting in bad faith. Article 574 (Partial Shortage and Loss of Items Sold and Seller’s Liability for Warranty) The provisions of the preceding two Articles shall apply mutatis mutandis to the case where the articles sold by quantity shows a shortage or part of the subject matter of sale had already been lost at the time when the contract was entered and the buyer was unaware of such shortage or loss. Article 575 (The Case Where Restricted Real Rights Exist in Contract and Seller’s Liability for Warranty) (1) Where the subject matter of a sale is subject to a superficies, servitude, chonsegwon, right of retention, or pledge and the buyer was unaware thereof, the buyer may rescind the contract only if the objective of the contract is not unattainable thereby. In other cases the buyer may only claim damages. (2) The provisions of the preceding paragraph shall apply mutatis mutandis to the cases where a servitude which has been represented as existing in favour of the immovable which is the subject of the sale does not exist or where a registered lease exists on such an immovable. (3) The rights mentioned in the preceding two paragraphs shall be exercised within one year from the time the buyer became aware of the fact. Article 576 (Exercise of Right of Mortgage or Chonsegwon and Seller’s Liability for Warranty) (1) If the buyer has been unable to acquire or has lost the ownership of the immovable which forms the subject of a sale by reason of the exercise of a right of mortgage or chonsegwon existing over such an immovable, the buyer may rescind the contract. (2) In the cases of the preceding paragraph, if the buyer has preserved the ownership at his own expense, he may demand reimbursement of such expenses from the seller. (3) In a case where mentioned in the preceding two paragraphs the buyer may recover damages he has sustained from the seller. Article 577 (Sale of Superficies and Chonsegwon Which Forms Subject of Mortgage and Seller’s Liability for Warranty) The provisions of the preceding Article shall apply mutatis mutandis to the sale of superficies or chonsegwon which have been the subject of the mortgage. Article 578 (Sale by Auction and Seller’s Liability for Warranty) (1) In the case of a sale by auction, the successful bidder may in accordance with the provisions of the preceding eight Articles, either rescind the contract or demand a reduction of the purchase-price against the obligor. (2) In the case of the preceding paragraph, if the obligor is under financial disability, the successful bidder may demand all or some of the proceeds of the sale which the obligee has received as his portion of the proceeds of the sale. (3) If, in the cases of the preceding two paragraphs, the obligor was aware of any deficiency in the object or right sold and nevertheless failed to disclose it, or the obligee was aware of such deficiency and demanded a sale by auction, the successful bidder may claim damages either from the obligor or obligee who was aware of such deficiency. Article 579 (Sale of Claim and Seller’s Liability for Warranty) (1) If the seller of a claim warrants the solvency of the obligor, he is presumed to have warranted his solvency at the time the contract was entered. (2) If the seller of a claim which is not yet due warrants the solvency of the obligor, he is presumed to have warranted his solvency at the time when the claim becomes due. Article 580 (Seller’s Liability for Warranty Against Defect) (1) If any defects exist in the subject-matter of a sale, the provisions of Article 575 (1) shall apply mutatis mutandis: Provided, That if the buyer was aware of or was not aware of such defects due to his negligence, this shall not apply. (2) The provisions of the preceding paragraph shall not apply to the cases of a sale by auction. Article 581 (Sale in Kind and Seller’s Liability for Warranty) (1) Even where the subject matter of a sale has been specified in kind, if any defects exist in the specified subject matter, the provisions of the preceding Article shall apply mutatis mutandis. (2) In the cases of the preceding paragraph, the buyer may demand the non-defective item without rescinding a contract or claiming for damages. Article 582 (Period during Which Rights Mentioned in Preceding Two Articles are to be Exercised) The rights mentioned in the preceding two Articles shall be exercised by the buyer within six months from the time when he was first aware of such fact. Article 583 (Liability for Warranty and Concurrent Fulfilment) The provisions of Article 536 shall apply mutatis mutandis to the cases of Articles 572 through 575, 580 and 581. Article 584 (Special Stipulation for Relief of Liability for Warranty) Even where the seller has made a special stipulation that he is not liable in respect of the warranties mentioned in the preceding fifteen Articles, he may not be relieved of liability in respect of any fact of which he was aware and nevertheless failed to disclose, or in respect of any right which he himself created in favour of, or assigned to, a third person. Article 585 (Presumption of Same Time-Limit) If a time has been stipulated for the performance of duties of one party to a contract of sale, the same time-limit shall also be presumed to have been stipulated for the other party’s performance of duties. Article 586 (Place of Payment of Purchase-Price) If the purchase-price is to be paid in exchange for the delivery of the subject matter of the sale, the payment shall be made at the place of delivery. Article 587 (Reversion of Fruits and Interest on Purchase-Price) If the subject matter of a sale which has not yet been delivered produces fruits after a contract of sale has been entered, such fruits shall vest in the seller. The buyer shall pay interest on the purchase-price from the day of the delivery: Provided, That if a time-limit has been stipulated for payment of the purchase-price, this shall not apply. Article 588 (Buyer’s Right to Refuse Payment of Purchase-Price Where Third Person Claims Right) If a third person claims a right over the subject matter of the sale, and consequently there is a danger of the buyer’s losing what he has bought in whole or in part, he may refuse payment of the purchase-price to the extent of such danger: Provided, That this shall not apply when the seller furnishes reasonable security. Article 589 (Seller’s Right to Demand Buyer to Deposit Purchase-Money) In the case of the preceding Article, the seller may demand the buyer to deposit the purchase-price.
Sub-Section 3 Redemption
Article 590 (Definition of Redemption) (1) If the seller reserves the right of redemption at the time of the contract of sale, the seller may redeem the object of a sale by returning the purchase-money received and the expenses relating to such a sale borne by the buyer. (2) If any specific agreement concerning the redemption money has been made between the parties referred to in paragraph (1), such agreement shall govern the matters concerning redemption money. (3) Unless a specific agreement has been made between the parties in the cases of paragraphs (1) and (2), the fruits of the object of the sale and the interest on the purchase-price shall be deemed to have been set- off against each other. Article 591 (Period for Redemption) (1) The period for redemption shall not exceed five years in the case of immovables and three years in the case of movables. If any period specifically agreed upon between the parties exceeds the period mentioned above, it shall be reduced to five years in the case of immovables and three years in the case of movables. (2) If a period for redemption has been fixed, it may not subsequently be extended. (3) If no period for redemption has been designated, the period shall be deemed to be five years in the case of immovables and three years in the case of movables. Article 592 (Registration of Right of Redemption) If, where the object of a sale is an immovable, the reservation of the right of redemption has been registered simultaneously with the registration of a sale, such registration shall be effective against the third persons. Article 593 (Subrogative Exercise of Right of Redemption and Right of Buyer) Where a creditor of the seller desires to redeem the property in place of the seller, the buyer may extinguish the right of redemption by discharging the debt of the seller, out of the balance remaining after the amount to be repaid by the seller has been deducted from the value of the object, as assessed by an expert appointed by the court, and by paying the surplus, if any, to the seller. Article 594 (Execution of Redemption) (1) The seller shall lose the right of redemption unless he tenders the purchase-price he received and the expenses relating to the sale to the buyer within the specified period for redemption. (2) If the buyer or any subsequent purchaser has disbursed expenses in respect of the object of a sale, the seller shall reimburse the same amount in accordance with the provisions of Article 203: Provided, That with respect to useful expenses the court may upon the application of the seller, allow him a reasonable period for reimbursement. Article 595 (Redemption of Common Share) If, after one of the co-owners of the object of a sale, in which the right of redemption has been reserved, has sold his share, and the partition of, or sale by auction of such an object has taken place, the seller may exercise the right of redemption in respect of that part or the purchase- money which the buyer has received or is to receive: Provided, That the buyer who has not given any notice upon the partition or a sale by auction to the seller, may not set up against the seller therewith.

