Lecture on Contract Law
KAGAYAMA Shigeru
Professor emeritus of Nagoya University(from 2008)
Professor emeritus of Meijigakuin University（from 2017）
http://cyberlawschool.jp/kagayama/
Lecture on Contract

1

Self-introduction
 I am a emeritus professor of Meijigakuin University in Tokyo.
 12 years ago, however, I was a professor of Nagoya
University.
 During these periods I was going to Asian countries, State ofMongolia, Vietnam, Cambodia, Laos, Uzbekistan and China tocooperate development of civil law.
 Fortunately, these activities were evaluated from this university,
I became to an emeritus professor of Nagoya University in2008.

 So, I am both a professor of Meijigakuin University and an
emeritus professor of Nagoya University because emeritus
professor is life long post.

Lecture on Contract2

I. Planning of the lecture
KAGAYAMA Shigeru
Professor of Meijigakuin University

1. Aim: to master the legal way of thinking→IRAC(Issue, Rule, Argument, Conclusion)
2. Methods: mutual communication
3. Contents: contract law and cases
4. Evaluation: exercise and presentation(no written examination)
Lecture on Contract3

Schedule of lecture
Evaluation by presentation
1st day

2nd day

3rd day

4th day

1st period

Introduction

Formation ofcontract

Validity of contract

1st Presentation

2nd period

History of Civil
Code of Japan

Formation ofcontract

Validity of contract

2nd Presentation

lunch
3rd period

Best 30 articles Content ofof Civil Code of contract
Japan

Performance &Non-performanceof contract

3rd Presentation

4th period

Formation ofcontract

Non-performanceof contract

Close(Coffee
and Cakes)

Preparation

Validity ofcontract

Unjust enrchment
Lecture on Contract4

1. Aim & way of studying law
 The aim of law is to resolve disputes
peacefully.
 The final goal of studying law is to masterthe way: how to read precedents which apply law tofacts and improve law adjusting to facts.
 how to to select the important facts amongthem.
 how to create a persuasive proposal ofresolution for dispute, based on law andprecedent.
Lecture on Contract

5

IRAC:Legal way of thinking-Royal road to learningI: Issue
R: Rules, Reference
A: Application (to apply a rule to the issue)
Application1 → a tentative conclusion
Application2 → opposite tentative conclusion
Argument (to argue pros and cons oftentative conclusions)
C: Conclusion
Lecture on Contract6

Top-down and Bottom-up wayof thinking
Rule 2Rule 1

facts finding

fact 1

rule finding

fact 2

Lecture on Contract

another rule &facts finding

fact 3

7

IRAC as the legal way of thinking
Analyze, argue and draw your Conclusion
Analysis

Issue

Finding data & facts

Rules

Finding Rules

Application

Application of Rules,
Tentative conclusions

Argument

Argument against / fortentative conclusions

A
Argument

Conclusion
Lecture on Contract

Finding final conclusion

82. Method of lecture and studyMutual communication is the best way
to master law.
Vertical communication

 Giving lecture and understanding Asking question and answering mutually

Horizontal communication

 Asking questions and answering mutually Solving assignments by discussing each other
Lecture on Contract

9Vertical & horizontal
communicationlecturer

lectureask & propose

student
consult each otherstudent

discuss

Lecture on Contract

student

10

3. Contents of the lecture Introduction
What is civil law?
History of the Civil Code of Japan
Comparison with Civil Code of Japan andthe Uniform Law (CISG, UNIDROIT Principles
and PECL) Principles of contract law
Formation and content of contract
Validity and performance of contractNon-performance of contract and remedies
Lecture on Contract11

4. Evaluation
Mutual evaluation is necessary tomaster the legal way of thinking.
Methods of Evaluation

 Exercise of cases
 Presentation in groups from the view
point of comparative study of laws

Exercise 1: sample and the mostdifficult exercise
Lecture on Contract12

st
1 Example of exercise
 Facts in Japan

 Today ‘A’ indicates to ‘B’ 31 August as the deadline
for acceptance of its offer.
 ‘B’ knows that the normal time for transmission ofletters by mail to ‘A’ is 2 days and sends its letter of
acceptance on 25 August.
 Owing to a strike of the postal service in ‘A’’s
country, the letter, which shows the date of its
mailing on the envelope, only arrives on 1
September.
 On 2 September ‘A’ informs ‘B’ that it considers theoffer as having lapsed.

 Question Contract is concluded or not?
Lecture on Contract13

II. What is Civil law?
KAGAYAMA Shigeru
Professor of Meijigakuin University

Comparison withpublic law,
special law,criminal law andprocedural law
Lecture on Contract

14

Public law and private law
State
PublicLaw
PeoplePublicLaw

PrivateLaw

People• Legal fabric is woven with warp and weft
• Public law controls relationship between
State and people (vertical relationship).
• Private law controls relationship between
people (horizontal relationship).
Lecture on Contract

15

General law and specific law
Commercial law(Specific law)

Civil law
(General law)

• In application, specific law(commercial law)takes precedence over general law(civil law).
• In structure, general law(civil law) fills up a
gap of specific law(commercial law).
• In lawmaking, legislator cuts a special law
short due to general law.
Lecture on Contract

16

Criminal law and Civil law• The same act may be both a crimeand a civil wrong.

• If you entrust your bag to a someone,
and he runs off with it, he commits thecrime of theft and also two civil wrongs– the tort of conversion and a breach ofcontract with you to keep the bag safe.

• Criminal law punishes a criminal andcivil law takes a remedy to a victim.
Lecture on Contract17

Difference between
Criminal law and Civil law
Criminal law（Legality principle）
Type of
Crime:
Assault
The
other
type

Not
guiltyType of
Crime:
Battery

Punishment

General principle

Civil law (Remedy)
Type oftorts:
Assault
The
other
type

RemedyType oftorts:
Battery

General principle

Typology
Lecture on Contract18

Substantive and procedural law
syllogism

Major premise: The human is motal.
Commercial
law Socrates is a human.
Minor premise:(Specific law)
Conclusion: Socrates is motal.

• Legal syllogism• (1) Rule,• (2) Subsumption of facts under a rule• (3) Conclusion (judgment)• Rule is substantive law, subsumption andconclusion takes place according toprocedural law.
Lecture on Contract

19

From Syllogistic to
Toulmin Diagram• Syllogism• Major premise: All men are motal.
• Miner premise: Socrates is a man.
• Conclusion: Socrates is mortal.
• Toulmin Diagram
Socrates is a man.

probably
not

Socrates is mortal.

Socrates is aman of god ofphilosophy.

All menare mortal.
All living things
are mortal.
Lecture on Contract20

Conclusion• Civil law is the general andsubstantive law of private laws.

Civil law

Public/privateGeneral/specialSubstantive/
procedural

privategeneralsubstantive

Lecture on Contract21

Exercise 2• Fill in the blanks.
Public/privateGeneral/specialSubstantive/
procedural

privategeneralsubstantive

Constitution
Civil law
Commercial law
Civil procedure law
Criminal law
Criminal procedure law
Labor law
Lecture on Contract22

Exercise 3• International public law is a public law?
The World
government

Treaties
customs

State
PublicLaw
PeoplePublicLaw

PrivateLaw

State
PublicLaw

PeoplePeopleLecture on Contract

PublicLaw

PrivateLaw

People23

III. History of the Civil Codeof Japan
KAGAYAMA Shigeru
Professor of Meijigakuin University

Enactment as a result ofcomparative study of law

Lecture on Contract241. Outline of the historicalbackground of Civil CodeFirst Draft ofGerman Civil
Code

1860

Japan-U.S.
Commercial
TreatyMaiji
Restration

Contitution of
the Empire of
Japan

1870

1880

1890

Boissonade
comes to Japan
Boissonade
Civil Code

Second Draft
of German
Civil CoderevisedLecture on Contract

New Civil CodeI, II, III

1900

abolition of
extraterritoriality

New Civil Code
IV, V

25

2. History of Enactment of Civil Code of Japan
Year
1858
1868
1870-1

Japanese

Oversees

EventsJapan-U.S. Commercial treaty
Meiji Restoration
German-French War

1873
1887

Boissonade came to Japan

1889
1890
1896

Constitution of the Empire of Japan
Boissonade Civil Code2nd Draft of German Civ. Code
New Civil Code I,II,III

1898
1899

New Civil Code IV, V
Abolition of extraterritoriality

1st Draft of German Civ. Code

Lecture on Contract26

3. Enactment of Civil Code to revise
unequal treaties
 Signing of unequal JapanU.S. Commercial
Treaty(1858) and Meiji
Restoration

 “Translate the French Civil
Code with all possible speed,
never minding mistakes!” Boissonade came to Japanat invitation of the Meiji
Government(1873)
Lecture on Contract27

4. Boissonade Civil Code(Old Civil Code of Japan)
 Promulgation of Boissonade Civil Code (1890)
 Controversy over Code leads to Postponement of
Old Civil Code (1892)
 French school of jurists
 The idea of natural law expressed by Boissonade English school of jurists

 The positive law(customs and case law) is more
important.
 Some Japanese nationalistic scholars joined this
opposition.

 “Boissonade civil code will destroy the tradition andbeautiful morals of Japan.”
Lecture on Contract28

5. Enactment of New Code ofJapan (1896, 1898)
Member ofdrafting
committee

Boisso-nade
Civil CodeHOZUMI

con

Englishbarristerpro

Doctor of
French civil
law

con

Doctor ofGerman civil
law

UME

TOMII

Specialty

Lecture on Contract29

6. Enactment as a result ofcomparative study of law
 Absorption of various provisions of other European
countries Doctrine of ultra vires -> Art. 43
 Hadley v. Baxendale(1854) -> Art. 416
 Great effect of the Draft of German Civil Code onrevision of Boissonade Civil Code
 German Pandekten system
 General principles and basic rules are singled out
and put at the beginning of the Code, each Book oreach Chapter.

 Civil Code of Japan as a revision of Boissonade
Civil Code
Lecture on Contract30

7. Comparison of theThree Civil Codes
Boissonade
Civil
Code

Institutional
SystemBook 1

PersonGermanCivil Code

Pandekten
SystemCivil Codeof Japan

Pandekten
SystemBook 1

GeneralProvisions

Book 1

GeneralProvisions

Book 2

Obligation

Book 2

Real Property

Book 2

Property

Book 3Acquisition of
Property

Book 3

Real
Property

Book 3Obligation

Book 4

Security of
Obligation

Book 4

FamilyBook 4

FamilyBook 5

EvidenceBook 5

Succession

Book 5

Succession

Lecture on Contract31

8. Best 20 of Civil Code of Japan
from the view point of frequency of application(1945-2013)95 601541
1% 1%
703 2%
2%

612
2%
177
2%
90
2%
719
4%

110 711 416 723
1% 1% 1% 1%

656
1%

770
1%

709
32%
1
5%
415
6%

715
8%

722
9%

710
18%

Lecture on Contract32

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

Articles1
2

General tort law

34Comparative Negligence

Compensation

Employers’ liability

5

Non Performance ofcontract

6
7

General Principles

8

Pubic policy

910

Joint tortfeasor

Transfer real estate
and registration
Restriction of sublease

No.

ArticlesNo.

Articles11 Unjust Enrichment
Termination
12

21 Liability of land
22 Prescription of tort

13
14

Mistake

23
24

Duty of Care of
Mandatary

15

Apparent Agency

25

Loan for use

27

Action Paulienne

Lease

Sale

16
17

Next kin’s right forcompensation

18

Defamation

28

Acquisitive
prescription

19
20

Quasi-Mandate

29
30

Free of contract

Scope of Damages

Judicial Divorce

Lecture on Contract

Division of Inherited
26
Property

Action oblique33

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

Articles

No.

11
12

Articles

No.

21
22

3
4

13
14

23
24

5

15

25

6
7

16
17

26
27

8

18

28

9
10

19
20

29
30

Lecture on Contract

Articles34

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2
3
4

ArticlesGeneral tort law

No.

11
12
13
14

Articles

No.

21
22
23
24

5

15

25

6
7

16
17

26
27

8

18

28

9
10

19
20

29
30

Lecture on Contract

Articles35

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2
3
4

ArticlesGeneral tort law
Compensation

No.

11
12
13
14

Articles

No.

21
22
23
24

5

15

25

6
7

16
17

26
27

8

18

28

9
10

19
20

29
30

Lecture on Contract

Articles36

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

11
12

Articles

No.

21
22

3 Comparative Negligence
4

13
14

23
24

5

15

25

6
7

16
17

26
27

8

18

28

9
10

19
20

29
30

Lecture on Contract

Articles37

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

11
12

Articles

No.

21
22

3 Comparative Negligence
4 Employers’ liability

13
14

23
24

5

15

25

6
7

16
17

26
27

8

18

28

9
10

19
20

29
30

Lecture on Contract

Articles38

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

11
12

Articles

No.

21
22

3 Comparative Negligence
4 Employers’ liability

13
14

23
24

5

15

25

6
7

16
17

26
27

8

18

28

9
10

19
20

29
30

Non Performance ofcontract

Lecture on Contract

Articles39

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

11
12

Articles

No.

