Japanese Civil Code (Law of Obligations) Reform Commission Draft Proposal

The English version of the Draft Proposals of the Reform Commission below was translated by Mina Shibahara (International Communications Advisor, INC Office) and edited by Kyoko Ishida (Assistant Professor, Waseda University).

The square brackets with an alphabet such as 【1.5.A】 propose policy for deliberation.

Although current Civil Code composes of five books, the Commission proposes revision of articles that relate to the Law of Obligations only. Therefore, the proposals below cover a part of Book I (General Principles) and Book III (Obligations) only.

A correction was made in 【3.1.1.67】(2) on January 18, 2010.


Book I General Principles	Chapter 1-4 (no proposal drafted) Chapter 5 Juridical acts Chapter 6 Calculation of Time Chapter 7 Prescription	PDF

Book III Obligations	Part One. Contracts and Obligations in General Chapter 1 Obligations Based on Contracts Chapter 2 Preservation of Non-Exempt Property Chapter 3 Extinguishment of Claims Chapter 4 Movement of the Parties Chapter 5 Negotiable Instruments Chapter 6 Claim and Obligation Relations of Multiple Parties Chapter 7 Guarantees	PDF
	Part Two. Specific Contracts Chapter 1 Sale Chapter 2 Exchange Chapter 3 Gifts Chapter 4 Leases Chapter 5 Loans for Use Chapter 6 Loans for Consumption Chapter 7 Finance Leases Chapter 8 Rendering of Services Chapter 9 Contracts to Produce Work Chapter 10 Mandates Chapter 11 Deposits Chapter 12 Employment Chapter 13 Partnerships Chapter 14 Life Annuities Chapter 15 Settlement Chapter 16 Supplementary Rules	PDF
	Part Three. Claims Based on Law	PDF

	Chapter 5 Juridical acts 【1.5.A】(Juridical act) The Commission proposes as follows. (1) The concept of a “juridical act” shall be maintained. (2) There will be no specific provisions corresponding to a definition provision or a classification provision with respect to a juridical act. (3) When prescribing provisions on a “juridical act”, the division of sections in the present Civil Code establishing Division 1 “General Provisions” and Division 2 “Manifestation of Intention” shall be maintained. 【1.5.B】(Liability for damages of the person making the mistake) The Commission proposes that, as with the present Civil Code, there will be no specific provisions on the liability for damages of the person making the mistake, and this shall be left to the general provisions relating to liability for damages. 【1.5.C】(Distinction between mandate and representation) The Commission proposes that, as with the present Civil Code, a distinction is to be made between the internal relationship between the parties to a mandate contract and the external relationship with the other party to the act which is performed, and the external relationship of the latter shall be provided for as a matter of “representation” independently of the internal relationship of the former. With respect to the internal relationship, this shall generally be left to the rules for each contract in the Obligations Book; however, when closely relating the rules on internal relationships to the rules on external relationships, this shall be provided for along with the rules on “representation”. 　【1.5.D】(Agency and statutory representation) The Commission proposes that as with the present Civil Code, with respect to “representation,” rules shall be established for both agency and statutory representation and, where necessary, particular rules shall be stipulated for each. 【1.5.E】(Construction of rules on representation and delegation) The Commission proposes as follows. (1) Authority shall be positioned as a matter on a par with representation and the division corresponding to “Representation” in the present Civil Code shall be replaced with “Representation and Authority.” (2) The rules concerning “representation” shall be divided into the “basic principles” of representation, “apparent agency” and “unauthorized representation” and shall be stipulated in such order. 【1.5.F】(Representation for a commercial act) The Commission proposes that the rules of Article 504 of the Commercial Code shall not be made into general law. 【1.5.G】(Unspecified principals) The Commission proposes that there shall be no particular provisions on unspecified principals. 【1.5.H】(Positioning of rules relating to sub-agency) The Commission proposes that, with respect to the appointment of a sub-agent by the agent, there shall be a distinction between the internal relationship between the agent and the sub-agent and the external relationship with the other party, and matters necessary for the rules on the external relationship of the latter shall be provided for in the division on “Representation” and the rules on the internal relationship of the former shall be left to the rules for each contract in the Obligations Book. 【1.5.I】(Responsibility of the representative in cases of appointment of a substitute representative) The rules corresponding to Article 105 of the present Civil Code relating to the responsibility of the agent in cases where a substitute representative has been appointed shall be left to the rules for each contract【3.2.10.05】(2), (3) in the Obligations Book. 