### SECTION 4 Contract of Exchange

Article 596 (Definition of Contract of Exchange) A contract of exchange becomes effective when two parties agree to exchange any property right other than money. Article 597 (Supplementary Disbursement of Money) If one of the parties has agreed to transfer the property rights mentioned in Article 596 together with the additional payment of money, the provisions relating to the purchase-price of a sale shall apply mutatis mutandis with respect to the money.

### SECTION 5 Loan for Consumption

Article 598 (Definition of Loan for Consumption) A loan for consumption becomes effective when one of the parties agrees to transfer the ownership of money, or any other substitute, to the other party, and the other party agrees to return the same amount of money or the same kind, quality, and quantity of any substitute therefor. Article 599 (Bankruptcy and Invalidation of Loan for Consumption) A loan for consumption shall cease to be effective, if one of the parties has been declared bankrupt before the lender delivers the object of the loan for consumption to the borrower. Article 600 (Commencement of Computing Interest) Computation of interest on a loan for consumption shall begin from the time when the borrower has received the object of a loan for consumption. When the borrower has delayed receiving the delivery of the object for a reason for which the borrower is responsible, the computation of interest shall be commenced from the time when the lender has tendered the delivery of such an object. Article 601 (Loan for Consumption Bearing No Interest and Right of Rescission) Either party to a loan for consumption bearing no interest may rescind the contract at any time before the object of a loan for consumption has been delivered to the borrower: Provided, That if damages have been caused to the other party due to the rescission of the contract, the rescinding party shall be liable to compensate for such damages. Article 602 (Lender’s Liability for Warranty) (1) If any defect is found in the object of a loan for consumption bearing interest, the provisions of Articles 580 through 582 shall apply mutatis mutandis. (2) In the case of a loan for consumption bearing no interest the borrower may return the value of the defective object: Provided, That if the lender was aware of the defect and, nevertheless, failed to inform the borrower thereof, the provisions of paragraph (1) shall apply. Article 603 (Time to Return ) (1) The borrower shall return to the lender an object of the same kind, quality, and quantity as the object borrowed at the time agreed upon by the parties. (2) If no time for the return of an object has been stipulated by the parties, the lender shall fix a reasonable period and then demand the return of the object loaned: Provided, That the borrower has the right to return the object borrowed at any time. Article 604 (Refund of Market Price due to Impossibility of Return) If it becomes impossible for the borrower to return an object of the same kind, quality, and quantity as the borrowed one, he shall refund the value of the object at the current market price: Provided, That this shall not apply to the cases mentioned in Articles 376 and 377 (2). Article 605 (Quasi-Loan for Consumption) In case where both parties are liable to furnish money, or any other substitutes, not by a loan for consumption, if both parties agree to make the subject matter the object of a loan for consumption, it becomes effective as a loan for consumption. Article 606 (Loan by Substitutes) If, in the case of pecuniary loans, the borrower accepts delivery of valuable instruments, or any other thing in place of money, the amount of the loan shall be the current price of the object at the time of such delivery to the borrower. Article 607 (Promise to Return by Substitutes) If the borrower has promised to substitute any other property right in lieu of the borrowed object, the value of the substituted property shall not exceed the aggregate value of the original amount borrowed plus the interest thereon. Article 608 (Prohibition of Agreement Prejudicial to Borrower) Any agreement entered by the parties which is in violation of the provisions of the preceding two Articles and is prejudicial to the borrower is not valid even if claimed as a “redemption” or as any other legal remedy.

### SECTION 6 Loan for Use

Article 609 (Definition of Loan for Use) A loan for use becomes effective when one of the parties agrees to deliver an object to the other party for his gratuitous use, and the taking of profits therefrom, and when the other party agrees to return such object after having used and taken profits therefrom. Article 610 (Borrower’s Right to Use and Take Profits) (1) The borrower shall use and take profits from the object in such a manner as is determined by the contract or by the nature of its subject matter. (2) The borrower may not allow a third person to use or take profits from the object borrowed without the consent of the lender. (3) If the borrower has violated the provisions of paragraphs (1) and (2), the lender may rescind the contract for the future. Article 611 (Burden to Bear Expenses) (1) The borrower shall bear the ordinary and necessary expenses relating to the object borrowed. (2) The provisions of Article 594 (2) shall apply mutatis mutandis to any other expenses. Article 612 (Provisions to be Applied Mutatis Mutandis) The provisions of Articles 559 and 601 shall apply mutatis mutandis to loans for use. Article 613 (Time to Return Object Borrowed) (1) The borrower shall return the object borrowed at the time agreed upon by the parties. (2) If no time for the return of the object borrowed has been stipulated by the parties, the borrower shall return the object when he has completed the use thereof and the taking of profits therefrom in conformity with the purpose specified in the contract or the nature of the subject matter: Provided, That the lender may rescind the contract for the future at any time after a reasonable period has elapsed to allow for the specified use of the object and the taking of profits therefrom. Article 614 (Borrower’s Death or Bankruptcy and Rescission of Contract for Future) The lender may rescind the contract for the future when the borrower has died or has been declared bankrupt. Article 615 (Borrower’s Duty for restitutio in integrum and Right to Remove) The borrower shall restore the object borrowed to its original condition before he returns it to the lender and the borrower may remove any attachments which he has attached thereto. Article 616 (Co-borrower’s Joint Obligation) When several persons jointly borrow an object or objects, they shall be jointly obligated. Article 617 (Period for Claiming Damages and Reimbursement of Expenses) Compensation for damages which have arisen from the use of the object, or the taking of profits therefrom contrary to the tenor of the contract or the nature of the subject matter, and the reimbursement of expenses incurred by the borrower, shall be claimed within six months from the date of the return of the object borrowed to the lender.