21
22

3 Comparative Negligence
4 Employers’ liability

23
24

5

Non Performance ofcontract

13
14
15

25

6
7

General Principles

16
17

26
27

8

18

28

9
10

19
20

29
30

Lecture on Contract

Articles40

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

11
12

Articles

No.

21
22

3 Comparative Negligence
4 Employers’ liability

23
24

5

Non Performance ofcontract

13
14
15

25

6
7
8

General Principles

16
17
18

26
27
28

19
20

29
30

9
10

Joint tortfeasor

Lecture on Contract

Articles41

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

11
12

Articles

No.

21
22

3 Comparative Negligence
4 Employers’ liability

23
24

5

Non Performance ofcontract

13
14
15

25

6
7

General Principles

16
17

26
27

8

Pubic policy

18

28

19
20

29
30

9
10

Joint tortfeasor

Lecture on Contract

Articles42

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

11
12

Articles

No.

21
22

3 Comparative Negligence
4 Employers’ liability

23
24

5

Non Performance ofcontract

13
14
15

25

6
7

General Principles

16
17

26
27

8

Pubic policy

18

28

19
20

29
30

9
10

Joint tortfeasor

Transfer real estate
and registration

Lecture on Contract

Articles43

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

11
12

Articles

No.

21
22

3 Comparative Negligence
4 Employers’ liability

23
24

5

Non Performance ofcontract

13
14
15

25

6
7

General Principles

16
17

26
27

8

Pubic policy

18

28

19
20

29
30

9
10

Joint tortfeasor

Transfer real estate
and registration
Restriction of sublease

Lecture on Contract

Articles44

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

1
2

ArticlesGeneral tort law
Compensation

No.

Articles

No.

23
24

11 Unjust Enrichment
Termination
12

3 Comparative Negligence
4 Employers’ liability

Mistake5

Non Performance ofcontract

13
14
15

Apparent Agency

6
7

General Principles

8

Pubic policy

910

Joint tortfeasor

Transfer real estate
and registration
Restriction of sublease

Lease

21
22

25

16
17

26
27

18

28

19
20

29
30

Lecture on Contract

Articles45

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
ArticlesNo.

11 Unjust Enrichment
Termination
12

21
22

3 Comparative Negligence
4 Employers’ liability

Mistake23
24

5

Non Performance ofcontract

13
14
15

Apparent Agency

6
7
8

General Principles

No.

1
2

9
10

ArticlesGeneral tort law
Compensation

Joint tortfeasor
Pubic policy
Transfer real estate
and registration
Restriction of sublease

No.

Lease

16
17
18

Next kin’s right forcompensation

19
20

Quasi-Mandate

Scope of Damages
Defamation

Judicial Divorce

Lecture on Contract

Articles

25
26
27
28
29
30
46

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

Articles1
2

General tort law

34Comparative Negligence

Compensation

Employers’ liability

5

Non Performance ofcontract

6
7

General Principles

8

Pubic policy

910

Joint tortfeasor

Transfer real estate
and registration
Restriction of sublease

No.

ArticlesNo.

Articles11 Unjust Enrichment
Termination
12

21 Liability of land
22 Prescription of tort

13
14

Mistake

23
24

Duty of Care of
Mandatary

15

Apparent Agency

25

Loan for use

Lease

16
17

Next kin’s right forcompensation

18

Defamation

28

19
20

Quasi-Mandate

29
30

Scope of Damages

Judicial Divorce

Lecture on Contract

Sale

26
27

47

9. Best 30 Articles of Civil Code of Japan
from the view point of frequency of application(1945-2013)
No.

Articles1
2

General tort law

34Comparative Negligence

Compensation

Employers’ liability

5

Non Performance ofcontract

6
7

General Principles

8

Pubic policy

910

Joint tortfeasor

Transfer real estate
and registration
Restriction of sublease

No.

ArticlesNo.

Articles11 Unjust Enrichment
Termination
12

21 Liability of land
22 Prescription of tort

13
14

Mistake

23
24

Duty of Care of
Mandatary

15

Apparent Agency

25

Loan for use

27

Action Paulienne

Lease

Sale

16
17

Next kin’s right forcompensation

18

Defamation

28

Acquisitive
prescription

19
20

Quasi-Mandate

29
30

Free of contract

Scope of Damages

Judicial Divorce

Lecture on Contract

Division of Inherited
26
Property

Action oblique48

IV. Comparison of the Civil Codeof Japan and the Uniform
Contract Laws
CISG: United Nations Convention on
Contracts for International Sales of
Goods
KAGAYAMA Shigeru
Professor of Nagoya University
Lecture on Contract49

CISG and Civil Code of Japan

Enactment of the Japanese Civil Code was a
result of comparative study of law.
The provisions of the Japanese Civil Codehave more in common with CISG than with
the German Civil Code.
Clear definitions and an independent systemof remedies are important characteristics of
CISG which do not exist in the Japanese Civil
Code. I think it is important to study Uniform
Law in order to reform the Japanese Civil
Code.
Lecture on Contract50

Art. 49 CISG
 (1) The buyer may declare the contract
avoided: (a) if the failure by the seller to perform any of his
obligations under the contract or this Convention
amounts to a fundamental breach of contract; or ←Common Law

 (b) in case of non-delivery, if the seller does notdeliver the goods within the additional period oftime fixed by the buyer in accordance withparagraph (1) of article 47 or declares that he will
not deliver within the period so fixed.
 ← Continental Law(German Civil Code)

Lecture on Contract51

Art. 541-543 J.C.C(Rescission due to non-performance) ←additional period of time:
German Law
 Article 541. If one of the parties does not perform his obligation, theother party may fix a reasonable period and demand its
performance, and may rescind the contract, if no performance iseffected within such period.
(Rescission of time-bargain) ←fundamental breach of contract:common law
 Article 542. If, according to the nature of the contract or by adeclaration of intention by the parties, the object for which thecontract was made cannot be attained unless it is performed at a
fixed time or within a fixed period, one of the parties has allowed thetime to elapse without performance on his parties the other party
may, without making a demand mentioned in the preceding Article,
forthwith rescind the contract.
(Rescission due to impossibility) Article 543. If performance has become impossible in whole or inpart by any cause for which the obligor is responsible, the obligee
may rescind the contract.
Lecture on Contract52

Art. 566, 570(Sale of object subject to usufruct)← fundamental breach of contract
 Article 566. Where the object of a sale issubject to a superficies, emphyteusis, servitude,
right of retention or pledge and the buyer was
unaware thereof, he may rescind the contract
only if the object of the contract cannot be
attained thereby; in other cases the buyer may
demand only compensation for damages.
(Warranty against defects)
 Article 570. If any latent defects exist in theobject of a sale, the provisions of Article 566 shallapply mutatis mutandis. except in the case of acompulsory sale by official auction.
Lecture on Contract53

World trend to
the Uniform contract law
 1. CISG: United Nations Convention on
Contracts for the International Sale ofGoods [1980]
 2. UNIDROIT Principles: UNIDROIT
Principles of International Commercial
Contracts [1994]
 3. PECLE: THE PRINCIPLES OF EUROPEAN
CONTRACT LAW [1994]
towards EUROPEAN CIVIL CODE
Lecture on Contract54

1. CISG
 The first successful convention of private
law unified the principles of common-law
and those of the continental law

 This Convention establishes a comprehensive
code of legal rules governing the formation ofcontracts for the international sale of goods,
the obligations of the buyer and seller,
remedies for breach of contract and otheraspects of the contract in 1980.
 The Convention entered into force on 1
January 1988. Participants(member states) are
now 57 countries.
Lecture on Contract55

http://www.uncitral.org/enindex.htm (1/3)

Lecture on Contract56http://www.uncitral.org/enindex.htm (2/3)

Lecture on Contract57http://www.uncitral.org/enindex.htm (3/3)

Lecture on Contract58

2. UNIDROIT Principles
 The UNIDROIT Principles set forth general rules
for international commercial contracts in 1994.

 They shall be applied when the parties have agreed
that their contract be governed by them.
 They may be applied when the parties have agreed
that their contract be governed by "general principlesof law", the "lex mercatoria" or the like.
 They may provide a solution to an issue raised when it
proves impossible to establish the relevant rule of theapplicable law.
 They may serve as a model for national andinternational legislators.

Lecture on Contract59http://www.unidroit.org/english/ (1/3)

Lecture on Contract60http://www.unidroit.org/english/ (2/3)

Lecture on Contract61http://www.unidroit.org/english/ (3/3)

Lecture on Contract62

3. PECL and European Contract
Code Unifying the market, currency and thencontract law
 Ole Lando and Hugh Beals(eds.), "ThePrinciples of European Contract Law, PartI
and II: Performance, Non-Performanceand Remedies, (Lluwer Law International,
1995, 2000).
 Academy of European Private Lawyers,"European Contract Code - Preliminary
draft", (Universita Di Pavia, 2001)
Lecture on Contract63http://europa.eu.int/ (1/2)

Lecture on Contract64http://europa.eu.int/ (1/2)

Lecture on Contract65

V. Formation of Contract
KAGAYAMA Shigeru
Professor of Meijigakuin University 1. freedom of contract
 2. offer
Definition of offer and acceptanceWithdrawal and Revocation of offer
 3. acceptance
Modified acceptanceDelayed acceptance
Lecture on Contract66

1. Freedom of contract A. Freedom of contents

 Limited by mandatory rules containing: Public order Good faith and fair trading Intention of parties is supplemented by Usages and practices
 Non-mandatory rules B. Freedom of form – No form
required C. Freedom of negotiation
Lecture on Contract67

A. Freedom of contents Article 1.1 of UNIDROIT Principles- Freedom of Contract

 The parties are free to enter into a contractand determine its content.

 Article 1.7 of UNIDROIT Principles- Good Faith and Fair Dealing (1) Each party must act in accordance withgood faith and fair dealing in international
trade.
 (2) The parties may not exclude or limit thisduty.
Lecture on Contract68

B. Freedom of form
 Article 11 of CISG

 Contract of sale need not be concluded in or evidenced
by writing and is not subject to any other requirement as
to form. It may be proved by any means, including
witnesses.

 Article 12 of CISG

 Any provision of article 11, article 29 or Part II of thisConvention that allows a contract of sale or its
modification or termination by agreement or any offer,acceptance or other indication of intention to be madein any form other than in writing does not apply where
any party has his place of business in a Contracting
State which has made a declaration under article 96 of
this Convention. The parties may not derogate from orvary the effect to this article.

Lecture on Contract69

C. Freedom of negotiation
 Article 2.15 of UNIDROIT principles- Negotiations in Bad Faith (1) A party is free to negotiate and is not liable
for failure to reach an agreement.
 (2) However, a party who negotiates or
breaks off negotiations in bad faith is liable forthe losses caused to the other party.
 (3) It is bad faith, in particular, for a party toenter into or continue negotiations whenintending not to reach an agreement with theother party.
Lecture on Contract70

Binding character of contract
 Article 1.3 of UNIDROIT Principles- Binding Character of Contract

 A contract validly entered into isbinding upon the parties. It can only
be modified or terminated inaccordance with its terms or byagreement or as otherwise provided inthese Principles.
 Exception: gross disparity, mistake,hardship, termination

Lecture on Contract71

Flow of Contract
Start
No（not concluded）

Formation
Yes

Unjustenrichment

No（invalid/avoidable）

Validity（Continued）

No

Effective

Yes
Condition

DamagesNo（non performance）
PerformanceNo

ExcuseYes

No

Termination
Specific
performanceEnd
Lecture on Contract

72

StartOffer to specificpersons

no

yes

yes
yes

Flow of formation of contract

Proposal to
unpecific persons

yes

Clear indication of
offer

no

Invitation to
offer

no

Normarly Revocation
would reach in time

Dispatch from offeroryes(Not Withdrawn)
yes

Reached Offeree
yes

IrrevocablenoRevocation reachedafter acceptanceyes

Revocation reachedwithout dely

yes

yes

Without notice ofOffereeyes

yes

Acceptanceno

Acceptance is notnecessaryno

Acceptance with
ModificationnoRefusal of Offereeno

New acceptanceof Offeror

yes

yes
yes

without materialchangeDispatche from
Offereeyes(Not Withdrawn)
yes

Reached Offeror
within specific period
yesnoNormarly Acceptancewould reach in timeyes

Without notice ofOfferorno

New acceptanceof Offeror

yes

End

Lecture on Contract73

Definition of Offer(1/2)
 Article 14 of CISG

 (1) A proposal for concluding a contract addressed
to one or more specific persons constitutes an offer if
it is sufficiently definite and indicates the intention of
the offeror to be bound in case of acceptance.
A proposal is sufficiently definite if it indicates the
goods and expressly or implicitly fixes or makes
provision for determining the quantity and the price.
 (2) A proposal other than one addressed to one ormore specific persons is to be considered merely as
an invitation to make offers, unless the contrary isclearly indicated by the person making the proposal.