【1.5.J】 (Special cases of grounds for extinguishment of the authority of representation granted through mandates of commercial acts) The Commission proposes that the rules corresponding to Article 506 of the Commercial Code shall remain in the Commercial Code; however, further careful deliberation is required on the side of the Commercial Code with respect to the necessity of establishing provisions corresponding to Article 506 of the Commercial Code and its contents. 【1.5.K】(Classifications of apparent representation) The Commission proposes as follows. (1) With respect to apparent representation, separate classifications shall be provided for as with the present Civil Code, and an all-inclusive provision shall not be established. (2) In this regard, the three classifications of the present Civil Code – apparent representation through indication of granted authority of representation, apparent representation of acts outside the area of authority and apparent representation after extinguishment of the authority of representation – shall be maintained and revisions shall be confined to only those that are necessary. 【1.5.L】(Indirect representation) The Commission proposes that except for matters related to the delegation of power, indirect representation shall be subject to the rules concerning intermediated contracts (mandate contracts), and general provisions shall not be established. Division 1 General Principles 【1.5.01】(Effect of a juridical act) In accordance with the provisions of this Code and other laws and regulations, a juridical act shall take effect based on a manifestation of intention. 【1.5.02】(Public policy) (1) A juridical act which is contrary to public policy is void. (2) A juridical act whose object injures a party’s rights or acquires an unfair benefit by utilizing such party’s distress, dependence or state of oppression or by utilizing such aspects as the party’s lack of consideration, experience or knowledge, is void. 【1.5.03】(Juridical acts and the provisions of laws and regulations) If the parties to a juridical act have manifested an intention which differs from the provisions of laws and regulations, such intention shall prevail; provided, however, that this shall not apply when the provisions relate to public policy. 【1.5.04】(Juridical acts and custom) If there is a custom relating to a juridical act, such custom shall prevail; provided, however, that this shall not apply when such custom is contrary to public policy (including cases where the custom is contrary to the provisions of laws and regulations relating to public policy), or if it is recognized that the parties manifested an intention which differs from such custom. 【1.5.05】(Revision of Article 3 of the Act on the General Rules Relating to the Application of Law) Article 3 of the Act on the General Rules Relating to the Application of Law shall be revised as follows. Custom shall have an effect equivalent to law except when such custom is contrary to public policy (including cases where the custom is contrary to the provisions of laws and regulations relating to public policy). 【1.5.06】(Revision of Article 1, paragraph 2 of the Commercial Code) [Proposal A] Article 1, paragraph 2 of the Commercial Code shall be deleted. [Proposal B] Article 1, paragraph 2 of the Commercial Code shall be revised as follows. With respect to commercial affairs, where there are matters which are not provided for in this Code, the provisions of the Civil Code shall apply. 【1.5.07】(Definition of consumer/business operator) (1) In order to distinguish the applicable subjects of the special provisions relating to consumer contracts, the provisions for the definitions of consumer and business operator shall be placed together as a pair. (2) With respect to the definitions of consumer/business operator, they shall be based on the following standpoints. (a) Consumer: an individual who concludes a contract for activities other than a business activity (or a professional activity). (b) Business operator: a juridical person or other organization An individual who concludes a contract for a business activity (or professional activity). (3) When utilizing the concept of a business operator for a contract other than a consumer contract, the above definition shall be used, and when there is a necessity to narrow down the requirements, the wording “as a commercial (operation),” “within the scope of a commercial (operation)” or other wording shall be added. 【1.5.08】(Definition of consumer contract) (1) As used in this Act, a “consumer contract” is a contract concluded between a consumer and a business operator. (2) The provisions prescribed with regard to a consumer contract do not apply to labor contracts. Division 2 Manifestation of Intention 【1.5.09】(Mental capacity) (1) A manifestation of intention which is made when in a state lacking the ability to appreciate the meaning of performing the juridical act (hereinafter referred to as “mental capacity”) may be rescinded. (2) In cases of (1) above, if the person manifesting an intention caused the temporary lack of mental capacity with intent or gross negligence, the manifestation of intention may not be rescinded; provided, however that this shall not apply if the other party knew or was grossly negligent in not knowing that the person manifesting the intention was lacking in mental capacity. * Some views were expressed on establishing provisions on the effect as follows. (1) A manifestation of intention made while in a state lacking the capacity to appreciate the meaning of performing the juridical act (hereinafter referred to as “mental capacity”) is void. (2) In cases of (1) above, if the person manifesting an intention caused the temporary lack of mental capacity with intent or gross negligence, the manifestation of intention shall not preclude the effect; provided, however, that this shall not apply if the other party knew or was grossly negligent in not knowing that the person manifesting the intention was lacking in mental capacity. 