10 Major Revisions to the Japanese Civil Code
Part One – Standard Terms and Conditions

By Shinya Yoshida and Peter Cassidy

On Friday, 26 May 2017, a bill to amend the portions of Japan’s Civil Code relating to claims passed the National Diet. This is the first major change to this area of the Code since it was first enacted in 1896, more than 120 years ago. The aim of this large-scale revision, which includes more than 200 revisions, is to update the Code for modern society, as there are many aspects of current society that are not dealt with in the current Code, such as Internet shopping and mobile phone contracts. Although the number of revisions is large, most are intended to codify principles that have already been confirmed in judicial precedents and academic writing. As the revision act was promulgated on 2 June, the revisions will take effect sometime before June 2020.

Despite the scale and importance of the revision, there seems to be a lack of commentary regarding the revisions in English. These changes are not only important for individuals and businesses located in Japan, but they may also affect the rights and obligations of companies that have trading relationships with Japanese companies. This series of columns will introduce ten areas of revision that are especially important. This first column will look at the new rules regarding the use of standard terms and conditions. The subsequent columns will discuss extinctive prescription periods, statutory interest rates and damages for late payment, cancellation of contracts, set-off of property damage claims, guarantees, contracts for work, e.g. construction, sales contracts, mistakes in contracts, and leases.

#1 Standard terms and conditions

Until now, the Japanese Civil Code has not had any provisions that dealt with standard terms and conditions, in other words the fine print that many companies use to create standard form contracts with large numbers of customers. Despite the lack of codified law, these standard terms and conditions appear everywhere in daily life and have become essential to the operation of modern business. As provisions that specifically regulate these terms and conditions have now been inserted into the Code, it is important to consider what effect the provisions will have on forms that your business uses in Japan. You may wish to consider introducing such forms into your business, or revising the forms already in use, before the new law comes into force. Individuals should also be aware of the effect the law will have on the contracts that they sign when purchasing products such as mobile phones, train passes and using internet shopping services.

  1. Agreements deemed to be “standard transactions”
    Under the revised Code, a “standard transaction” is a transaction conducted under a contract where part or all of the contract’s terms and conditions are contained in a standard set of terms that one party has prepared and uses in transactions with many different customers. So, for example, the contract forms used by courier companies, internet service providers and most other big businesses. When the parties agree to conduct a “standard transaction”, they will be deemed to have agreed to each of the individual terms contained in the standard terms and conditions form, regardless of whether they have read all of the terms. Specifically, this will occur when (1) there is an agreement that the terms and conditions form will apply to the contract (for example, the buyer signs a contract saying they accept the terms and conditions), or (2) the party which prepared the terms and conditions form indicates to the other party in advance that the terms and conditions will apply.
    However, there are some exceptions. The first is when the terms and conditions violate the principle of good faith in the way they limit the rights or increase the obligations of the buyer. The second is when the buyer has not previously been provided with a copy of the terms and conditions and they request the terms and conditions prior to entering the standard transaction, but that request is refused.

  2. Changes to terms and conditions
    The revised Civil Code provisions also allow changes to be made to the terms and conditions in certain circumstances. Until now, unilateral changes to the terms of conditions were permitted if the change benefited the other party, but raised a difficult problem if the change disadvantaged the other party. Under the revised provisions of the Code, if the terms and conditions themselves contain a provision stating that they are subject to change, then a change will be permitted if the contents of the change are reasonable, even when the other party is disadvantaged by the change. When making such a change to the terms and conditions, it is necessary to set a date that the change will come into effect and notify the relevant parties using the Internet or other appropriate methods of (a) that a change is being made, (b) the details of the change, and (c) the date the change will come into effect.

  3. Practical points to consider
    If you use standard forms in your business, now is the time to prepare to take full opportunity of the change to the law. If you include a change clause in your terms it will give you the flexibility to make changes to your standard terms and conditions when the need arises, without having to seek the consent of each of your customers.
    For people on the other side of the coin, you need to be aware that such standard terms and conditions will apply as long as you have been given an opportunity to read them. That includes ticking the “I agree” box online and being handed a sheet of fine print over the counter. Bear in mind that this will apply even if you cannot understand the Japanese that the contract is written in. You should also be aware that changes to terms and conditions can occur if allowed for under the contract.
    Finally, it is important to note that Articles 8 to 10 of the Consumer Contract Act list various types of contractual provisions that will be deemed invalid if included in a contract between a business operator and a consumer.