Lecture on Contract74

Definition of Offer (2/2)
 Article 55 of CISG

 Where a contract has been validly concluded
but does not expressly or implicitly fix or makeprovision for determining the price, the partiesare considered, in the absence of any
indication to the contrary, to have impliedly
made reference to the price generally charged
at the time of the conclusion of the contract forsuch goods sold under comparable
circumstances in the trade concerned.

Lecture on Contract75

A circular argument?
Definition of offer and acceptance Definition of offer

 Article 14 of CISG

 (1) A proposal for concluding a contract
addressed to one or more specific persons
constitutes an offer if it is sufficiently definite andindicates the intention of the offeror to be bound incase of acceptance.

 Definition of acceptance Article 18 of CISG

 (1) A statement made by or other conduct of theofferee indicating assent to an offer is anacceptance.
Silence or inactivity does not in itself amount toacceptance.
Lecture on Contract76

Another definition of offer
and acceptance Offer Awarding the power making contractconcluded from offeror to the offeree.

 Acceptance Exercising the offeree’s power making
contract concluded against the offeror.

 Rejection of offer

 Negative exercising the offeree’s power ofmaking contract concluded against theofferor.
Lecture on Contract

77

The time when an offer
becomes effective
CISG

Code Civil of Japan

Article 15(1) An offer becomes
effective when it reaches theofferee.
(2) An offer, even if it isirrevocable, may be
withdrawn if the withdrawal
reaches the offeree before orat the same time as the offer.

Article 97. (Manifestationof Intention to Person at
a Distance)(1) Manifestation of
intention to a person at a
distance shall become
effective at the time of
the arrival of the notice tothe other party.

Lecture on Contract78

Withdrawal of offer
Distinction between withdrawal
and revocation

Before an offer becomes effective it
can always be withdrawn whereas
the question of whether or not it
may be revoked.
After an offer become effective it
can revoke under some conditions
until the contract is concluded.

Lecture on Contract

79

Revocation of offer (1/4)
 There is the indication of irrevocability ofthe offer, the offeror could not revoke it.
 Indication of irrevocability
 Direct indication of irrevocability

 “This is a firm offer.” “We shall stand by our offer until we receive youranswer.” The indication of a fixed time for
acceptance “In case you intend to accept my offer, please
do so no later than 31 August.”
 “You have 10 days to accept this offer.”
Lecture on Contract80Revocation of offer (2/4)
Contract is concluded or not?
date
01 Augustactivities
offeror

offereedispatches an offer

02 Augustreceives the offer…
25 AugustDispatches a revocationof the offer

27 AugustReceives the revocation of theoffer

28 Augustdispatches the acceptance

30 AugustReceives the acceptance
Lecture on Contract

81Revocation of offer (3/4)-Revocation after dispatch of acceptance Contract is concluded or not? Difficult problem
date
01 Augustactivities
offeror

offereedispatches an offer

02 Augustreceives the offer…
25 AugustDispatches a revocationof the offer

26 Augustdispatches the acceptance

27 AugustReceives the revocation of theoffer

28 September

Receives the acceptance
Lecture on Contract82

Revocation of offer (4/4)
CISG

Civil Code of Japan

Article 16(1) Until a contract is concluded anoffer may be revoked if therevocation reaches the offeree before
he has dispatched an acceptance.
(2) However, an offer cannot be
revoked:(a) if it indicates, whether by statinga fixed time for acceptance orotherwise, that it is irrevocable; or(b) if it was reasonable for theofferee to rely on the offer as being
irrevocable and the offeree has acted
in reliance on the offer.

Article 521 (Offer specifying period of
acceptance)(1) An offer specifying a period for acceptancecannot be revoked.
(2) If the offeror does not receive notice of
acceptance within the period specified, theoffer shall cease to be effective.
Article 524 (Offer without limiting time for
acceptance)
An offer made to a person at a distance without
specifying a period for acceptance may not be
revoked until the lapse of a reasonable period
for the offeror to receive a notice of acceptance.

Lecture on Contract83

Rejection of offer
Article 17 of CISG

An offer, even if it is irrevocable, isterminated when a rejection reaches
the offeror.
 Article 528 of Civil Code of Japan(Modified acceptance) If the acceptor has accepted an offer
subject to a condition or with any othermodification, he shall be deemed to haverejected the original offer and made a newoffer himself.

Lecture on Contract84

Acceptance Article 18 of CISG

 (1) A statement made by or other conduct of theofferee indicating assent to an offer is anacceptance. Silence or inactivity does not in itself
amount to acceptance.
 (2) An acceptance of an offer becomes effective at
the moment the indication of assent reaches theofferor. An acceptance is not effective if theindication of assent does not reach the offeror within
the time he has fixed or, if no time is fixed, within areasonable time, due account being taken of thecircumstances of the transaction, including the
rapidity of the means of communication employedby the offeror. An oral offer must be accepted
immediately unless the circumstances indicate
otherwise.
Lecture on Contract85

Modified acceptance (1/3)
Article 19 of CISG

(1) A reply to an offer which
purports to be an acceptance but
contains additions, limitations orother modifications is a rejection of
the offer and constitutes a
counteroffer.

Lecture on Contract86Modified acceptance (2/3)
 Article 19 of CISG

 (2) However, a reply to an offer which purports to be
an acceptance but contains additional or different
terms which do not materially alter the terms of theoffer constitutes an acceptance, unless the offeror,
without undue delay, objects orally to the discrepancy
or dispatches a notice to that effect. If he does not so
object, the terms of the contract are the terms of theoffer with the modifications contained in theacceptance.
 (3) Additional or different terms relating, among otherthings, to the price, payment, quality and quantity of
the goods, place and time of delivery, extent of one
party's liability to the other or the settlement of disputes
are considered to alter the terms of the offer materially.

Lecture on Contract

87

Modified acceptance (3/3)
Article 528 of Civil Code ofJapan (Modified acceptance)If the offeree has accepted theoffer by adding any condition or
by making any othermodification, it shall be deemedthat the offeree has refused theoffer and has made a new offer.
Lecture on Contract

88The time when a contract isconcluded
CISG

Civil Code of Japan

Article 23
A contract isconcluded at the
moment when an
acceptance of an
offer becomes
effective inaccordance withthe provisions of
this Convention.

Article 526 (Time for coming into existence ofcontract inter absentee)(1) A contract between persons at a distance shallbe formed upon dispatch of the notice of
acceptance.
(2) In cases where no notice of acceptance isrequired due to the offeror's manifestation of
intention or usage of trade, the contract shall beformed upon the occurrence of any fact which ought
to be regarded as a manifestation of intention of
acceptance.

Lecture on Contract89

Exercise 4 (1/2)
Delayed acceptance Facts ‘A’ indicates to ‘B’ 31 August as the deadline
for acceptance of its offer.
 ‘B’ knows that the normal time for transmissionof letters by mail to ‘A’ is 2 days and sends its
letter of acceptance on 25 August.
 Owing to a strike of the postal service in ‘A’’s
country the letter, which shows the date of its
mailing on the envelope, only arrives on 1
September.
 On 2 September ‘A’ informs ‘B’ that it considers
the offer as having lapsed.
Lecture on Contract90

Exercise 4 (2/2)
Delayed acceptance Question: Contract is concluded or not?
date
01 Augustactivities
offeror

offereedispatches an offer

02 Augustreceives the offer

25 Augustdispatches the acceptance

31 Augustthe period of time of acceptance

01 September receives the acceptance
02 September

dispatches of the notice ofdelay of the acceptance
Lecture on Contract91Delayed acceptance (1/3)
 Article 21 of CISG

 (1) A late acceptance is nevertheless effective as an
acceptance if without delay the offeror orally so informs
the offeree or dispatches a notice to that effect.
 (2) If a letter or other writing containing a late acceptanceshows that it has been sent in such circumstances that if its
transmission had been normal it would have reached theofferor in due time, the late acceptance is effective as an
acceptance unless, without delay, the offeror orally informs
the offeree that he considers his offer as having lapsed ordispatches a notice to that effect.

Lecture on Contract92Delayed acceptance (2/3)
 Article 522 of Code Civil of Japan(Delayed acceptance)(1) Even where a notice of acceptance has arrived after
the expiration of the period mentioned in the preceding
Article, if the offeror could have known that it was
dispatched at such a time that it would have undernormal circumstances arrived within such period, theofferor shall dispatch, without delay to the person towhom the offer has been made, a notice of the delayed
arrival, unless a notice of the delay has already been
dispatched by him before its arrival.
 (2) If the offeror has neglected to give the noticementioned in the preceding paragraph, the notice of
acceptance shall be deemed not to have been delayed.


Lecture on Contract93Delayed acceptance (3/3)
Reached Offeror
within specific period
yesnoNormarly Acceptancewould reach in timeyes

Without notice ofOffereeno

New acceptanceof Offeror

yes

Lecture on Contract94

Exercise 5
Delayed revocation of offer
Contract is concluded or not?
date
01 Augustactivities
offerordispatches an offer

02 August
25 Augustoffereereceives the offer

revokes the offer

28 Augustdispatches the acceptance

29 Augustreceives therevocation of the offer

31 Augustreceives the acceptancedispatches of the notice ofdelay of revocation

01 September
Lecture on Contract95Delayed revocation of offer in
Civil Code of Japan
Civil Code of Japan
Article 527 (Delayed notice of revocation arrived after notice of
acceptance)(1) Even in cases where notice of the revocation of an offer has
arrived after notice of acceptance has been dispatched, if theacceptor could have known that it was dispatched at such a timethat it would have under normal circumstances arrived before thedispatch of the notice of acceptance, the acceptor shalldispatch without delay notice of the delayed arrival to the offeror.
(2) If the acceptor has neglected to give the notice mentioned in
the preceding paragraph the contract shall be deemed not tohave come into existence.
Lecture on Contract96

Lack of provision in CISG about
delayed revocation
 CISG has no article about delayed
revocation.
 Article 16 of CISG

 (1) Until a contract is concluded an offer may
be revoked if the revocation reaches theofferee before he has dispatched an
acceptance.
 (2) However, an offer cannot be revoked:

 (a) if it indicates, whether by stating a fixed time for
acceptance or otherwise, that it is irrevocable; or (b) if it was reasonable for the offeree to rely on theoffer as being irrevocable and the offeree has acted
in reliance on the offer.
Lecture on Contract

97

Good faith and general principles
CISG

Civil Code of Japan

Article 7(1) In the interpretation of this Convention, regard
is to be had to its international character and to
the need to promote uniformity in its applicationand the observance of good faith in international
trade.
(2) Questions concerning matters governed by thisConvention which are not expressly settled in it
are to be settled in conformity with the generalprinciples on which it is based or, in the absence ofsuch principles, in conformity with the law
applicable by virtue of the rules of privateinternational law.

Article 1 (Exercise ofprivate rights)(1) All private rights shallconform to the publicwelfare.
(2) The exercise of rights
and performance of
duties must be done ingood faith.
( 3) No abusing of rights
is permissible.

Lecture on Contract98Delayed acceptance andapplication of good faith
Act according to good faithOfferee sent
acceptancein due time

reliance on themeans oftransmission

Offeror could obligation ofrecognize
dispatching a
the delay
notice of delay

resultIf there is no notice of delay,
he/she may act as if theacceptance should havereached in due time.
If he/she has neglected togive the notice it shall bedeemed not delayed

Lecture on Contract99Delayed revocation andapplication of good faith
Act according to good faithresultOfferor sent reliance on the
revocation on means ofdue timetransmission

If there is no notice of delay,
he/she may act as if therevocation should havereached in due time.

Offeree could obligation ofrecognize the dispatching a
delay
notice of delay

If he/she has neglected togive the notice it shall bedeemed not delayed

Lecture on Contract100

My draft amendment of
Article 16 of CISG
 Article 16 of CISG (to be amended
additionally) (3) If a letter or other writing containing a late
revocation of the offer shows that it has been sentin such circumstances that if its transmission had
been normal it would have reached the offeree in
due time, the late revocation of the offer iseffective as a revocation unless, without delay, theofferee orally informs the offeror that he considers
his revocation as having lapsed or dispatches a
notice to that effect.
Lecture on Contract101

Conclusion:
How to fill up a lack of rule
 In case of lack of rule (delayed
revocation)

 find the relevant rule (delayed acceptance)
 extract a principle on which the relevant rule isbased:
 Protection of reliance on the means of transmission
 Obligation of dispatching a notice of delay No delay is deemed in case of negligence of thenotice apply the extracted principle to the case
 add the rule by draft amendment
Lecture on Contract

102

Examination (1/4)
 Read these sentences and Answer thequestions as follows: Facts in Japan A indicates to B 31 August as the deadline for
acceptance of its offer.
 B knows that the normal time for transmission ofletters by mail to A is 2 days and sends its letter of
acceptance on 25 August.
 Owing to a strike of the postal service in A’s country
the letter, which shows the date of its mailing on theenvelope, only arrives on 1 September.
 On 2 September A informs B that it considers the offer
as having lapsed.