【1.5.10】(Special provisions for acts relating to daily life) An act, which comes under the proviso of Article 9 of the present Civil Code, may not be rescinded even if performed while in a state lacking mental capacity. 1 One view was expressed on establishing provisions with regard to the effect as follows. An act, which comes under the proviso of Article 9 of the present Civil Code, shall not preclude the effect even if performed while in a state lacking mental capacity. 2 With regard to this proposal and the proposal of 1, one view was expressed that special provisions shall not be established relating to acts coming under the proviso of Article 9 of the present Civil Code. 【1.5.11】(Mental reservation) (1) If a person manifesting an intention makes the manifestation of intention knowing it not to be true, such manifestation of intention is void, only when falling under one of the following items: (a) The other party knows that such intention is untrue; or (b) The other party could have known that such intention is untrue; provided, however, that this does not apply if the person manifesting the intention concealed the fact that the intention was untrue in order to mislead the other party into thinking that the person manifesting the intention had a true intention. (2) The invalidity of a manifestation of intention pursuant to (1) may not be asserted against a third party without knowledge. 【1.5.12】(Fictitious manifestation of intention) (1) A fictitious manifestation of intention made in collusion with the other party is void. (2) The invalidity of a manifestation of intention pursuant to (1) may not be asserted against a third party without knowledge. 【1.5.13】(Mistakes) (1) In cases where a manifestation of intention, which differs from a true intention, is made with regard to one of the parties or the contents of a juridical act through a mistake, if it can be believed that the person manifesting the intention would not have made the manifestation of intention if there had been no such mistake and, where it is reasonable to believe so, such manifestation of intention may be rescinded. (2) In cases where at the time of manifesting the intention, the nature of a person or a thing or some other fact relating to such manifestation of intention was wrongly recognized, only when such recognition is reflected in the contents of a juridical act shall it be deemed to fall under the manifestation of intention made pursuant to the mistake of (1). (3) In cases of (1) and (2), if there is gross negligence on the part of the person manifesting the intention, such manifestation of intention may not be rescinded; provided, however, that this shall not apply when falling under one of the following items: (a) The other party knows about the mistake of the person manifesting the intention; (b) The other party is grossly negligent in not knowing about the mistake of the person manifesting the intention; (c) The other party brought about the mistake of the person manifesting the intention; or (d) The other party made the same mistake as the person manifesting the intention. (4) The rescission of a manifestation of intention pursuant to (1), (2) and (3) may not be asserted against a third party without knowledge or fault. 【1.5.14】(Special provisions on electronic consumer contracts) (1) In cases of【1.5.13】(1) and (2), with regard to the manifestation of intention for the offer or acceptance of an electronic consumer contract made by a consumer, when a mistake falls under any of the following, even if there is gross negligence on the part of the person manifesting the intention, such manifestation of intention may be rescinded; provided, however, that this shall not apply in cases where the business operator which is the other party to the electronic consumer contract (including a person who is entrusted, the same shall apply hereinafter), with regard to the manifestation of intention for offer or acceptance, took measures, via the screen through electronic means, to ask for confirmation of whether or not a manifestation of intention for offer or acceptance was to be made, or where a declaration of intention was made by the consumer to the business operator to the effect that there was no need to take such measures: (a) At the time of the consumer making a transmission using its computer, the consumer did not intend to manifest an intention to offer or accept an electronic consumer contract with the business operator; or (b) At the time of the consumer making a transmission using its computer, the consumer intended to make a manifestation of intention whose object differed from the manifestation of intention for the offer or acceptance of such electronic consumer contract. (2) In (1), an “electronic consumer contract” is a contract which has been concluded between a consumer and a business operator through electronic means via a computer screen and, through the consumer making a transmission using its computer complying with the procedures displayed on the screen by the business operator or the person who has been entrusted, the manifestation of intention for such offer or acceptance is made. (3) In (1), “electronic means” is a method using electronic information processing systems or any other method using information communications technology. 