### SECTION 7 Lease

Article 618 (Definition of Lease) A lease becomes effective when one of the parties has agreed to allow the other party to use an object and take profits therefrom, and the latter has agreed to pay rent for it. Article 619 (Short Term Lease Given by Person without Capacity or Authority to Dispose of Property) Where a lease is given by a person who has no capacity or authority to dispose of property, its duration shall not exceed the periods mentioned below:
Article 620 (Renewal of Short Term Lease) The periods mentioned in the preceding Article may be renewed: Provided, That such renewal shall be effected within one year in the case of land, within three months in the case of a building or any other structure, and within one month in the case of a movable, prior to the expiration of the period. Article 621 (Registration of Lease) (1) The lessee of an immovable may, unless there exists any contrary agreement between the parties, request the lessor to cooperate in effecting necessary formalities for the registration of the lease. (2) The lease of an immovable, if registered, shall be effective against the third persons from the time registration has been effected. Article 622 (Defenses Set up against Third Person of Lease of Land for Which Ownership of Building has been Registered) (1) When the object of a lease of land is to own a building, if a building on such land has been registered by the lessee, the lease of land shall be effective against a third person even if such a lease of land has not been registered. (2) If a building has been destroyed or has become dilapidated from use prior to the termination of the lease period, it shall lose the effect mentioned in paragraph (1). Article 623 (Lessor’s Duty) A lessor is bound to deliver the object to the lessee, to maintain conditions necessary for the use and taking profits of the leased object while the lease is in force. Article 624 (Lessor’s Act of Preservation and Duty of Tolerance) The lessee may not object to a lessor who performs any act deemed necessary for the preservation of the object leased. Article 625 (Act of Preservation against Intention of Lessee and Lessee’s Right of Rescission for Future) If the lessor performs an act of preservation against the will of the lessee and the lessee is thereby incapable of attaining the objective for which the lease has been obtained, the lessee may rescind the contract for the future. Article 626 (Lessee’s Right to Demand Reimbursement) (1) If a lessee has made necessary expenditures relating to the preservation of the object leased he may demand reimbursement thereof from the lesson. (2) If the lessee has made any useful expenditures, the lessor shall reimburse the lessee, to the extent that the increase in value remains subsisting at the time when the lease terminates, in the amount disbursed by the lessee or the amount by which the value of the object has been increased. In such a case, the court may, upon the application of the lessor, allow him reasonable time for settlement with the lessee. Article 627 (Partial Loss of Object Leased, and Right to Demand Reduction of Rent and Right of Rescission for Future) (1) If part of the leased object has become unusable, or has become impossible to take profit from, due to loss or any other cause other than the fault of the lessee, the lessee may demand a reduction of the rent in proportion to the part which has been lost. (2) If, as mentioned in paragraph (1), the remaining part of the object is not sufficient to enable the lessee to attain the objective for which the lease has been made, the lessee may rescind the contract for the future. Article 628 (Right to Demand an Increase or Reduction of Rent) If the rent previously agreed upon by the parties has become unreasonable due to the increase or decrease of the public impost imposed upon the object leased or any other change in the economic situation, either party may demand of the other party to raise or reduce the rent for the future. Article 629 (Restriction on Assignment of Right of Lease and Sub-lease) (1) A lessee may not assign his rights or sub-lease the leased object without the consent of the lessor. (2) If the lessee violates the provisions of paragraph (1), the lessor may rescind the contract for the future. Article 630 (Effect of Sub-lease) (1) If a lessee has sub-leased the object with the consent of the lessor, the sub-lessee assumes the obligations directly to the lessor. In this case the sub-lessee may not set a defense against the lessor by a payment of the rent to the sub-lessor. (2) The provisions of paragraph (1) shall not prejudice the exercise of the lessor’s right against the lessee. Article 631 (Confirmation of Sub-lessee’s Rights) If the lessee has sub-leased the object with the consent of the lessor, the rights of the sub-lessee shall not be extinguished even when the contract of lease is terminated by an agreement between the lessor and the lessee. Article 632 (In Case Where Lessee Allows Third Person to Use Small Part of Building Leased) The provisions of Articles 629, 630 and 631 shall not apply in cases where the lessee of a building allows a third person to use a small part of the building leased.
Article 633 (Time to Pay Rent)
Rent shall be paid at the end of each month in the case of a movable, a building, or a building site, and at the end of each year in the case of any other land: Provided, That in the case of a leased object which has a harvest season, rent shall be paid, without delay, upon the close of such a season.
Article 634 (Lessee’s Duty to Give Notice) If repairs are necessary to the leased object or a third person claims a right over it, the lessee shall notify the lessor thereof without delay: Provided, That this shall not apply if the lessor has prior knowledge of this information. Article 635 (Notice of Rescission for Future of Lease without Fixed Period) (1) If no period for a lease has been fixed, either party may give notice to the other party at any time to rescind the lease for the future. (2) Rescission of the lease for the future shall be effective upon the expiration of the periods mentioned in each of the following subparagraphs, from the day on which the other party has received the notice mentioned in paragraph (1):
Article 636 (Notice of Rescission for Future of Lease with Fixed Period) Even in cases where a lease period has been fixed by the parties, the provisions or Article 635 shall apply mutatis mutandis if one or both of the parties has reserved a right to rescind the lease for the future with respect to the remaining unexpired term. Article 637 (Lessee’s Bankruptcy and Notice of Rescission of Contract for Future) (1) If the lessee has been declared bankrupt, either the lessor or the bankruptcy trustee may, in accordance with the provisions of Article 635, give notice to rescind the lease for the future with respect to the remaining unexpired term, notwithstanding the fact that the lease contained a fixed period of rental. (2) In the cases of paragraph (1), neither party may claim damages arising from the rescission of the lease for the future with respect to the remaining unexpired term. Article 638 (Notice of Rescission to Sub-lessee) (1) If a lease has been terminated by the notice of rescission with respect to its unexpired rental period, and the leased object has lawfully been sub-leased, the lessor may not set up a claim against the sub-lessee based on the rescission of the lease unless notice is given to the sub-lessee. (2) The provisions of Article 635 (2) shall apply mutatis mutandis in cases where the sub-lessee receives the notice mentioned in paragraph (1). Article 639 (Implicit Renewal) (1) If the lessee continues to use the object leased, or takes profits therefrom after the expiration of the period of the lease, and the lessor fails to raise any objection thereto within a reasonable period, it shall be deemed to have created a new lease on the same terms and conditions as those of the previous one: Provided, That either party may give notice to the other party to rescind the lease for the future in accordance with the provisions of Article 635. (2) In the case of paragraph (1), the security for the previous lease furnished by a third person shall be extinguished by expiration of the period. Article 640 (Rent in Arrears and Rescission of Lease for Future) In the case of the lease of a building or any other structure, if the amount of rent in arrears reaches the rent for two periods, the lessor may rescind the contract for the future. Article 641 (Rent in Arrears and Rescission Future) The provision of Article 640 shall apply mutatis mutandis to the case of a lease of land where the object is to own a building or any other structure, or is for planting, collecting salt, and stock farming. Article 642 (Rescission of Lease of Land for Future and Notice to Mortgage Right Holders) The provisions of Article 288 shall apply mutatis mutandis in the cases of Article 641 if a building or any other structure on such land becomes an object of real right granted by way of security. Article 643 (Lessee’s Right to Demand Renewal of Contract and Right to Demand Purchase of Building, etc.) The provisions of Article 283 shall apply mutatis mutandis to buildings, trees, or any other facilities on land remaining after the expiration of the period of the lease of land where the object is to own a building or any other structure, or is for planting, collecting salt, and stock farming. Article 644 (Sub-lessee’s Right to Demand Lease Contract and Right to Demand Purchase of Building) (1) In the case of a land lease where the lessee’s objective is to own a building or any other structure, or for planting, collecting salt, and stock farming, where the land has been lawfully sub-leased, if any building, tree or any other facilities on the land remains subsisting at the time when the periods for lease and sub-lease have concurrently terminated, the sublessee may demand that the lessor give him a lease on the same terms as those of the former sub-lease. (2) The provisions of Article 283 (2) shall apply mutatis mutandis, if, in the case of paragraph (1), the lessor does not desire to lease his land. Article 645 (Right to Demand Lease and Right to Demand Purchase Exercisable by Lessee of Land which became Object of Superficies) The provisions of Article 644 shall apply mutatis mutandis in a case where a superficiary leases land which became the object of superficies. Article 646 (Lessee’s Right to Demand Purchase of Accessories) (1) If the lessee of a building or any other structure has attached an Article to such a building, etc. with the consent of the lessor for the benefit of the lessee’s use, the lessee may demand that the lessor purchase such accessories at the time when the contract of lease terminates. (2) The provisions of the preceding paragraph shall apply to the accessories purchased from the lessor. Article 647 (Sub-Lessee’s Right to Demand Purchase of Accessories) (1) If, in a case where the lessee of a building or any other structure has lawfully sub-leased such a building, etc., and the sub-lessee has attached an Article to such a building, etc. with the consent of the lessor for the benefit of the sub-lessee’s use, the sub-lessee may demand that the lessor purchase such accessories at the time when the contract of sub- lease terminates. (2) The provisions of the preceding paragraph shall also apply to the accessories purchased from the lessor or purchased from the lessee with the consent of the lessor. Article 648 (Pledge for Accessories, Fruits, etc. on Leased Land, Recognized by Law) If the lessor of land levies an attachment pursuant to the claims relating to the lease, on a movable owned by the lessee which is affixed to the leased land, or offered for the benefit of the lessee’s use, and fruits accruing from such land, it shall be effective as a pledge. Article 649 (Mortgage on Building on Leased Land, Recognized by Law) If the lessor of land levies an attachment on a building on his land owned by the lessee, pursuant to the claims for rent of the last two years, for which period rent has not been paid, such right shall be effective as a mortgage. Article 650 (Pledge for Accessories attached to Leased Building, etc., Recognized by Law) If the lessor of a building or any other structure attaches, pursuant to the claims created under the lease, a movable owned by the lessee and also attached to the building or any other structure, it shall be effective as a pledge. Article 651 (Duration of Lease Contract) (1) The duration of the lease except in cases of land lease the object of which is to own a building or any other structure made of stone, limestone, brick or any other solid building or structure, or is for planting or collecting salt, shall not exceed twenty years. If the period agreed upon by the parties exceeds twenty years, the period shall be shortened to twenty years. (2) The period mentioned in paragraph (1) may be renewed. The period shall not exceed ten years from the day on which it has been renewed. Article 652 (Mandatory Provisions) Any agreement entered by the parties in contravention of the provisions of Articles 627, 628, 631, 635, 638, 640, 641, and 643 through 647 which is unfavorable to either the lessee or sub-lessee shall be void. Article 653 (Special Rule Applicable to Lease for Temporary Use) The provisions of Articles 628, 638, 640, 646 through 648, 650 and Article 652 shall not apply to the cases where it is evident that a lease or sub-lease is given for temporary use. Article 654 (Provisions to be applied Mutatis Mutandis) The provisions of Articles 610 (1), 615 through 617 shall apply mutatis mutandis to the cases of lease.