Lecture on Contract

103

Examination (2/4)
 Questions

 (1) The contract between A and B isconcluded?
 (a) yes (b) no (2) If A doesn't inform 'B' till 30 September thatit considers the offer as having lapsed, thecontract between A and B is concluded?
 (a) yes (b) no (3) If contract is concluded in case ofquestion (1) or (2), which day is the contractconcluded?
 (a) 25 August, (b) 27 August, (c) 31 August, (d) 1
September, (e) 2 September
Lecture on Contract

104

Examination (3/4)
 (4) If contract is concluded in case ofquestion (1) or (2), which provision isapplicable?

 (a) Art. 7 of CISG, (b) Art. 21 of CISG, (c) Art. 522
of Civil Code of Japan, (d) Art. 527 of Civil Codeof Japan (5) If contract is concluded in case ofquestion (1) or (2), which principle does
justify it?

 (a) freedom of contract, (b) negligence, (c)good faith

Lecture on Contract105VI. Content of contract
Professor KAGAYAMA Shigeru
Meijigakuin University

1. Type of contracts
2. Type of obligations
3. Determination of content

Lecture on Contract1061. Type of contracts
PurposeTransfer
propertyright

onerous

Name of contract
Gift

gratisprice

SalethingsExchange

gratis,onerous

Loan for consumption

gratisLoan for use

onerousLease

onerous

Employment

onerousWorkgratis, onerous

Mandategratis, onerous

Bailment

Using things andserviceonerous

Association

onerousLife Annuity

Solution of disputes

onerousCompromise

Returning similar things
Using thingsothersNatureUsing service

Lecture on Contract

107gratisType of Contracts
Transfer
Ownership

No needto returnonerousNeed toreturnUse andreturnContracts

4. Loan for
Consumption

1. Gift
PayingMoney

2. SaleExchangegoods

3. Exchange

gratis

5. Loan for use

onerous

6. Lease

Time limited
work
SupplyService
Independentwork

No transfer
ownership

Enterprise

7. Employment
Completionof work

8. Work

Officework

9. Mandate

Depositionof things

10. Bailment

Organization

11. Association

Annuity

12. Life Annuity

Resolutionof dispute

13. Compromise
Lecture on Contract108

2. Type of obligations
Viewpoint
OriginExecution

Evidence

Type of obligationscomment

Express obligation

From stipulation of parties

Implied obligation

From purpose and Nature of contract,
practices and usages, good faith andfair trading, reasonableness

Obligation to
give

Pay money

Easiest to execute

Deliver things

Easy to execute

Obligation to do or
not to do

Difficult to execute: change to thedamages in case of non-performance

Obligation to achieve a
specific result

Obligee should prove non-fault

Obligation of best efforts

Obligore should prove obligor’s fault

Lecture on Contract109

Duty of specific result and Dutyof best efforts
 Article 5.4 of UNIDROIT Principles- Duty to Achieve a Specific Result. Duty ofBest Efforts

 (1) To the extent that an obligation of a party
involves a duty to achieve a specific result, thatparty is bound to achieve that result.
 (2) To the extent that an obligation of a party
involves a duty of best efforts in theperformance of an activity, that party is boundto make such efforts as would be made by areasonable person of the same kind in thesame circumstances.
Lecture on Contract

110Determination of duty of result or
duty of best efforts
 Article 5.5 - Determination of Kind of Duty
Involved In determining the extent to which an obligation of aparty involves a duty of best efforts in the performanceof an activity or duty to achieve a specific result,regard shall be had, among other factors, to (a) the way in which the obligation is expressed in
the contract; (b) the contractual price and other terms of thecontract; (c) the degree of risk normally involved inachieving the expected result; (d) the ability of the other party to influence theperformance of the obligation.
Lecture on Contract111

3. Determination of content
A. Determination of Quality
B. Determination of PriceC. Indefinite period

Lecture on Contract112

A. Determination of quality
Article 5.6 - Determination of
Quality of Performance

Where the quality of performance isneither fixed by, nor determinable
from, the contract a party is bound to
render a performance of a qualitythat is reasonable and not less than
average in the circumstances.
Lecture on Contract113

B. Determination of price Article 5.7 - Price Determination

 (1) Where a contract does not fix or make provision for
determining the price, the parties are considered, in theabsence of any indication to the contrary, to have madereference to the price generally charged at the time of theconclusion of the contract for such performance incomparable circumstances in the trade concerned or, if nosuch price is available, to a reasonable price.
 (2) Where the price is to be determined by one party andthat determination is manifestly unreasonable, a reasonable
price shall be substituted notwithstanding any contract term
to the contrary.
 (3) Where the price is to be fixed by a third person, and that
person cannot or will not do so, the price shall be areasonable price.
Lecture on Contract114

C. Indefinite period
Article 5.8 - Contract for an
Indefinite PeriodA contract for an indefinite period
may be ended by either party bygiving notice a reasonable time inadvance.

Lecture on Contract

115

Lecture on Contract116VII. Validity of contract
Professor KAGAYAMA Shigeru
Meijigakuin University

1. Causes of Invalidity of contract
2. Effects of invalidity of contract
Lecture on Contract117

Flow of Contract
Start
No（not concluded）

Formation
Yes

Unjustenrichment

No（invalid/avoidable）

Validity（Continued）

No

Effective

Yes
Condition

DamagesNo（non performance）
PerformanceNo

ExcuseYes

No

Termination
Specific
performanceEnd
Lecture on Contract118

Condition of the validity of Contract
The contract is valid ifthe parties of contract concluded it a) with legal capacity or with sufficientauthority and b) the representation of will is consistent
with its internal will, c) without unfair intervention to theirdecision making process and d) the contents conform to the publicorder.
Lecture on Contract119Exclusion of the condition of validity
 Article 3.3 of UNIDROIT Principles- Initial Impossibility (1) The mere fact that at the time of theconclusion of the contract the performance ofthe obligation assumed was impossible does
not affect the validity of the contract.
 (2) The mere fact that at the time of theconclusion of the contract a party was notentitled to dispose of the assets to which thecontract relates does not affect the validity of
the contract.
Lecture on Contract120

1. Causes of Invalidity of contract
A. Lack of capacity of party
B. Lack of authority of agency
C. Lack of will (defective
declaration of will)
D. Unfair intervention to thedecision making
E. Violation of public order
Lecture on Contract121

A. Lack of capacity(Civil Code of Japan) Article 4 (Age of Majority) The age of majority is reached when a person
has reached the age of 20.
 Article 753 (Attaining majority by marriage) If a minor enters into marriage, he/she shall bedeemed to have attained majority.

 Article 5 (Juristic Act of Minors)

 (1) A minor must obtain the consent of his/her statutory
agent to perform any juristic act; provided, however,
that, this shall not apply to an act merely intended toacquire a right or to be relieved of a duty.
 (2) A juristic act in contravention of the provision of thepreceding paragraph may be rescinded.
Lecture on Contract122Form of consent of the legal
representative (1/2)
Article 5 (Property permitted todispose) (3) Notwithstanding the provision of paragraph
1, in cases the statutory agent permits thedisposition of property by specifying the
purpose thereof, a minor may freely dispose of
the same to the extent of such purpose. The
same shall apply in cases his/her statutory
agent permits the disposition of the property
without specifying any purpose.
Lecture on Contract123Form of consent of the legal
representative (2/2)
 Article 6 (Permission to carry on business)

 (1) A minor who is permitted to carry on one ormore kinds of business shall have the same
capacity to act as a person of the age ofmajority as far as such business is concerned.
 (2) In the case set forth in the preceding
paragraph, if the minor may be unable toperform the relevant business for any reason,
his/her statutory agent may revoke or limit
permission in accordance with the provisionsof Part IV (Relatives).
Lecture on Contract124

Valid contract in spite of lack of
capacity
Article 21 (Fraudulent Means
Committed by Person with Limited
Capacity) If a person with limited capacity
manipulates any fraudulent means to
induce others to believe that he/she isa person with capacity, his/her act
may not be rescinded.
Lecture on Contract125

B. Lack of authority of agency(PECL:Principles of European Contract laws)
 Article 3:204 : Agent acting without or outside his
authority (1) Where a person acting as an agent acts withoutauthority or outside the scope of its authority, its acts
are not binding upon the principal and the third party.
 (2) Failing ratification by the principal according toarticle 3:207, the agent is liable to pay the third party
such damages as will place the third party in the same
position as if the agent had acted with authority. This
does not apply if the third party knew or could not havebeen unaware of the agent's lack of authority.

Lecture on Contract126

Liability of Principal (1/3)
Article 3:201 : Express, implied andapparent authority

(3) A person is to be treated as having
granted authority to an apparent agent if
the person's statements or conduct induce
the third party reasonably and in goodfaith to believe that the apparent agent
has been granted authority for the act
performed by it.

Lecture on Contract127

Liability of Principal (2/3)
 Article 3:207 : Ratification by Principal
 (1) Where a person acting as an agent
acts without authority or outside its
authority, the principal may ratify theagent's acts.
 (2) Upon ratification, the agent's acts are
considered as having been authorised,without prejudice to the rights of otherpersons.

Lecture on Contract128

Liability of Principal (2/3)
 Article 3:208 : Third Party's Right with
Respect to Confirmation of Authority

 Where the statements or conduct of theprincipal gave the third party reason tobelieve that an act performed by theagent was authorised, but the third party isin doubt about the authorisation, it may
send a written confirmation to theprincipal or request ratification from it. If
the principal does not object or answer
the request without delay, the agent's act
is treated as having been authorised.

Lecture on Contract

129

Exercise 6
 Facts

 The principal Y authorized an agent ‘A’
to register a piece of land which heowned.
 ‘A’ was given the title deed and Y’s seal.
 Instead of registering the property, ‘A’sold it to a third person X.

 Question

 X can claim against Y to transfer theland and register it by name of X.
Lecture on Contract

130

Illustration of exercise 6
Apparent agent case
Principal
Ytitle deed and seal
to register for Y

Claim to transfer the land

AgentA
Sold the land
Third
party
X

Lecture on Contract131

Reference (1/6)
 Article 109 (Apparent Authority due toManifestation of Grant of Authority ofAgency) A person who manifested to a third party thathe/she granted certain authority of agency toother person(s) shall be liable for any act
performed by such other person(s) with third
parties within the scope of such authority,
unless such third parties knew, or were
negligent in not knowing, that such otherperson(s) were not granted the authority ofagency.

Lecture on Contract132

Reference (2/6)
 Article 110 (Apparent Authority of
Act Exceeding Authority)

The provision of the main clause of thepreceding Article shall apply mutatis
mutandis to the case where an agent
performs any act exceeding its authority
and a third party has reasonablegrounds for believing that the agent has
the authority.
Lecture on Contract133

Reference (3/6)
Article 112 (Apparent Authority
After Termination of Authority ofAgency)Termination of the authority of agency
may not be asserted vis-a-vis a third
party without knowledge; provided,
however, that, this shall not apply tothe cases where such third party was
negligent in not knowing such fact.
Lecture on Contract134Reference (4/6)
 Article 555(Sale) A sale shall become effective when one ofthe parties promises to transfer a certain real
rights to the other party and the other party promises to pay the purchasemoney for it.

 Article 176(Creation and Transfer of Real
Rights) The creation and transfer of real rights shalltake effect solely by the manifestations ofintention of the relevant parties.
Lecture on Contract135

Reference (4/6)
 Article 555(Sale) A sale shall become effective when one ofthe parties promises to transfer a certain real
rights to the other party and the other party promises to pay the purchasemoney for it.

 Article 176(Creation and Transfer of Real
Rights) The creation and transfer of real rights shalltake effect solely by the manifestations ofintention of the relevant parties.
Lecture on Contract

136

The effect of the double selling of a realestate(Art. 177 Code Civil of Japan)
Propertyright
1st Buyer

1st Sale contract

SellerRegistration

2nd Salecontract

2nd Buyer
Lecture on Contract137

Reference (6/6)
Article 178(Requirements of
Perfection of Transfer of Real Rights
concerning Movables)
The transfers of real rights
concerning movables may not be
asserted against third party, unlessthe movables are delivered.

Lecture on Contract138

Extract the principles on apparent
agency Premise 1. The principal creates the appearance of authorized
agency against the pretended agent.
 2. The apparent agent acts like a authorized agent.
 3. The third party believes that the apparent agent has
been granted authority in good faith and without
negligence.

 Result

 1. The principal is responsible to the third party to theact of apparent agent.
 2. The bona fide third party may deem the apparent
agent to be a authorized agent.

Lecture on Contract139

C. Lack of will (defective declarationof will)Structure of Civil Code of Japan1. Declarant is aware of lack of will
a) Mental reservation (ex. a joke)b) Fictitious juristic act by collusion

2. Declarant is not aware of lack ofwillc) Mistake

Lecture on Contract

140a) Mental reservation
 Article 93 (Concealment of True Intention)
Civ. C. Japan The validity of the manifestation of intention shall not be
impaired even if the person who makes the
manifestation knows that it does not reflect his/her true
intention;
 provided, however, that, in cases the other party knew,
or could have known, the true intention of the person
who makes the manifestation, such manifestation of
intention shall be void.
 Example: A person who sold his property as a joke isnevertheless bound by his words. However, if the
opposite party was aware that this was a joke, or
should have been aware of this, the act is null andvoid.