【1.5.15】(Misrepresentation) (1) With regard to a manifestation of intention made to the other party, in cases where the other party made a representation which differed from fact regarding matters which would ordinarily influence the decision of the person manifesting the intention as to whether or not to make the manifestation of intention, and such person manifested an intention based on an incorrect understanding of the facts, such manifestation of intention may be rescinded. (2) With regard to the manifestation of intention made to the other party, in cases where a third party made a representation which differed from fact regarding matters which would ordinarily influence the decision of the person manifesting the intention as to whether or not to make the manifestation of intention, and such person manifested an intention based on an incorrect understanding of the facts, such manifestation of intention may be rescinded only when falling under one of the following items: (a) The third party serves as a representative for the other party or is some other person for whose act the other party should bear responsibility; or (b) At the time of the person manifesting the intention making the manifestation of intention, the other party knew or could have known that the third party had made a representation to the person manifesting the intention which differed from fact. (3) The rescission of the manifestation of intention pursuant to (1) and (2) may not be asserted against a third party who is without knowledge or fault. Cases falling under Article 4, paragraph 2 of the Consumer Contract Act (failure of notification of a disadvantageous fact) would constitute the “misrepresentation” denoted here, and therefore rescission would be permitted in accordance with【1.5.15】, but one view was also expressed that it would be preferable to explicitly confirm to such effect. 【1.5.16】(Fraud) (1) If the person manifesting the intention was induced to do so through fraud, it may rescind such manifestation of intention. (2) If through information, which should have been provided under the principle of good faith not being provided, or an explanation, which should have given under the principle of good faith not being given, the person manifesting the intention was deliberately made to make a mistake or the mistake of the person manifesting the intention was deliberately abused leading to the person making the manifestation of intention, it shall be deemed that the manifestation of intention was made through the fraud of (1). (3) If a third party committed fraud with regard to the manifestation of intention made to the other party, such manifestation of intention may be rescinded only when falling under one of the following: (a) The third party serves as a representative for the other party or is some other person for whose act the other party should bear responsibility; or (b) At the time of the person manifesting the intention making the manifestation of intention, the other party knew or could have known that such third party had committed fraud. (4) The rescission of the manifestation of intention pursuant to (1), (2) and (3) may not be asserted against a third party who is without knowledge or fault. 【1.5.17】(Duress) If the person manifesting the intention was induced to do so under duress, it may rescind such manifestation of intention. 【1.5.18】(Special provisions on consumer contracts – misconception based on the provision of a conclusive evaluation) (1) At the time of the business operator soliciting for the conclusion of a consumer contract, if through providing the consumer with a conclusive evaluation on uncertain items with regard to the goods, rights, services or other things which were the object of such consumer contract, the consumer was under the misconception that the details of the conclusive evaluation so provided were definite and, through such misconception, manifested an intention to offer or accept the consumer contract, such manifestation of intention may be rescinded. (2) If a third party provided the consumer with the conclusive evaluation in (1), the manifestation of intention to offer or accept such consumer contract may be rescinded only when falling under one of the following items: (a) Such third party serves as the representative or some other person of such business operator and the business operator is the person who should bear responsibility for such act; or (b) At the time of the consumer manifesting the intention to offer or accept the consumer contract, the business operator knew or could have known that the third party had provided a conclusive evaluation. (3) A representative for the consumer pertaining to the conclusion of the consumer contract (including sub-agent (including those persons who are appointed as sub-agents through two or more layers)) is deemed to be the consumer with regard to the application of (1) and (2). (4) The rescission of the manifestation of intention for the offer or acceptance of a consumer contract pursuant to (1), (2) and (3) may not be asserted against a third party without knowledge or fault. 