### SECTION 8 Contract of Employment

Article 655 (Definition of Contract of Employment) A contract of employment becomes effective when one of the parties agrees to render services to the other party and the latter agrees to pay the former remuneration therefor. Article 656 (Amount of Remuneration and Time to Pay) (1) Where no agreement has been entered upon between the parties as to the amount of remuneration, custom shall prevail accordingly. (2) Remuneration shall be made at the time mutually agreed upon, but where no time has been specified, custom shall prevail. In the absence of any established custom of time, it shall be paid after the completion of the work agreed upon without delay. Article 657 (Exclusivity of Rights and Duties) (1) The employer may not assign his rights to a third person without the consent of the employee. (2) An employee may not substitute a third person to perform his services without the consent of the employer. (3) If one of the parties violates the provisions of paragraphs (1) and (2), the other party may rescind the contract for the future. Article 658 (Content of Service and Right of Rescission for Future) (1) If the employer demands of the employee some unrelated service which has not been agreed upon between the parties, the employee may rescind the contract and refuse to perform his services in the future. (2) If, in a case where the specified services which have been agreed upon between the employer and employee require special training, experience, and knowledge on the part of the employee, the employer may rescind the contract for services for the future if the employee fails to possess the above qualifications agreed upon. Article 659 (Lapse of Three Years or More and Right to Give Notice of Rescission of Contract for Future) (1) If the period of employment agreed upon between the parties exceeds three years, or if it is to continue for the lifetime of one of the parties or of a third person, either party may give notice of his intention to rescind the contract of employment for the future at any time after the expiration of three years. (2) In the case of paragraph (1), the notice of intention to rescind the contract of employment for the future by either of the parties becomes effective after three months have elapsed from the date of receipt by the other party of such notice. Article 660 (Notice of Rescission for Future of Contract of Employment in which No Period has been Fixed) (1) If no period for the employment has been fixed by the parties, either party may give notice to the other party of his intention to rescind the contract for the future at any time. (2) In the case of paragraph (1), the notice of intention to rescind for the future becomes effective after one month has elapsed from the date of receipt by the other party of such notice. (3) If remuneration has been fixed on a set and regular periodical basis, the rescission of the contract for the future shall be deemed to be effective after one full period has elapsed from the date of completion of the current period during which the other party received the notice of intention to rescind the contract for the future. Article 661 (Unavoidable Cause and Right to Rescind Contract for Future) Even where a fixed period for the employment has been set by the parties, either party may, if any unavoidable cause arises, rescind the contract for the future: Provided, That if such cause arises out of the negligence of one of the parties, such party is liable for damages to the other party. Article 662 (Implicit Renewal) (1) If the employee continues to render services after the expiration of the agreed period, and the employer has not raised any objection thereto within a reasonable period, they are deemed to have entered into a new contract of employment on the same terms as before: Provided, That either party may give notice to the other party to rescind the contract for the future in accordance with the provisions of Article 660. (2) In the case of paragraph (1), the security furnished by a third person in respect to the former contract of employment shall be extinguished at the expiration of the first period agreed upon. Article 663 (Employer’s Bankruptcy and Notice of Rescission of Contract for Future) (1) If the employer has been declared bankrupt, either the employee or the bankruptcy trustee may rescind the contract of employment, even when a term of employment contract has been fixed. (2) In the case of paragraph (1), neither party may claim from the other any damages arising from the rescission of the contract for the future.