Lecture on Contract141

Toulmin’s diagram of mental reservation(Shifting the burden of proof)
The person who makes amanifestation knows that it is
not a true intention.

probably
rebutted

The person who
makes manifestation
should takeresponsibility for it.

The manifestation
is valid.

The other party knew,
or could have known,
the true intention of
the person who
makes themanifestation.

1.Invalid: The other party knew, or could have known, the true intention of the person
who makes the manifestation.(Rule: If there is no will, then manifestation is invalid)
2.Valid: The other party did not know and could have not known(without fault), thetrue intention of the person.(Exception: Application of theory of transaction safety)
Lecture on Contract142

Legal structure of mental
reservation and its amendment
Current Art. 93
 Article 93(Concealment of True
Intention)

 [Principle: valid] The
validity of the
manifestation of intention
shall not be impaired even
if the person who makes
the manifestation knowsthat it does not reflect
his/her true intention;
 [Exception: void] provided,
however, that, in cases theother party knew, or could
have known, the true
intention of the person
who makes the
manifestation, suchmanifestation of intention
shall be void.

Amendment of Art. 93
 Article 93 (Concealment of True Intention)

 (1) Principle: If a party’s manifestation is different withtrue intention(i.e. lack of intention), then the
manifestation is null and void.
 (2) Exception: If the other party, however, did notknow and could have not known, the true intention of
the one party, then the manifestation is not null andvoid but valid.
 (3) Presumption: In order to protect the safety oftransaction, if a party who makes the manifestation
knows that it does not reflect his/her true intention,then it is presumed that the other party did not know
and could have not known, the true intention of theperson who makes the manifestation.
 (4) Burden of proof: If the party who makes different
manifestation with true intention proves that the otherparty knew, or could have known, the true intention of
the party who makes the manifestation, suchmanifestation of intention shall be void, as a principle,
provided in first paragraph.

Lecture on Contract

143b) Fictitious juristic act by collusion
Article 94 (Fictitious declaration of
intention)

(1) Any fictitious manifestation of
intention made in collusion withanother party shall be void.
(2) The nullity of the manifestation of
intention pursuant to the provision of
the preceding paragraph may not be
asserted against a third party without
knowledge.
Lecture on Contract

144

Exercise 7
 Facts

 X colludes with ‘A’ and fictitiously sells him apiece of land.
 ‘A’ abused X’s trust and sold the land to a third
party Y, who reasonably believed that ‘A’ was
the genuine owner.

 Questions

 The sale contract between ‘A’ and X is valid?
 X can claim to recover the land against Y?

Lecture on Contract

145

Illustration of Exercise 7
Fictitious contract caseXfictitous contract
in collusion

Claim to recovery of land

A

Sold the land
Third
party
Y

Lecture on Contract146

Supplementary Lecture on
Contract in 2014
Prof. Shigeru KAGAYAMA
Meijigakuin University

Lecture on Contract

147

Contents of Supplementary Lecture
Relation ship between acontract and a real right Effect of Sale contract

 Sale Contract (Art. 555
Civil Code of Japan)
 Effect of Sale contract(Art. 176 Civ. Code ofJapan)
 Restriction of the effectof sale contract without
registration (Art. 177 Civ.
Code of Japan)

 Application to thefictitious sale contract

External effect ofcontractual obligation
 Principle: Relativity ofContract The effect of contractual
obligation remains within
parties of contract

 Exception: External effectof contractual obligation
 “Action oblique (action
indirecte)”
 “Action directe”

 Perfect “action directe”
 Imperfect “action
directe”

 Action paulienne

Lecture on Contract148

Relationship between acontract and a real right

Lecture on Contract149

Relationship between sale contract
and real right of land (1/2)
 Article 555(Sale) A sale shall become effective when one ofthe parties promises to transfer a certain real
rights to the other party and the other party promises to pay the purchasemoney for it.

 Article 176(Creation and Transfer of Real
Rights) The creation and transfer of real rights shalltake effect solely by the manifestations ofintention of the relevant parties.
Lecture on Contract

150

The effect of sale contract(Art. 176 Code Civil of Japan)
Propertyright
1st Buyer

Sale contract

Seller Article 176(Creation and Transfer of Real Rights)
 The creation and transfer of real rights shalltake effect solely by the manifestations of intention of therelevant parties.

Lecture on Contract151

Relationship between sale contract
and real right of land (2/2)
 Article 177(Requirements of Perfection of
Changes in Real Rights concerning
Immovable properties)

 Acquisitions of, losses of and changes in real
rights concerning immovable properties may
not be asserted against third parties,
 unless the same are registered pursuant tothe applicable provisions of the Real Estate
Registration Act (Law No. 123 of 2004) andother laws regarding registration.
Lecture on Contract

152

The effect of the double selling of a realestate(Art. 177 Code Civil of Japan)
Propertyright
1st Buyer

1st Sale contract

SellerRegistration

2nd Salecontract

2nd Buyer
Lecture on Contract

153

Illustration of Exercise 7
Fictitious contract caseXfictitous contract
in collusion

Claim to recovery of land

A

Sold the land
Third
party
Y

Lecture on Contract154

Application of Art. 177 to fictitious
juristic act by Collusion Case (1/3)
Registration

Registration

Propertyright

Propertyright
HusbandX

Fictitious sale contract
Claim to return registration

Wife
A
Sale
contract
Bona fide
Buyer Y

Lecture on Contract

155

Application of Art. 177 to fictitious
juristic act by Collusion Case (2/3)
Registration

Registration

Propertyright

Propertyright
HusbandX

Fictitious sale contract
Claim to return registration

Wife
A
Sale
contract
Bona fide
Buyer Y

Lecture on Contract156

Application of Art. 177 to fictitious
juristic act by Collusion Case (3/3)
Registration

Registration

Propertyright

Propertyright
HusbandX

Fictitious sale contract
Claim to return registration

Wife
A
Sale
contract
Bona fide
Buyer Y

Lecture on Contract157

External effect of contract

Lecture on Contract

158

Action Oblique and Attachment
Dividend is equal among obligees
Obligee A

Credit α

Obligor B

Credit γ

Obligee D

Creditβ Non-performance of “B”
 Name of “A”
 Subrogate of “B”
 “A” exercises credit β

Obligor’s
obligor C

Lecture on Contract

 Non-performance of “B”
 Name of “D”
 For sake of “D”
 “D” exercises credit β

159

“Action directe” of a victim against
assurance company
 Security Act of the Automobile Accident Liability Art. 16 (1) A victim of automobile accident may claim for damages against
insurance company of tortfeasor to the extent of the insurance amount.
Victim A

Damages

Tortfeasor
Btransfer

CreditObligee D

Insurance
Insurance

Insurance
Company C
Lecture on Contract

160

“Action directe” of sub-lease contract
 Article 613 (1) (1) If a lessee lawfully sub-leases a leased Thing, the sub-lessee shall assume a direct
obligation to the lessor. In such cases, advance payment of rent may not be asserted against
the lessor.
 (2) The provisions of the preceding paragraph shall not preclude the lessor from exercising
his/her rights against the lessee.

Lessor A

Credit of
Rent
transfer

Lessee B

Sub-lessor

CreditObligee D

CreditCreditof subof
lease
subRent
lease
rent
Sublessee C
Lecture on Contract

161

Action paulienne
 Article 424(Obligee's Right
to Demand the Rescissionof Fraudulent Act) Article 425(Effect of Rescission of
Fraudulent Act) (1) An obligee may demand
the court to rescind any
juristic act which an obligor
commits knowing that it will
prejudice the obligee; provided, however, that, thisshall not apply to the cases
where any person who
benefits from such act, or any
person who succeeds to such
benefit, did not know, at thetime of such act or succession,
the fact that the obligee is tobe prejudiced.

 The rescission pursuant to the provision of
the preceding Article shall have an effectfor the benefit of all obligees.

 Article 426(Limitation Period of
Obligee's Right to Rescind
Fraudulent Act) The right to rescind pursuant to theprovision of Article 424 shall be
extinguished by operation of prescription
if not exercised within two years from thetime that the obligee acquired
knowledge of the cause of the rescission.
The same shall apply if twenty years passfrom the time of the act.

Lecture on Contract

162

Action paulienne(droit de suit: tracing right)
Monetary credit
Obligee “A”
EstateObligor “B”
Mala fide

Transfer
EstateMala fide
Beneficiary”C”

Transfer
EstateLecture on Contract

Mala fide
Beneficiary”D”
163End of Supplementary Lecture
Lecture on Contract164c) MistakeArticle 95 (Mistake) Civ. C. Japan

 Manifestation of intention has no effectwhen there is a mistake in any elementof the juristic act in question;
provided, however, that the person who
made the manifestation of intention
may not assert such nullity byhimself/herself if he/she was grossly
negligent.

Lecture on Contract165

Relationship between grossnegligence and mala fide
Bona fide(in good faith)
Without
negligence

negligenceGrossnegligence

Mala fide(in bad faith)

Evaluate as mala fide andProtected in
not protected almost all
Protected
almost all
some cases but opponent is also malacasesfide cases
Lecture on Contract

166

An Example of gross mistakeOn 8 December 2005, the brokerage of Mizuho Securities Co.
Ltd. mistook a client's sell order for 1 J-Com share at 610,000
yen for one selling 610,000 shares at 1 yen each, placing theincorrect order with the Tokyo Stock Exchange's transaction
system.
The company immediately realized the mistake after placing
the order and submitted several cancel orders. However, theTSE failed to process the cancellation in accordance with thecancel orders due to a defect in the TSE’s electronic trading
system, and thus allowed the sales of the shares composing
the order to be completed. As a result, the Company
eventually accrued a loss of approximately 40.7 billion yen.
Lecture on Contract167

My proposal of amendment of Art.
95 of Civ. C. of Japan Logical calculation

 Gross negligence ≦ mala fide Mistake with gross negligence ≦mala fide mistake = Mental reservation (Art. 93)

 Art. 93

 Mental reservation shall be null and void, if the other party
was aware, or should have been aware, of the real
intention of the declarant.

 Art. 95 (should be revised as follows) Manifestation of intention has no effect when there is a
mistake in any element of the juristic act in question.
Mistake with gross negligence shall also be void, only if
the other party was aware, or should have been aware ofgross mistake of declarent.
Lecture on Contract168

D. Unfair intervention to thedecision making
 Article 96 (Fraud or duress)

 (1) Manifestation of intention which is induced byany fraud or duress may be rescinded.
 (2) In cases any third party commits any fraud
inducing any person to make a manifestation of
intention to the other party, such manifestation of
intention may be rescinded only if the other party
knew such fact.
 (3) The rescission of the manifestation of intention
induced by the fraud pursuant to the provision of
the preceding two paragraphs may not be
asserted against a third party without knowledge.
Lecture on Contract169

Distinction of “mistake of element oflegal act” and “mistake of motive”
 Mistake of element of juristic act(Art.95)
 Manifestation and juristic act are null andvoid.
 There is no intention corresponding to the
manifestation.

 Mistake of motive(Art.96 Paragraph2)
 Manifestation is not null but avoidable.

 There is a intention corresponding to the
manifestation, there is, however, a defect in theprocess of making will.
Lecture on Contract170

E. Violation of public orderArticle 90 (Public policy)
Civil Code of JapanA juristic act with any
purpose which is against
public policy or good
morals is void.
Lecture on Contract

171

Gross Disparity
 Article 3.10, UNIDROIT Principles

 (1) A party may avoid the contract or an individual
term of it if, at the time of the conclusion of thecontract, the contract term unjustifiably gave theother party an excessive advantage. Regard is tobe had, among other factors, to (a) the fact that the other party has taken unfair
advantage of the first party's dependence, economic
distress or urgent needs, or of its improvidence,
ignorance, inexperience or lack of bargaining skill;and (b) the nature and purpose of the contract.

Lecture on Contract172

2. Effect of invalidity of contract
Absolute invalidity

Violation of public orderRelative invalidity

Nul and void / Avoidance Lack of capacity of party Lack of authority of agency
 Lack of will
 Unfair intervention to the decision making

Lecture on Contract

173

Effect of avoidance (1/2)
 Article 3.17, UNIDROIT Principles Retroactive Effect of Avoidance (1) Avoidance takes effect retroactively.
 (2) On avoidance either party may claim
restitution of whatever is supplied under thecontract or the part of it avoided, provided
that it concurrently makes restitution ofwhatever it has received under thecontract or the part of it avoided or, if itcannot make restitution in kind, it makes
an allowance for what it has received.
Lecture on Contract

174

Effect of avoidance (2/2)
 Article 3.18 – Damages, UNIDROIT
Principles

 Irrespective of whether or not the contract
has been avoided, the party who knew orought to have known of the ground foravoidance is liable for damages so as to put
the other party in the same position in which
it would have been if it had not concluded
the contract.

Lecture on Contract

175Condition of the validity of Contract(Review)(a) The legal capacity(Principal) orwith sufficient authority(Agent)
Conditionof thevalidity ofcontract(b) The representation of will is
consistent with its internal will(c) Without unfair intervention totheir decision making process(d) The contents conform to the
public order(e) Following public order
Lecture on Contract

176

VIII. Performance of contract
KAGAYAMA Shigeru
Professor emeritus of
Nagoya University

1. Time of performance
2. Order of performance
3. Place of performance
4. Costs of performance
5. Imputation of payments
Lecture on Contract177

Flow of Contract
Start
No（not concluded）

Formation
Yes

Unjustenrichment

No（invalid/avoidable）

Validity（Continued）

No

Effective

Yes
Condition

DamagesNo（non performance）
PerformanceNo

ExcuseYes

No

Termination
Specific
performanceEnd
Lecture on Contract

178

Type of contracts
PurposeTransfer
propertyright

onerous

Name of contract
Gift

gratisprice

SalethingsExchange

gratis,onerous

Loan for consumption

gratisLoan for use

onerousLease

onerous

Employment

onerousWorkgratis, onerous

Mandategratis, onerous

Bailment

Using things andserviceonerous

Association

onerousLife Annuity

Solution of disputes

onerousCompromise

Returning similar things
Using thingsothersNatureUsing service

Lecture on Contract

179

gratisType of Contracts
Transfer
Ownership

No needto returnonerousNeed toreturnUse andreturnContracts

4. Loan for
Consumption

1. Gift
PayingMoney

2. SaleExchangegoods

3. Exchange

gratis

5. Loan for use

onerous

6. Lease

Time limited
work
SupplyService
Independentwork

No transfer
ownership

Enterprise

7. Employment
Completionof work

8. Work

Officework

9. Mandate

Depositionof things

10. Bailment

Organization

11. Association

Annuity

12. Life Annuity

Resolutionof dispute

13. Compromise
Lecture on Contract

180

Example of Sale Contract
Option Contract
Civil Code of Japan
Article 557（Earnest Money) When the buyer delivers earnest money tothe seller, the buyer may cancel thecontract by forfeiting his/her earnest
money or the seller may cancel thecontract by reimbursing twice its amount,until either party commences
performance of the contract.
Lecture on Contract181

1. Time of performance
Article 6.1.1 - Time of PerformanceA party must perform its obligations: (a) if a time is fixed by or determinable fromthe contract, at that time; (b) if a period of time is fixed by ordeterminable from the contract, at any timewithin that period unless circumstancesindicate that the other party is to choose atime;
 (c) in any other case, within a reasonable
time after the conclusion of the contract.
Lecture on Contract182

2. Order of performance Article 6.1.4 - Order of Performance (1) To the extent that the performances of theparties can be rendered simultaneously, theparties are bound to render themsimultaneously unless the circumstancesindicate otherwise.
 (2) To the extent that the performance of only
one party requires a period of time, that party
is bound to render its performance first, unlessthe circumstances indicate otherwise.

Lecture on Contract183

3. Place of performance Article 6.1.6 - Place of Performance (1) If the place of performance is neither fixedby, nor determinable from the contract, aparty is to perform:

 (a) a monetary obligation, at the obligee’s place ofbusiness;
 (b) any other obligation, at its own place ofbusiness.

 (2) A party must bear any increase in the
expenses incidental to performance which is
caused by a change in its place of business
subsequent to the conclusion of the contract.

Lecture on Contract184

4. Costs of performance
Article 6.1.11 - Costs of
PerformanceEach party shall bear the costs ofperformance of its obligations.

Lecture on Contract185

5. Imputation of payments (3/1)
Article 6.1.12 - Imputation ofPayments

(1) An obligor owing several
monetary obligations to the sameobligee may specify at the time of
payment the debt to which it intends
the payment to be applied. However,the payment discharges first any
expenses, then interest due andfinally the principal.

Lecture on Contract186

5. Imputation of payments (3/2)
Article 6.1.12 - Imputation ofPayments

(2) If the obligor makes no suchspecification, the obligee may, withina reasonable time after payment,
declare to the obligor the obligation
to which it imputes the payment,
provided that the obligation is due
and undisputed.

Lecture on Contract187

5. Imputation of payments (3/3)
 Article 6.1.12 - Imputation of Payments

 (3) In the absence of imputation under paragraphs(1) or (2), payment is imputed to that obligation
which satisfies one of the following criteria and in theorder indicated: (a) an obligation which is due or which is the firstto fall due; (b) the obligation for which the obligee has least
security; (c) the obligation which is the most burdensome
for the obligor;
 (d) the obligation which has arisen first.
 If none of the preceding criteria applies, payment is
imputed to all the obligations proportionally.

Lecture on Contract188

IX. Non-Performance of contract
Professor of KAGAYAMA Shigeru
Meijigakuin University

Remedies of non-performance
Right to performance
Termination
Right to damages
Lecture on Contract189

Flow of Contract
Start
No（not concluded）

Formation
Yes

Unjustenrichment

No（invalid/avoidable）

Validity（Continued）

No

Effective

Yes
Condition

DamagesNo（non performance）
PerformanceNo

ExcuseYes

No

Termination
Specific
performanceEnd
Lecture on Contract

190

Definition of non-performance
Article 7.1.1 - Non-Performance
DefinedNon-performance is failure by aparty to perform any of its
obligations under the contract,
including defective performanceor late performance.

Lecture on Contract

191

Type of non-performance Delayed (late) performance Impossibility of performance Imperfect (defective) performance Defect of object(luck of conformity)
 Defect of right Article 41 of CISG

 The seller must deliver goods which are freefrom any right or claim of a third party, unlessthe buyer agreed to take the goods subject tothat right or claim. However, if such right or
claim is based on industrial property or otherintellectual property, the seller's obligation isgoverned by article 42.
Lecture on Contract

192

Excuse of non-performance (1/3)
 Article 7.1.2 - Interference by the OtherParty A party may not rely on the non-performanceof the other party to the extent that such nonperformance was caused by the first party's
act or omission or by another event as towhich the first party bears the risk.
 A agrees to perform building work on B’s land
beginning on 1 February. If B locks the gate to theland and does not allow A entry, B cannot
complain that A has failed to begin work.

Lecture on Contract

193

Excuse of non-performance (2/3)
 Article 7.1.6 - Exemption Clauses

 A clause which limits or excludes one party's liability for
non-performance or which permits one party to tender
performance substantially different from what the otherparty reasonably expected may not be invoked if it would
be grossly unfair to do so, having regard to the purpose of
the contract.

 A tour operator offers at a high price a tour providing foraccommodation in specifically designated luxury hotels. A
term of the contract provides that the operator may alter theaccommodation if the circumstances so require. If theoperator puts up its clients in second class hotels, it will be
liable to them notwithstanding the contractual term since theclients expected to be accommodated in hotels of acategory similar to that which had been promised.

Lecture on Contract

194

Excuse of non-performance (3/3)
 Article 7.1.7 - Force Majeur (1) Non-performance by a party is excused ifthat party proves that the non-performance
was due to an impediment beyond its control
and that it could not reasonably be expected
to have taken the impediment into account at
the time of the conclusion of the contract or tohave avoided or overcome it or its
consequences.
 (4) Nothing in this article prevents a party fromexercising a right to terminate the contract or
to withhold performance or request interest on
money due.
Lecture on Contract

195

Exercise 8
 Facts
 On 13 August, seller(X) and purchaser(Y)concluded a contract of sale of seller's house.
 The content of contract was as follows: Time of performance: on 16 August Price of house: 8,000,000 yen.

 On 15 August, X found that his house had
been struck by lightning and burned out on 14
August.
 Question May Y terminate the contract?
 May Y claim damages of the benefit for
resale?
Lecture on Contract

196

Right to performance (1/3)
Article 7.2.1 - Performance ofmonetary Obligation
Where a party who is obliged to pay
money does not do so, the othermay require payment.

Lecture on Contract

197

Right to performance (2/3)
 Article 7.2.2 - Performance of Non-Monetary
Obligation

 Where a party who owes an obligation other than one to
pay money does not perform, the other party may require
performance, unless (a) performance is impossible in law or fact;
 (b) performance or, where relevant, enforcement isunreasonably burdensome or expensive; (c) the party entitled to performance may reasonably
obtain performance from another source; (d) performance is of an exclusively personal
character; or (e) the party entitled to performance does not require
performance within a reasonable time after it has, orought to have, become aware of the nonperformance.
Lecture on Contract

198

Right to performance (3/3)
Article 7.2.3 - Repair andReplacement of Defective
Performance

The right to performance includes inappropriate cases the right to require
repair, replacement, or other cure ofdefective performance. The provisionsof Articles 7.2.1 and 7.2.2 apply
accordingly.
Lecture on Contract

199

Condition of termination(1/3)
Article 7.3.1 - Right to Terminate
the Contract

(1) A party may terminate thecontract where the failure of theother party to perform an obligation
under the contract amounts to afundamental non-performance.

Lecture on Contract200

Condition of termination (2/3)
 (2) In determining whether a failure to perform
an obligation amounts to a fundamental nonperformance regard shall be had, in particular,
to whether

 (a) the non-performance substantially deprives theaggrieved party of what it was entitled to expect
under the contract unless the other party did notforesee and could not reasonably have foreseen such
result; (b) strict compliance with the obligation which has
not been performed is of essence under the contract; (d) the non-performance gives the aggrieved party
reason to believe that it cannot rely on the otherparty’s future performance; (e) the non-performing party will suffer
disproportionate loss as a result of the preparation or
performance if the contract is terminated.
Lecture on Contract201

Condition of termination (3/3)
 (3) In the case of delay the aggrieved party may
also terminate the contract if the other party fails
to perform before the time allowed under Article
7.1.5 has expired.
 Article 7.1.5 - Additional Period for Performance (3) Where in a case of delay in performance which is notfundamental the aggrieved party has given notice allowing
an additional period of time of reasonable length, it may
terminate the contract at the end of that period. If theadditional period allowed is not of reasonable length it shallbe extended to a reasonable length. The aggrieved party
may in its notice provide that if the other party fails toperform within the period allowed by the notice thecontract shall automatically terminate.

Lecture on Contract

202

Termination due to expiring an
additional period
Article 541 of Civil Code of Japan(Termination due to delayedperformance) If one of the parties does not perform his
obligation, the other party may fix areasonable period and demand its
performance, and may terminate thecontract, if no performance is effected
within such period.
Lecture on Contract203

Effect of termination (1/2)
 Article 7.3.5 - Effects of Termination in
General (1) Termination of the contract releases bothparties from their obligation to effect and toreceive future performance.
 (2) Termination does not preclude a claim fordamages for non-performance.
 (3) Termination does not affect any provision in
the contract for the settlement of disputes or any
other term of the contract which is to operate
even after termination.
Lecture on Contract204

Effect of termination (2/2)
 Article 7.3.6 - Restitution

 (1) On termination of contract either party may
claim restitution of whatever it has supplied,
provided that such party concurrently makes
restitution of whatever it has received. If
restitution in kind is not possible or appropriate
allowance should be made in money wheneverreasonable.
 (2) However, if performance of the contract has
extended over a period of time and thecontract is divisible, such restitution can only beclaimed for the period after termination has
taken effect.
Lecture on Contract

205

Condition of damages
Article 7.4.1 - Right toDamagesAny non-performance gives theaggrieved party a right todamages either exclusively or in
conjunction with any otherremedies except where the nonperformance is excused underthese Principles.
Lecture on Contract206

Effect of damages
 Article 7.4.2 - Full Compensation

 (1) The aggrieved party is entitled to fullcompensation for harm sustained as a result of
the nonperformance. Such harm includes both
any loss which it suffered and any gain of which
it was deprived, taking into account any gain to
the aggrieved party resulting from its avoidanceof cost or harm.
 (2) Such harm may be non-pecuniary andincludes, for instance, physical suffering or
emotional distress.

Lecture on Contract

207

Exercise 9
 Facts

 On 13 August, seller(X) and purchaser(Y) concluded acontract of sale of seller's house.
 The content of contract was as follows: Time of performance: on 16 August Price of house: 8,000,000 yen.
 On 14 August, X found that his house had been struckby lightning and burned out on 12 August.

 Question May X claim the price of house against Y?
 May Y terminate the contract?
 May Y claim damages of the benefit for resale?

Lecture on Contract208

X. Unjust enrichment
Professor of KAGAYAMA Shigeru
Meijigakuin University 1. General unjust enrichment
 2. Special unjust enrichment
A. benefiting unjust enrichment
B. violating unjust enrichment
C. redeeming unjust enrichment
Lecture on Contract209

1. General unjust enrichment
 A. Bona fide unjust enrichment

 Article 703 (Liability to return benefit of bona fide person)
 A person, who without any legal ground derives abenefit from the property or services of another andthereby causes loss to the latter, is bound to return
such benefit to the extent that it still exists.