### SECTION 9 Contract for Work

Article 664 (Definition of Contract for Work) A contract for work becomes effective when one of the parties has agreed to perform a certain job and the other has agreed to pay remuneration for the result of such work. Article 665 (Time to Make Remuneration) (1) The remuneration shall be made simultaneously with the delivery of the finished object of the work: Provided, That if the delivery of the object of the work is not required, remuneration shall be paid without delay after the work has been performed. (2) The provisions of Article 656 (2) shall apply mutatis mutandis to the remuneration mentioned in paragraph (1). Article 666 (Contractor’s Right to Demand Creation of Mortgage on Immovable which is Object of Contract) The contractor for work on an immovable may demand of the person who ordered the work to create mortgage on the immovable in order to secure the contractor’s claim in relation to his remuneration mentioned in Article 665. Article 667 (Contractor’s Liability for Warranty) (1) If any defect exists in the completed subject-matter of a work or in a certain part of the subject-matter of a work which has been finished before the completion of all the work, the person who ordered the work may fix a reasonable period for the contractor to repair and rectify such defect: Provided, That this shall not apply if the defect is not material and if its rectification would involve excessive expense. (2) The person who has ordered the work may claim damages in lieu of, or together with, rectification of the defect. (3) The provisions of Article 536 shall apply mutatis mutandis in the cases of paragraph (2). Article 668 (Contractor’s Liability for Warranty-Right of Rescission of Person Who Ordered Work) If, by reason of some defect in the finished subject-matter of the work, the purpose of the contract can not be achieved, the person who ordered the work may rescind the contract: Provided, That this shall not apply to a building or any other structure on land. Article 669 (Contractor’s Liability for Warranty-Release from Responsibility in Case Defect has Arisen through Nature of Materials Supplied or Instructions Given by Person Who Ordered Work) The provisions of Articles 667 and 668 shall not apply if the defect in the finished subject-matter of the work has arisen through the nature of the materials supplied by the person who ordered the work, or by reason of instructions given by him: Provided, That this shall not apply if the contractor, knowing the impropriety of the materials or instructions, has failed to notify the person who ordered the work. Article 670 (Duration of Warranty Liabilities) (1) The demand for rectifying the defects, the claim for damages, or the rescission of the contract mentioned in Articles 667, 668 and 669 shall be made within one year from the day of the delivery of the subject- matter of the work. (2) Where the delivery of the subject-matter of the work is not required, the period mentioned in paragraph (1) shall commence to run from the day on which the work was finished. Article 671 (Contractor’s Liability for Warranty Special Rules Applicable to Land, Building, etc.) (1) A contractor for work with respect to land, a building or any other structure shall be liable for any defects in the subject-matter of the work or in its foundations for a period of five years after delivery: Provided, That this period shall be ten years where the subject-matter of the work is made of stone, limestone, brick, metal or any other similar material. (2) If the subject-matter is destroyed or damaged by reason of such defects mentioned in paragraph (1), the person who ordered the work shall exercise the rights mentioned in Article 667 within one year from the day that such destruction or damage took place. Article 672 (Special Agreement Releasing Warranty Liabilities) Even where there was a special agreement between the parties that the contractor shall not be bound by warranty liabilities mentioned in Articles 667 and 668, he may not be relieved of liabilities with respect to the defects in workmanship or materials of which he was aware and nevertheless failed to give notice. Article 673 (Right of Rescission of Person who Ordered Work Before Its Completion) Before the completion of the contracted work, the person who ordered the work may rescind the contract at any time, but shall be liable for damages. Article 674 (Bankruptcy of Person who Ordered Work and Right of Rescission) (1) If the person who ordered the contracted work has been declared bankrupt, the contractor or the bankruptcy trustee may rescind the contract. In such a case, the contractor may claim in the distribution of the bankrupt estate remuneration for the part of work already completed, and for any other expenses which are not included in such remuneration. (2) In a case where of paragraph (1), neither party may demand from the other party compensation for any damages which have arisen from the rescission of the contract.

### SECTION 10 Advertisement for Prize Contest

Article 675 (Definition of Advertisement for Prize Contest) An advertisement for prize contest shall become effective when an advertiser has expressed his intention to give a certain reward to any person who performs a certain act and a contestant has accomplished such an act as has been specified in the advertisement. Article 676 (Person Entitled to Reward) (1) If there are several persons who have accomplished the act specified in the advertisement, the person who accomplished it first shall be entitled to the reward. (2) If two or more persons have accomplished the act simultaneously, each of them shall be entitled to the reward in equal proportions: Provided, That If the reward is by its nature indivisible, or if it has been stipulated in the advertisement that only one person is to receive the reward, the ultimate recipient of such a reward shall be determined by drawing lots. Article 677 (Act Done by Person Who was not Aware of Advertisement) The provisions of Article 676 shall apply mutatis mutandis where a person has accomplished the act specified in the advertisement without knowledge of such an advertisement. Article 678 (Advertisement which Specifies Prize only for Performance of Highest Credit) (1) An advertisement offering the reward only for one of several contestants who has performed the act in the manner deserving the highest credit shall be effective only if a certain period of definite duration is stipulated for the contest. (2) In a case where of paragraph (1), the decision as to whose performance deserves the highest credit shall be made by the person designated in the advertisement. If no such designation has been made in the advertisement, the decision shall be made by the advertiser himself. (3) A decision that no performance deserves the highest credit among the contestants shall be impermissible: Provided, That this shall not be the case where declaration of a different intention from the above exists in the advertisement or the standards of the decision has been stipulated by the nature of the advertisement. (4) No contestant may raise objection to the decision mentioned in paragraphs (2) and (3). (5) If two or more persons are judged to have performed the act with the same highest credit, the provisions of Article 676 (2) shall apply mutatis mutandis. Article 679 (Withdrawal of Advertisement for Prize Contest) (1) Where a period within which the act specified by the advertiser is to be accomplished has been fixed in the advertisement, the advertisement may not be withdrawn before the expiration of such period. (2) In a case where of an unfixed period within which the act specified by the advertiser is to be performed, the advertiser may, until such time as a person has completely performed the specified act, withdraw the advertisement in the same manner in which it was originally effected. (3) If the advertisement cannot be withdrawn in the same manner as the advertisement was originally effected, the withdrawal may be made in any other similar manner: Provided, That such withdrawal shall be effective only as against persons who have become aware thereof.

### SECTION 11 Mandate

Article 680 (Definition of Mandate) A mandate shall become effective when one of the parties has entrusted the other party with the management of affairs and the other party has consented thereto. Article 681 (Mandatary’s Duty of Care and Due Diligence) A mandatary shall manage the affairs entrusted to him with the care of a good manager in accordance with the tenor of the mandate. Article 682 (Restriction on Right of Reappointment) (1) A mandatary may not allow any third person to manage the entrusted affairs without the consent of the mandator or any inevitable reasons. (2) If a mandatary has allowed a third person to manage the entrusted affairs in accordance with the provisions of paragraph (1), the provisions of Articles 121 and 123 shall apply mutatis mutandis. Article 683 (Mandatary’s Duty to Report) A mandatary shall upon demand by the mandator report on the status of the management of the entrusted affairs, and upon the termination of the mandate he shall make a full report on the entire developments with respect to the management of the entrusted affairs without delay. Article 684 (Mandatary’s Duty to Deliver and Transfer Things Acquired, etc.) (1) A mandatary shall deliver to the mandator all the money and any other things which he has received and the fruits which he has collected therefrom in the course of management of the entrusted affairs. (2) All rights which the mandatary has acquired in his own name on behalf of the mandator shall be transferred to the mandator. Article 685 (Mandatary’s Liability for Pecuniary Consumption of Money) If a mandatary has spent for his own benefit any money which he ought to deliver to the mandator or which is to be used for the mandator’s benefit, he shall pay interest thereon as from the day on which he spent such money, and if there are any further damages, he shall also be liable therefor. Article 686 (Mandatary’s Right to Demand Remuneration) (1) In the absence of a special agreement, a mandatary may not demand remuneration from the mandator. (2) Where it was agreed that a mandatary is to receive remuneration, he may not demand it until the entrusted affairs have been completely performed: Provided, That if the remuneration has been fixed by periods, he may demand it after the expiration of the period. (3) If a mandate terminates in the course of performance of the entrusted affairs by the mandatary due to any cause not attributable to the mandatary, he is entitled to remuneration in proportion to the affairs already managed by him. Article 687 (Mandatary’s Right to Demand in Advance Payment of Expenses) If any expense is required for the management of the entrusted affairs, the mandator shall, upon demand by the mandatary, pay them in advance. Article 688 (Mandatary’s Right to Demand Reimbursement of Expenses, etc.) (1) If a mandatary has defrayed any expenses necessary for the management of the entrusted affairs, he may demand from the mandator the reimbursement of such expenses with interest thereon from the day on which they were defrayed. (2) If a mandatary has assumed an obligation necessary for the management of the entrusted affairs, he may request the mandator to perform it in his place and, if the obligation is not due, to furnish adequate security. (3) If a mandatary, without any negligence on his part, sustains damages through the management of the entrusted affairs, he may demand compensation therefor from the mandator. Article 689 (Right to Terminate Mandate by either Party at Will) (1) Either party may at any time rescind a contract of a mandate for the future. (2) If one of the parties rescinds a mandate for the future without any inevitable reasons when it would be unfavourable to the other party, he shall compensate the other party for any damages occasioned by such rescission. Article 690 (Death, Bankruptcy, etc. and Termination of Mandate) A mandate shall terminate upon the death or bankruptcy of either party. The same shall apply where the mandatory is adjudged incompetent. Article 691 (Measures for Urgency at Time of Termination of Mandate) If, on the termination of a mandate, the circumstances are of an urgent nature requiring the continuous management, the mandatory, his successor or his agent by law shall continue to manage the entrusted affairs until the mandator, his successor, or his agent by law becomes in a position to take over the management of the affairs. In this case, the continuous management after the termination of a mandate shall be deemed to have the same effect as the original mandate. Article 692 (Requirement of Setting up of Termination of Mandate) No termination of a mandate can, whether the ground therefor exists on the part of the mandator or of the mandatory, be set up against the other party, unless the other party is given notice thereof or he is otherwise aware thereof.

### SECTION 12 Bailment

Article 693 (Definition of Bailment) Bailment shall become effective when one of the parties has committed to the other party the custody of money, securities or any other things, and the other party has consented thereto. Article 694 (Prohibition on Use of Bailed Articles by Bailee) A bailee may not use the bailed Articles without the consent of the bailor. Article 695 (Gratuitous Bailee’s Duty of Care) A gratuitous bailee shall give the same degree of care in the custody of the bailed Articles as he gives with respect to his own property. Article 696 (Bailee’s Duty to Give Notice) If a third person alleging a claim right over the bailed Articles has commenced an action against the bailee or levied an attachment thereon, the bailee shall notify the bailor thereof without delay. Article 697 (Bailor’s Liability to Redress Damages Arisen from Nature of or any Defect in Bailed Articles) A bailor shall indemnify the bailee for damages suffered by the bailee, as a result of the nature of, or any defect in, the bailed Articles: Provided, That this shall not be the case if the bailee was aware of such defects. Article 698 (Rescission of Contract of Bailment for Future on which Period has been Fixed) If a period was fixed for a bailment, a bailee may not, in the absence of any inevitable reason, rescind a contract of a bailment for the future before the expiration of the stipulated period of time: Provided, That the bailor may rescind the contract at any time. Article 699 (Rescission of Contract of Bailment for future on which No Period has been Fixed) If no period was fixed for a bailment, either party may rescind a contract of a bailment at any time. Article 700 (Place of Returning Bailed Articles) The bailed Articles shall be returned at the place where they have been kept: Provided, That if the bailee has for any justifiable cause removed it to another place, he may return it at the place where the Articles actually exist. Article 701 (Provisions to be Applied Mutatis Mutandis) The provisions of Articles 682, 684 through 687 and 688 (1) and (2) shall apply mutatis mutandis to a bailment. Article 702 (Bailment subject to Consumption) Where the bailee is allowed by the contract to consume the bailed Articles, the provisions relating to loans for consumption shall apply mutatis mutandis: Provided, That if no time for its return has been fixed by the contract, the bailor may at any time demand its return.

### SECTION 13 Partnership

Article 703 (Definition of Partnership) (1) A partnership shall become effective when two or more persons have agreed to carry on a joint undertaking by making mutual contribution thereto. (2) The contribution mentioned in paragraph (1) may be made in cash or in kind such as other property or labor service. Article 704 (Partnership-ownership of Partnership Property) The contribution made by each partner and the other property of the partnership shall belong to all the partners jointly. Article 705 (Liability for any Pecuniary Contribution in Arrears) If, where the contribution is to be made in cash, a partner delayed in making his contribution, he shall, besides paying any interest in arrears, compensate for all damages resulting therefrom. Article 706 (Method of Managing Partnership Affairs) (1) If a manager of the partnerships affairs has not been designated by the partnership contract, such a manager shall be elected with an affirmative vote of not less than two-thirds of all the partners. (2) The management of the partnership affairs shall be decided by a majority of the partners. If several managers are appointed to take charge of the affairs of the partnership, the management of the affairs shall be decided by a majority of such managers. (3) The ordinary affairs of the partnership may, notwithstanding the provisions of paragraph (2), be managed solely by any partner or any manager, as the case may be, acting alone: Provided, That if other partners or other managers, as the case may be, raises an objection to such acts before the completion thereof, he shall immediately suspend these acts. Article 707 (Provisions to be Applied Mutatis Mutandis) The provisions of Articles 681 through 688 shall apply mutatis mutandis to partners who manage the affairs of the partnership. Article 708 (Resignation and Removal of Manager of Partnership Affairs) A partner who manages the partnership affairs may not be allowed to resign without justifiable reasons and shall not be removed from the office except with the unanimous consent of the other partners. Article 709 (Presumption of Representative Power of Managers) The partners who manage the partnership affairs shall be presumed to have a representative power of the management of the partnership affairs. Article 710 (Partner’s Right to Inspect Affairs and Status of Property of Partnership) Each partner may at any time inspect the affairs and status of the property of the partnership. Article 711 (Ratio of Sharing of Profit and Loss) (1) In the absence of an agreement between the partners as to the ratio of the sharing of profits and losses, it shall be decided in proportion to the value of the contribution of each partner. (2) If the ratio has been fixed as to the sharing of either profits or losses, such ratio shall be presumed to apply both to profits and losses. Article 712 (Creditor’s Exercise of Right against Partners) A creditor of the partnership who was not aware of the ratio of the sharing of losses among the partners at the time when his claim came into existence, may exercise his right against each partner in equal shares. Article 713 (Debt of Insolvent Partner and Other Partner’s Liabilities) If any partner does not have sufficient means to discharge his obligations, his portion shall be equally divided among other partners. Article 714 (Effect of Attachment of Shares) Attachment of a partner’s share shall be effective against the partner’s right to future dividends and return of share. Article 715 (Prohibition of Set-off by Debtor of Partnership) A debtor of the partnership cannot set-off his obligation against a claim which he has against a partner. Article 716 (Voluntary Retirement) (1) If a partnership contract provides for no fixed period of the duration of the partnership, or if it has been specified therein that the partnership shall continue its existence during the life time of the partners, each partner may retire at any time: Provided, That he may not, in the absence of any inevitable reason, retire at a time which would be unfavorable to the partnership. (2) Even when a period has been fixed for the duration of the partnership, each partner may retire, if any inevitable reason exists therefor. Article 717 (Non-Voluntary Retirement) In addition to the cases mentioned in Article 716, a partner shall cease to be such for any of the following causes:
Article 718 (Expulsion) (1) Expulsion of a partner may be made only with just cause and by the unanimous consent of all other partners. (2) The decision of expulsion mentioned in paragraph (1) can not be set up against the expelled partner until he is notified of such a decision. Article 719 (Settlement of Account of an Ex-Partner’s Share) (1) The accounts between an ex-partner and remaining partners shall be settled based on the status of the property of the partnership at the time when the former ceased to be a partner. (2) The share of an ex-partner may be paid out in cash irrespective of the nature of his original contribution. (3) In a case where of a matter having not been completed at the time when a partner ceases to be such, the account may be settled after such matters have been completed. Article 720 (Demand to Dissolve Partnership due to Inevitable Reasons) Any partner may demand dissolution of the partnership if any inevitable reasons therefor exists. Article 721 (Liquidator) (1) If a partnership is dissolved, the liquidation shall be conducted jointly by all the partners or by a person appointed by them. (2) The appointment of a liquidator mentioned in paragraph (1) shall be decided by a majority of all the partners. Article 722 (Liquidator’s Way of Conducting Partnership Affairs) The provisions of the latter part of Article 706 (2) shall apply mutatis mutandis where there are two or more liquidators. Article 723 (Resignation and Removal of Liquidator who is Partner) The provisions of Article 708 shall apply mutatis mutandis where the liquidator is appointed from among the partners. Article 724 (Liquidator’s Duties, Powers, and Distribution of Surplus Assets) (1) The provisions of Article 87 shall apply mutatis mutandis to the duties and powers of the liquidator. (2) The surplus assets shall be distributed among the partners in proportion to the value of their contributions.