 B. Mala fide unjust enrichment

 Article 704 (Liability to return benefit of mala fide person)
 A person enriched mala fide shall return the benefit
received by him with interest, and if there has been
any damage, he is bound also to makecompensation therefor.
Lecture on Contract210

2. Special unjust enrichment
 A. Benefiting unjust enrichment

 Unjust enrichment failing to become
contract B. Violating unjust enrichment

 Unjust enrichment failing to become torts

 C. Redeeming unjust enrichment

 Unjust enrichment failing to become
management of another’s affairs

Lecture on Contract

211

Type of unjust enrichment
1. Generalunjustenrichment

2. Special
unjustenrichment

Bona fide unjust
enrichment
Mala fide unjust
enrichment
A. Benefiting
unjust enrichment

failing to become

B. Redeeming
unjust enrichment

failing to become management

C. Violating unjust
enrichment

failing to become

Lecture on Contract

contractof another’s affairs

torts
212

A. Benefiting unjust enrichment
 General unjust enrichment
 Exception of general unjust enrichment
 Article 705 (Money paid aware of no-obligation)

 If a person, who has effected an act of performance
purporting thereby to discharge an obligation, was awareat the time that no such obligation existed, he cannot
demand the return of the subject-matter of such act ofperformance.

 Article 706 (Performance before due)

 If a person, who has effected an act of performance
purporting thereby to discharge an obligation which is notdue, he cannot demand the return of the subject matter ofsuch act of performance; however, if the obligor effects
such act of performance by mistake, the obligee shallreturn the benefit which he received therefrom.

Lecture on Contract213

B. Violating unjust enrichment (1/2)
 Article 191 (Responsibility to person entitled torestoration)

 In cases a thing possessed has been lost or damaged
by any cause for which the possessor is responsible,

 a mala fide possessor shall be liable to makecompensation to the person entitled to restoration for theentire damage, and a bona fide possessor shall be liable to the extent of
the enrichment he still enjoys by reason of such loss ordamage; a possessor who has no intention of holding as owner shall,
however, make compensation for the entire damage eventhough he may have been acting bona fide.

Lecture on Contract214

B. Violating unjust enrichment (2/2)
 Article 189 (Bona fide possessor and fruits) 1. A bona fide possessor acquires the fruits of the thing inpossession.
 2. If a bona fide possessor fails in an action on title, he isdeemed to have been a mala fide possessor as from thetIme of the commencement of the action.

 Article 190 (Mala fide possessor and fruits) 1. A mala fide possessor is liable to return the fruits and to
make compensation for the value of fruits which havealready been consumed by him, or have been damagedby his fault or have not been collected through his neglect.
 2. The provisions of the preceding paragraph shall apply
mutatis mutandis to possessors by force or in secret.
Lecture on Contract215

C. Redeeming unjust enrichment(1/2)
 Article 196 (Possessor's right to reimbursement ofexpenses) 1. When a possessor restores the thing possessed, he isentitled to reimbursement from the person demanding
restoration for the amount expended on its preservationand other necessary expenses; however, in cases thepossessor has acquired the fruits, ordinary necessary
expenses shall be borne by himself.
 2. In regard to the cost of improvement and other usefulexpenses paid on a thing in possession, the possessor is, tothe extent that the increase in value remains subsisting,entitled to reimbursement either of the amount expended
or of the amount by which the value of the thing has been
increased, at the option of the person demanding its
recovery. Against mala fide possessor, however, the Court
may, upon the application of the person demanding
recovery, allow a reasonable time.
Lecture on Contract216

Redeeming unjust enrichment (2/2)
 Article 707 (Performance by person other thanobligor) 1. If, in cases where a person other than the
obligor has effected performance of an
obligation by mistake, the obligee has bonafide destroyed documentary evidence or has
relinquished any security or has lost his claim
by prescription, the person who has effected
the performance cannot demand the return.
 2. The provisions of the preceding paragraphshall not preclude the person who has effected
performance from availing himself of the rightto obtain reimbursement from the obligor.
Lecture on Contract

217

Redeeming unjust enrichment (Art. 707)
Obligee has bona fide destroyed documentary evidence or has
relinquished any security or has lost his claim by prescription

ObligeeDifficulty ofRight in action
exercising the right

ObligorRedeeming
unjustenrichment

Third Party
Lecture on Contract218

Exercise 10
 Facts:

 X repaired a bulldozer for M, who had rented itfrom Y.
 M went bankrupt and the repaired bulldozer was
returned to Y. (Y sold it to A and got ¥1,700,000).
 X sued Y in order recover the fee(¥514,000) for the
repair on the ground of Y’s unjust enrichment.

 Question:

 X can recover the fee?

 Reference: Judgment of the Supreme Court, July 16,1970(Minshu 24-7-909)
Lecture on Contract219

Illustration of Exercise 10
X
Repairer

repaireda bulldozer

actio in rem verso ?

MLessee(bankrupt)
Right of redeem
Y
Lessor ofbulldozer

Lecture on Contract

220

Materials
Best 50 of frequently applicablearticles of Civil Code of Japan(1945-2013)

Lecture on Contract221

9. Best 30 Articles of Civil Code of Japan
Frequency of application(1945-2013) -> Next31-50
No.

Articles1
2

General tort law

34Comparative Negligence

Compensation

Employers’ liability

5

Non Performance ofcontract

6
7

General Principles

8

Pubic policy

910

Joint tortfeasor

Transfer real estate
and registration
Restriction of sublease

No.

ArticlesNo.

Articles11 Unjust Enrichment
Termination
12

21 Liability of land
22 Prescription of tort

13
14

Mistake

23
24

Duty of Care of
Mandatary

15

Apparent Agency

25

Loan for use

27

Action Paulienne

Lease

Sale

16
17

Next kin’s right forcompensation

18

Defamation

28

Acquisitive
prescription

19
20

Quasi-Mandate

29
30

Free of contract

Scope of Damages

Judicial Divorce

Lecture on Contract

Division of Inherited
26
Property

Action oblique222

Best 31-50 applied articles of Civil
Code of Japan
ArticlesArticles31

Responsibility of Guarantor

41

Reimbursement of Joint Guarantors

32

Distribution of Property

42

Assignability of Claims

33

Fictitious Manifestation

43

Extinctive Prescription

34

Apparent obligee

44

Set-off

35

Employment

45

Sharing of Living Expenses

36

Mortgages

46

Fraud or Duress

37

Usages and practices

47

Loans for Consumption

38

Parental Authority in the Case ofDivorce48

Performance for Illegal Causes

39

Assignment of Nominative Claim

49

Simultaneous Performance40

Deposits for Consumption

50

Work

Lecture on Contract223

1. General provision of Torts
Article 709(Damages in)A person who has intentionallyor negligently infringed any rightof others, or legally protectedinterest of others, shall be liable
to compensate any damages
resulting in consequence.
Lecture on Contract224

2. SolatiumArticle 710(Compensation for
Damages Other than Property)

Persons liable for damages under theprovisions of the preceding Article（Art.
709） must also compensate for damages
other than those to property,regardless of whether the body, liberty or
reputation of others have been infringed,or property rights of others have been
infringed.
Lecture on Contract225

3. Comparative NegligenceArticle 722(Method of Damages andComparative Negligence)(1) The provisions of Article 417 shallapply mutatis mutandis to compensation
for damages in tort.
(2) If a victim is negligent, the court may
determine the amount of compensation
by taking that factor into consideration.

Lecture on Contract226

4. Employers’ liability
 Article 715(Liability of Employers) (1) A person who employs others for a certain business shall be
liable for damages inflicted on a third party by his/her employeeswith respect to the execution of that business;
provided, however, that this shall not apply
 if the employer exercised reasonable care in appointing the employee or insupervising the business, or if the damages could not have been avoided even if he/she had exercised
reasonable care.

 (2) A person who supervises the business on behalf of theemployer shall also assume the liability under the preceding
paragraph.
 (3) The provisions of the preceding two paragraphs shall notpreclude the employer or supervisor from exercising their right toobtain reimbursement against the employee.
Lecture on Contract227

5. Non-Performance of contract
Article 415(Damages due to Default)
If an obligor fails to perform consistent
with the purpose of its obligation, theobligee shall be entitled to demanddamages arising from such failure.
The same shall apply in cases it has
become impossible to perform due toreasons attributable to the obligor.

Lecture on Contract228

6. Principles of Civil Code of Japnan
Article 1(Fundamental Principles)(1) Private rights must conform to
the public welfare.
(2) The exercise of rights andperformance of duties must be donein good faith.
(3) No abuse of rights is permitted.
Lecture on Contract229

7. Joint Tortfeasors Article 719(Liability of Joint Tortfeasors)

 (1) If more than one person has inflicteddamages on others by their joint tortious acts,
each of them shall be jointly and severally
liable to compensate for those damages.
The same shall apply if it cannot be
ascertained which of the joint tortfeasors
inflicted the damages.
 (2) The provisions of the preceding
paragraph shall apply to any person who
incited or was an accessory to theperpetrator, by deeming him/her to be oneof the joint tortfeasors.
Lecture on Contract230

8. Public Policy

Article 90(Public Policy)
A juristic act
with any purpose which isagainst public policy
is void.
Lecture on Contract231

9. Transfer of real estate andregistration
 Article 177(Requirements of Perfection of
Changes in Real Rights concerning
Immovable properties)

 Acquisitions of, losses of and changes in real
rights concerning immovable properties may
not be asserted against third parties,
 unless the same are registered pursuant tothe applicable provisions of the Real Estate
Registration Act (Law No. 123 of 2004) andother laws regarding registration.
Lecture on Contract23210. Restriction of subleasingArticle 612(Restrictions on Assignment
and Subleasing of Leasehold)(1) A lessee may not assign the lessee's
rights or sublease a leased Thing withoutobtaining the approval of the lessor.
(2) If the lessee allows any third party tomake use of or take the profits of a leased
Thing in violation of the provisions of thepreceding paragraph, the lessor may
cancel the contract.
Lecture on Contract233

11. Unjust enrichment
Article 703(Obligation to Return Unjust
Enrichment)A person who has benefited (hereinafterin this Chapter referred to as "beneficiary")
from the property or labor of others
without legal cause and has thereby
caused loss to othersshall assume an obligation to return that
benefit, to the extent the benefit exists.
Lecture on Contract234

12. Termination of contract
Delayed performance
Article 541(Right to Cancel for Delayed
Performance)In cases where one of the parties does not
perform his/her obligations,if the other party demands performanceof the obligations, specifying areasonable period and no performance istendered during that period,
the other party may cancel the contract.
Lecture on Contract235

13. MistakeArticle 95(Mistake)

Manifestation of intention has no effectwhen there is a mistake in any element of
the juristic act in question;
provided, however, that the person who
made the manifestation of intention may
not assert such nullity by himself/herself if
he/she was grossly negligent.

Lecture on Contract236

14. Leases
Article 601(Leases)

A lease shall become effective whenone of the parties promises to make acertain Thing available for the using andtaking the profits by the other party andthe other party promises to pay rent forthe same.

Lecture on Contract237

15. Apparent agency
Article 110(Apparent Authority of Act
Exceeding Authority)

The provision of the main clause of thepreceding Article shall apply mutatis
mutandis to the case wherean agent performs any act exceeding its
authority anda third party has reasonable grounds forbelieving that the agent has the authority.
Lecture on Contract238

16. Next kin’s right to compensation
Article 711(Compensation for
Damages to Next of Kin)

A person who has taken the life of anothermust compensate for damages tothe father, mother, spouse and children of
the victim,
even in cases where the property rights ofthe same have not been infringed.

Lecture on Contract239

17. Scope of Damages
Adequate causation
 Article 416(Scope of Damages)

 (1) The purpose of the demand for thedamages for failure to perform an obligation
shall be to demand the compensation fordamages which would ordinarily arise fromsuch failure.
 (2) The obligee may also demand thecompensation for damages which arise fromany special circumstances if the party did
foresee, or should have foreseen, suchcircumstances.
Lecture on Contract240

18. Defamation
Article 723(Recovery in
Defamation)
The court may, at the request of thevictim, order a person who defamedothers,to effect appropriate measures torestore the reputation of the victim inlieu of, or in addition to, damages.
Lecture on Contract24119. Quasi-Mandate
Article 656(Quasi-Mandate)
The provisions of this Section
shall apply mutatis mutandis tomandates of business that do
not constitute juristic acts.

Lecture on Contract242

20. Judicial Divorce Article 770(Judicial Divorce) (1) Only in the cases stated in the following items may either
husband or wife file a suit for divorce:(i) if a spouse has committed an act of unchastity;(ii) if abandoned by a spouse in bad faith;(iii) if it is not clear whether a spouse is dead or alive for not less than
three years;
 (iv) if a spouse is suffering from severe mental illness and there is noprospect of recovery; or (v) if there is any other grave cause making it difficult to continue themarriage.


 (2) A court may dismiss a suit for divorce if it finds continuing
the marriage reasonable taking into account all
circumstances, even in the case where there is a cause listed
in items (i) to (iv) inclusive of the preceding paragraph.
Lecture on Contract24321. Liability of land
 Article 717(Liability of Possessor and Owner of Structure on Land) (1)If any defect in the installation or preservation of any
structure on land causes damages to others, the possessor ofsuch structure shall be liable to the victims to compensate forthose damages; provided, however, that, if the possessor has
used necessary care to prevent the damages arising, theowner must compensate for the damages.
 (2) The provisions of the preceding paragraph shall apply
mutatis mutandis to cases where there is any defect in theplanting or support of bamboos and trees.
 (3) In the cases of the preceding two paragraphs, if there isanother person who is liable for the cause of the damages,
the possessor or owner may exercise their right to obtainreimbursement against such person.
Lecture on Contract244

22. Limitation of time ofliability of tort
 Article 724(Restriction of Period of Right toDemand Compensation for Damages in
Tort)

 The right to demand compensation fordamages in tort shall be extinguished by theoperation of prescription if it is not exercisedby the victim or his/her legal representative
within three years from the time when he/shecomes to know of the damages and theidentity of the perpetrator.
 The same shall apply when twenty years
have elapsed from the time of the tortious act.
Lecture on Contract245

23. Duty of care of a good manager
Article 644(Duty of Care of
Mandatary)
A mandatary shall assume a duty toadminister the mandated businesswith the care of a good manager
compliance with the main purport ofthe mandate.

Lecture on Contract246

24. Sale
Article 555(Sale)A sale shall become effectivewhenone of the parties promises totransfer a certain real rights tothe other party andthe other party promises to pay
the purchase money for it.
Lecture on Contract247

25. Loan for use Article 616(Mutatis Mutandis Applicationof Loans for Use) The provisions of Paragraph 1 of Article 594,
Paragraph 1 of Article 597 and Article 598
shall apply mutatis mutandis to leases.

 Article 593(Loans for Use)

 A loan for use shall become effective when
one of the parties receives a defined Thingfrom the other party
 by promising that he/she will return the Thingafter he/she has gratuitously made use ofand taken the profits of the same.
Lecture on Contract248

26. Division of Inherited Property
 Article 907(Agreement or Ruling for Division ofInherited Property etc.)

 (1) Joint heirs may at any time divide inheritedproperty by agreement except in the case where thisis prohibited by the decedent's will pursuant to theprovision of the following Article.
 (2) If agreement is not, or cannot be, settled
between joint heirs regarding division of inheritedproperty, each of the joint heirs may make anapplication to the family court for a division of theinherited property.
 (3) In the case referred to in the preceding
paragraph, if there is a special reason, the family
court may prohibit the division of the inheritedproperty, in whole or part, for a specified period.
Lecture on Contract249

27. Action Paulienne
 Article 424(Obligee's Right to Demand theRescission of Fraudulent Act) (1) An obligee may demand the court to rescind
any juristic act which an obligor commits
knowing that it will prejudice the obligee;
provided, however, that, this shall not apply tothe cases where any person who benefits fromsuch act, or any person who succeeds to such
benefit, did not know, at the time of such act or
succession, the fact that the obligee is to be
prejudiced.
 (2) The provision of the preceding paragraphshall not apply to a juristic act with a subject
other than property rights.
Lecture on Contract250

28. Acquisitive Prescription
 Article 162(Acquisitive Prescription of
Ownership) (1) A person who possesses any property of
another for 20 years peacefully and openly
with an intention to own shall acquire theownership thereof.
 (2) A person who possesses any property of
another for 10 years peacefully and openly
with an intention to own shall acquire theownership thereof if he/she was without
knowledge and was not negligent when thepossession started.
Lecture on Contract25129. Free of contract
Article 91(Manifestation ofIntention Inconsistent with Default
Rules)
If any party to a juristic act manifests
any intention which is inconsistent
with a provision in any laws andregulations not related to public
policy, such intention shall prevail.
Lecture on Contract252

30. Action oblique Article 423(Obligee's Subrogation)

 (1) An obligee may exercise the right vested
in the obligor in order to preserve his/her own
claim; provided, however, that, this shall not
apply to rights which are exclusive andpersonal to the obligor.
 (2) Until exercised by way of subrogation
admitted in a judicial proceeding, theobligee may not exercise the right set forth in
the preceding paragraph unless and until
his/her claim has become due; provided,
however, that, this shall not apply to any actof preservation.
Lecture on Contract253

31. Suretyship Article 446(Responsibility of Guarantor)

 (1) A guarantor shall have the responsibility toperform the obligation of the principal obligor when
the latter fails to perform such obligation.
 (2) No contract of guarantee shall be effective unless
it is made in writing.
 (3) If a contract of guarantee is concluded byelectromagnetic record (meaning a record
produced by electronic means, magnetic means, or
any other means unrecognizable by natural sensory
functions that is for computer data-processing use)which records the contents thereof, the contract ofguarantee is deemed to be made in writing, and theprovision of the preceding paragraph shall apply.

Lecture on Contract254

32. Distribution of Property
 Article 768(Distribution of Property) (1) One party to a divorce by agreement may claim a
distribution of property from the other party.
 (2) If the parties do not, or cannot, settle on agreementwith regard to the distribution of property pursuant to theprovision of the preceding paragraph, either party may
make a claim to the family court for a disposition in lieu ofagreement; provided that this claim for distribution ofproperty shall be extinguished at the expiration of two
years from the day of divorce.
 (3) In the case referred to in the preceding paragraph, thefamily court shall determine whether to make a distribution,and the amount and method of that distribution, taking into
account the amount of property obtained through thecooperation of both parties and all other circumstances.

Lecture on Contract25533. Fictitious Manifestation
Article 94(Fictitious Manifestation ofIntention)

(1) Any fictitious manifestation of
intention made in collusion with anotherparty(ies) shall be void.
(2) The nullity of the manifestation of
intention pursuant to the provision of thepreceding paragraph may not be
asserted against a third party without
knowledge.
Lecture on Contract25634. Apparent obligee
Article 478(Performance to a Holder of
Quasi-Possession of Claim)

Any performance made vis-a-vis a holderof quasi-possession of the claim
shall remain effective to the extent theperson who performed such obligationacted without knowledge, and was freefrom any negligence.

Lecture on Contract257

35. Employment
Article 623(Employment)An employment contract shallbecome effective whenone of the parties promises to theother party that he/she will engage
in work andthe other party promises to pay
remuneration for the same.
Lecture on Contract258

36. Morgage
 Article 369(Content of Mortgages)

 (1) A Mortgagee shall have the right toreceive the performance of his/her claim
prior to other obligees out of the immovable
properties that the obligor or a third party
provided to secure the obligation withouttransferring possession.
 (2) Superficies and emphyteusis can be thesubject matter of a mortgage. In such cases,
the provisions of this Chapter shall apply
mutatis mutandis.
Lecture on Contract259

37. Usages and Practices
Article 92(Custom Inconsistent with
Default Rules)
In cases there is any custom which isinconsistent with a provision in any
law or regulation not related to
public policy, if it is found that any
party to a juristic act has theintention to abide by such custom,such custom shall prevail.
Lecture on Contract260

38. Parental Authority
in the Case of Divorce Article 819(Person Who Has Parental Authority in the Case ofDivorce or Recognition)

 (1) If parents divorce by agreement, they may agree upon which parent shallhave parental authority in relation to a child.
 (2) In the case of judicial divorce, the court shall determine which parent shallhave parental authority.
 (3) In the case where parents divorce before the birth of a child, the mothershall exercise parental rights and duties; provided that the parties may agree
that the father shall have parental authority after the child is born.
 (4) A father shall only exercise parental authority with regard to a child of histhat he has affiliated if both parents agree that he shall have parental authority.
 (5) When the parents do not, or cannot, make the agreements referred to inparagraph (1), paragraph (3), and the preceding paragraph, the family court
may, on the application of the father or the mother, make a ruling in lieu ofagreement.
 (6) The family court may, on the application of any relative of the child, rulethat the other parent shall have parental authority in relation to the child if it
finds it necessary for the interests of the child.
Lecture on Contract261

39. Assignment of Nominative Claim Article 467(Requirement for Assertion of
Assignment of Nominative Claim against Third
Parties) (1) The assignment of a nominative claim may
not be asserted against the applicable obligor or
any other third party, unless the assignor gives a
notice thereof to the obligor or the obligor has
acknowledged the same.
 (2) The notice or acknowledgement set forth in
the preceding paragraph may not be asserted
against a third party other than the obligor unlessthe notice or acknowledgement is made using
an instrument bearing a fixed date.
Lecture on Contract262

40. Deposits for Consumption
 Article 666(Deposits for Consumption)

 (1) The provisions of Section 5 (Loans for
Consumption) shall apply mutatis mutandis tocases where a depositary may, under thecontract, consume the Thing deposited.
 (2) Notwithstanding the provisions ofParagraph 1 of Article 591 which shall apply
mutatis mutandis under the preceding
paragraph, if the contract referred to in thepreceding paragraph does not specify thetiming of the return, the depositor may
demand the return at any time.
Lecture on Contract263

41. Reimbursement of
Joint Guarantors
 Article 465(Right of Joint Guarantors to Obtain Reimbursement
for One Obligation)
 (1) Where there are several guarantors, if one guarantor
has paid the entire amount of the obligation or any amountexceeding the portion which is borne by such guarantor
because the principal obligation is indivisible, or because
there is a special provision that each guarantor should pay
the entire amount, the provisions of Articles 442 to 444
inclusive shall apply mutatis mutandis.
 (2) Except in cases provided in the preceding paragraph,
if one of the guarantors who are not jointly and severally
liable has paid the entire amount or any amountexceeding the portion to be borne by that guarantor, theprovisions of Article 462 shall apply mutatis mutandis.
Lecture on Contract26442. Assignability of Claims
 Article 466(Assignability of Claims)
 (1) A claim may be assigned; provided,
however, that, this shall not apply to the cases
where its nature does not permit the assignment.
 (2) The provisions of the preceding paragraphshall not apply in cases where the parties havemanifested their intention to the contrary;provided, however, that such manifestation of
intention may not be asserted against a third
party without knowledge.

Lecture on Contract26543. Extinctive Prescription
 Article 166(Running of Extinctive Prescription)
 (1) The extinctive prescription commences to run when it
has become possible to exercise the right.
 (2) The provision of the preceding paragraph shall notpreclude the commencement of acquisitive prescription
for the benefit of a third party who possesses any subject
matter which is a right subject to the time ofcommencement or a right subject to a condition
precedent, at the time of commencing such possession;
provided, however, that the holder of the right may
demand the possessor to give his/her acknowledgment at
any time to interrupt the prescription.

Lecture on Contract266

44. Set-off Article 505(Requirements for Set-offs)

 (1) In cases where two persons mutually owe to theother any obligation with the same kind of purpose, if
both obligations are due, each obligor may berelieved from his/her own obligation by setting off
each value thereof against the corresponding
amount of the obligation of the other obligor;
provided, however, that, this shall not apply to thecases where the nature of the obligation does not
permit such set-off.
 (2) The provisions of the preceding paragraph shallnot apply in cases where the relevant party manifests
his/her intention to the contrary; provided, however,that such manifestation of intention may not be
asserted against a third party without knowledge.
Lecture on Contract267

45. Sharing of Living Expenses
Article 760(Sharing of Living
Expenses)A husband and wife shall share theexpenses that arise from themarriage taking into account theirproperty, income, and all othercircumstances.

Lecture on Contract268

46. Fraud or Duress Article 96(Fraud or Duress)
 (1) Manifestation of intention which is induced byany fraud or duress may be rescinded.
 (2) In cases any third party commits any fraud
inducing any person to make a manifestation of
intention to the other party, such manifestation of
intention may be rescinded only if the other party
knew such fact.
 (3) The rescission of the manifestation of intention
induced by the fraud pursuant to the provision of
the preceding two paragraphs may not be
asserted against a third party without knowledge.
Lecture on Contract269

47. Loans for Consumption
Article 587(Loans for Consumption)
A loan for consumption shall become
effective when one of the parties
receives money or other things fromthe other party by promising thathe/she will return by means of things
that are the same in kind, quality andquantity.
Lecture on Contract27048. Performance for Illegal Causes
Article 708(Performance for Illegal
Causes)A person who has tendered
performance of an obligation for an
illegal cause may not demand thereturn of the thing tendered;provided, however, that this shall not
apply if the illegal cause existed
solely in relation to the Beneficiary.
Lecture on Contract271

49. Simultaneous Performance
Article 533(Defense for Simultaneous
Performance)

A party to a bilateral contract may refuse
to perform his/her own obligation until theother party tenders the performance of
his/her obligation;
provided, however, that this shall not
apply if the obligation of the other party is
not yet due.
Lecture on Contract272

50. Work
Article 632(Contracts for Work)A contract for work shallbecome effective when one ofthe parties promises to complete
work and the other party
promises to pay remuneration
for the outcome of the work.
Lecture on Contract273