### SECTION 14 Life Annuity

Article 725 (Definition of Contract of Life Annuity) A contract of life annuity shall become effective when one of the parties has agreed to deliver money, or other things, periodically to the other party or to a third person, until the end of his life or that of the other party or the third person. Article 726 (Computation of Life Annuity) A life annuity shall be computed by the day. Article 727 (Rescission of Contract of Life Annuity) (1) If an obligor on a life annuity neglects to pay the periodical payments or fails to perform any of his other duties after he has received the principal of the annuity, the obligee on a life annuity may demand the return of such principal: Provided, That in such case, the obligee shall return to the obligor the balance, after interest on the principal sum has been deducted from the periodical payments already received by him. (2) The provisions of paragraph (1) shall not preclude any claim for damages. Article 728 (Rescission and Concurrent Performance) The provisions of Article 536 shall apply mutatis mutandis to the cases mentioned in Article 727. Article 729 (Death Occurred by any Reason Attributable to Obligor and Declaration of Continuance of an Obligation) (1) If death occurs by any reason for which the obligor on a life annuity is responsible, the court may, upon the application of the obligee or his successor, declare that the obligation shall continue to exist for a reasonable period. (2) The right mentioned in Article 727 may also be exercised even in the cases of paragraph (1). Article 730 (Life Annuity due to Testamentary Gift) The provisions of this Section shall apply mutatis mutandis to a life annuity effected by a testamentary gift.

### SECTION 15 Compromise

Article 731 (Definition of Compromise) A compromise shall become effective when the parties have agreed to terminate a dispute between them by mutual concessions. Article 732 (Creative Effect of Compromise) A contract of a compromise shall have the effect that the rights conceded by one of the parties is thereby extinguished and the other party will, in turn, acquire the pertinent rights by virtue of the compromise. Article 733 (Effect of Compromise and Mistake) A contract of a compromise may not be canceled on the ground of a mistake: Provided, That this shall not be the case where such a mistake is concerned with the matters relating to the qualification of either party of a compromise or any matters other than those which are pertinent to the dispute subject to the compromise.

## CHAPTER Ⅲ MANAGEMENT OF AFFAIRS

Article 734 (Definition of Management of Affairs) (1) A person who manages affairs on behalf of another without being bound to do so shall conduct that management in the manner most advantageous to the principal according to the nature of such affairs. (2) If a manager knows or should have known the intention of the principal, he shall conduct the management in conformity with the intention of the principal. (3) If a manager has managed the affairs in violation of paragraphs (1) and (2), he shall be liable for the damages caused thereby even if he was not guilty of negligence: Provided, That if his act of management conforms to the public interest, he shall not be liable for damages unless he was grossly negligent. Article 735 (Management of Affairs in Urgency) If a manager has managed the affairs in order to protect the principal against an imminent danger to the latter’s life, person, reputation or property, he shall not be liable for any damages caused thereby, unless he acted wilfully or with gross negligence. Article 736 (Manager’s Duty to Give Notice) A manager shall give notice to the principal without delay when he has commenced to manage his affairs: Provided, That this shall not be the case where the principal is already aware thereof. Article 737 (Manager’s Duty to Continue Management) A manager shall continue the management until the principal, his successor or his agent by law is in a position to manage the affairs: Provided, That this shall not be the case, if it is evident that such a continuance would be against the intention of the principal or would be prejudicial to the principal’s interests. Article 738 (Provisions to be Applied Mutatis Mutandis) The provisions of Articles 683 through 685 shall apply mutatis mutandis to management of affairs. Article 739 (Manager’s Right to Demand Reimbursement of Expenses) (1) If a manager has defrayed any necessary or useful expenses on behalf of the principal, he may demand reimbursement thereof from the principal. (2) When a manager has assumed on behalf of the principal an obligation which is necessary or beneficial to the latter, the provisions of Article 688 (2) shall apply mutatis mutandis. (3) If a manager manages the affairs against the principal’s intention, the provisions of paragraphs (1) and (2) shall apply mutatis mutandis only to the extent of the principal’s present enrichment. Article 740 (Manager’s Right to Claim for Indemnification Suffered without Negligence) When a manager has suffered loss caused not by his own negligence in the course of the management of affairs, he shall be entitled to claim for indemnification to the extent that the principal is being enriched thereby.

## CHAPTER Ⅳ UNJUST ENRICHMENT

Article 741 (Definition of Unjust Enrichment) A person who without any legal ground derives a benefit from the property or services of another and thereby causes loss to the latter shall be bound to return such benefit. Article 742 (Discharge without Obligation) If a person has discharged an obligation with the knowledge that no such obligation has ever existed, he may not demand the return of the subject matter. Article 743 (Discharge prior to Due Date) If an obligor has discharged an obligation which is not due, he may not demand the return of the subject matter: Provided, That if the obligor discharges such obligation by mistake, the obligee shall return the benefit which he received therefrom. Article 744 (Discharge without Olbigation which Conforms to Moral Sense) In the event that a person, not liable to an obligation, has discharged such an obligation by mistake and such discharge conforms to a sense of morality, he may not demand the return of the subject matter. Article 745 (Discharge of Another Person’s Obligation) (1) If, in the event that a person other than the obligor has discharged an obligation by mistake, the obligee has in good faith destroyed evidentiary documents, relinquished any security, or lost his claim rights by prescription, the person who has effected the performance may not demand the return of his payments. (2) In the case of paragraph (1), the person who has effected the performance may avail himself of the right to obtain reimbursement from the obligor. Article 746 (Performance for Illegal Cause) If a person granted property or rendered service for an illegal cause, he may not demand the return of benefits resulting therefrom: Provided, That this shall not be the case if such illegal cause exists only on the part of the person enriched. Article 747 (Cases where Original Object is not Returnable, Liability for Return of Value, and Liability of Subsequent Purchaser) (1) If the person enriched is unable to return the object itself which he has received, he shall return the value of the object. (2) When the person enriched is unable to return the benefit, a third party acting in bad faith, who has obtained the object or the benefits gratuitously from the person enriched, shall be liable to return such objects in accordance with the provisions of paragraph (1). Article 748 (Amount of Benefits to be Returned by Person Enriched) (1) The person enriched in good faith shall be liable to act as set forth in Article 747 to the amount that he still possesses of such benefits. (2) A person enriched in bad faith shall return the benefits received by him together with interest, and if there has been any damage, he shall be bound also to make compensation. Article 749 (Recognition of Bad Faith of Person Enriched) (1) If the person enriched becomes aware of the fact that no legal ground had ever existed after he had received such benefit, he shall be liable to return the benefit as a person enriched in bad faith, from the time of his awareness of the above fact. (2) The person enriched in good faith shall, if defeated in a lawsuit, be deemed to be a person enriched in bad faith from the time such action was filed.

## CHAPTER Ⅴ TORTS

Article 750 (Definition of Torts) Any person who causes losses to or inflicts injuries on another person by an unlawful act, wilfully or negligently, shall be bound to make compensation for damages arising therefrom. Article 751 (Compensation for Non-Economic Damages) (1) A person who has injured the person, liberty or fame of another or has inflicted any mental anguish to another person shall be liable to make compensation for damages arising therefrom. (2) The court may order the guilty party to discharge the compensation mentioned in paragraph (1) by periodical payments, and may order such guilty parties to offer reasonable security in order to insure his performance of such obligations. Article 752 (Consolation Money in a case where of Violation of Life) A person who has caused the death of another person shall be liable for damages to the lineal ascendants, lineal descendants and the spouse, even where no economic damages exist as a result thereof. Article 753 (Minor’s Competency) In the event that a minor has caused damage to another, if he was not in possession of sufficient intelligence to understand his responsibility for the act, he shall not be liable for damages resulting therefrom. Article 754 (Competency of Person of Mental Unsoundness) A person who, while in a state of mental unsoundness, has caused damage to another, shall not be liable for damages resulting therefrom: Provided, That this shall not be the case, if he has brought upon himself his state of mental unsoundness either wilfully or negligently. Article 755 (Liability of Supervisor over Incompetent Person) (1) In the event that an incompetent person exempts from liabilities in accordance with the provisions of Articles 753 and 754, the person who is under a legal duty to supervise such incompetent persons shall be bound to make compensation for damages which the incompetent person has caused to a third person: Provided, That this shall not be the case, if the person so supervising has exercised reasonable care. (2) A person who supervises an incompetent person as a substitute for a person whose duty is to supervise shall also assume the same liability as set forth in paragraph (1). Article 756 (Employer’s Liability for Damages) (1) A person who employs another to carry out an undertaking shall be bound to make compensation for damages done to a third person by the employee in the course of the execution of the undertaking: Provided, That this shall not be the case, if the employer has exercised due care in the appointment of the employee, and the supervision of the undertaking, or if the damage would have resulted even if due care had been exercised. (2) A person who supervises the undertaking in place of the employer shall also assume the same liability as set forth in paragraph (1). (3) In cases of paragraphs (1) and (2), the employer or the supervisor may exercise the right to obtain reimbursement from the employee. Article 757 (Liability of Person who Ordered Work to be Done) The person who placed an order for a work to be done shall not be bound to make compensation for any damages caused to a third person by the contractor with respect to such work: Provided, That this shall not be the case, if the former was guilty of gross negligence in placing the order, or in providing instructions therefor. Article 758 (Liability of Possessor, Owner of Structure, etc.) (1) If any damages has been caused to another person by reason of any defect in the construction or maintenance of a structure, the person in possession of the structure shall be liable for such damages: Provided, That if the person in possession has exercised due care in order to prevent the occurrence of such damages, compensation for the damage shall be made by the owner. (2) The provisions of paragraph (1) shall apply mutatis mutandis where there exists any defect in the planting or maintenance of trees. (3) In cases of paragraphs (1) and (2), the possessor or the owner may exercise the right to obtain reimbursement from the person to whom the damages are attributable. Article 759 (Liability of Possessor of Animals) (1)The possessor of an animal shall be liable for any damages caused to another person by the animal: Provided, That this shall not be the case, if the possessor has not neglected nor failed to give proper care according to the species and nature of the animal. (2)A person who has a custody of an animal in place of the possessor shall assume the responsibility mentioned in paragraph (1). Article 760 (Liability of Joint Tort-feasors) (1)If two or more persons have by their joint unlawful acts caused damages to another, they shall be jointly and severally liable to make compensation for such damages. (2)The provisions of paragraph (1) shall also apply if it is impossible to ascertain which of the participants, albeit not joint, has caused the damages. (3)Instigators and accessories shall be deemed to act jointly. Article 761 (Self-Defense and Act of Necessity) (1)A person who, in order to protect his own interest or that of a third person against an unlawful act of another, unavoidably causes damages to another person shall not be liable for such damages: Provided, That the injured party may claim for damages in respect of the unlawful act. (2)The provisions of paragraph (1) shall apply mutatis mutandis where a person unavoidably caused damages to another person in order to avert an imminent danger.

##### Article 762 (Status of Unborn Child in respect of Claims for Damage)

An embryo or fetus shall, in respect of the claim for damages, be deemed to have been already born. Article 763 (Applicable Provisions to be Applied Mutatis Mutandis) The provisions of Articles 393, 394, 396 and 399 shall apply mutatis mutandis to torts claims. Article 764 (Special Rules which Govern in case of Defamation) The court may, on the application of the injured party, order the person who has impaired another’s fame to take suitable measures to restore the injured party’s fame, either in lieu of, or together with damages. ≪Inclusion of the publication of apology in newspapers, etc. in the “suit- able measures to restore the injured party’s fame” in this Article is in violation of the Constitution according to the decision of limited un- constitutionality by the Constitutional Court which was made on Apr. 1, 1991≫ Article 765 (Application for Reduction in Compensation Amount) (1)The person liable to make compensation in accordance with the provisions of this Chapter may petition the court for a reduction in the amount of compensation, if the damages were caused neither inten- tionally nor by gross negligence, and such payments of compensation shall be a severe hardship to his livelihood. (2)The court may, if the petition mentioned in paragraph (1) has been filed, reduce the amount of compensation after a study of the claimant’s and obligor’s respective financial situations and the cause giving rise to the damages. Article 766 (Prescription in respect of Right to Claim for Damages) (1)The right to claim for damages resulting from an unlawful act shall lapse by prescription if not exercised within three years commencing from the date on which the injured party or his agent by law becomes aware of such damage and of the identity of the person who caused it. (2)The provisions of paragraph (1) shall also apply if ten years have elapsed from the time when the unlawful act was committed.