【1.5.19】(Special provisions on consumer contracts – distress) (1) At the time of the business operator soliciting for the conclusion of a consumer contract, aside from when falling under one of the following acts, if the business operator continued to solicit the consumer despite the consumer indicating a desire to the effect that continuation of the solicitation was unwanted, and through the business operator continuing the solicitation the consumer was distressed into manifesting the intention to offer or accept such consumer contract, such manifestation of intention may be rescinded: (a) The consumer indicated a desire to the business operator to the effect that the business operator leave the residence or the place where the business was being conducted but the business operator did not leave such place; or (b) The consumer indicated a desire to the effect that it wished to leave the place where such business operator was soliciting for conclusion of the consumer contract but the business operator did not allow the consumer to leave such place. (2) 【1.5.18】 (2), (3), and (4) shall apply mutatis mutandis to (1). 【1.5.20】(Effective time of the manifestation of intention) (1) A manifestation of intention to which there is another party takes effect when the manifestation of intention reaches the other party. (2) When falling under one of the following items, except for cases where otherwise agreed or where there is a custom, the manifestation of intention is deemed to have reached as in (1) at that time: (a) In cases where the other party or a person who has the authority to receive the manifestation of intention for the other party has recognized the manifestation of intention; or (b) Aside from cases where the manifestation of intention has arrived in the receiving equipment set up or specified by the other party or a person who has the authority to receive the manifestation of intention for the other party, cases where the other party or the person who has the authority to receive the manifestation of intention for the other party was in an environment where it could recognize the manifestation of intention. (3) In cases where a manifestation of intention to which there is another party is made using a means which usually should have reached the other party, if the other party did not perform an act necessary for the delivery without justifiable reason and as a result the manifestation of intention did not reach the other party, such manifestation of intention is deemed to have reached at the time the usual delivery would have been made. 【1.5.21】(Death or lack of mental capacity/ limits on the capacity to act of the person manifesting an intention) The effect of a manifestation of intention made to a person at a distance shall not be precluded even if the person manifesting the intention dies or comes to lack mental capacity after making the manifestation of intention, or limits have been placed on the capacity to act with regard to such manifestation of intention. 【1.5.22】(Capacity to receive the manifestation of intention) If the other party to a manifestation of intention was in a state lacking mental capacity at the time of receiving such manifestation of intention, or was a minor or an adult ward, such manifestation of intention may not be asserted against the other party; provided, however, that this shall not apply after its statutory representative has become aware of such manifestation of intention. 【1.5.23】(Manifestation of intention by public notice) (1) If the person manifesting the intention is unable to identify the other party or does not know the whereabouts of the other party, the manifestation of intention may be made through means of a public notice. (2) The public notice in (1) shall be in accordance with the provisions of the Code of Civil Procedure regarding service by public notice (Law No. 109 of 1996), shall be posted on the court notice board and the fact of the posting shall be published at least once in the Official Gazette; provided, however, that if the court deems it appropriate, the court may order a posting on the notice board of the city office, ward office, or town or village office or any equivalent facility in lieu of the publication in the Official Gazette. (3) The manifestation of intention by means of the public notice is deemed to have reached the other party upon the elapse of two weeks since the day the fact of the last posting was published in the Official Gazette, or the day on which any posting in lieu of such publication commenced; provided, however, that the service of such notice shall not take effect if the person manifesting the intention was negligent in not identifying the other party or not knowing the whereabouts of the other party. (4) The procedure for the public notice shall be subject to the jurisdiction of the summary court which has jurisdiction over the area where the residence of the person manifesting the intention is located in cases where the other party cannot be identified, or over the area where the last known residence of the other party is located where the whereabouts of the other party is unknown. (5) The court shall require the person manifesting the intention to pay for the costs for the public notice in advance. Division 3 Representation and Authority Section 1 Representation Subsection 1 Basic Principles 【1.5.24】(Basic requirements of representation) (1) In cases where the representative is granted the authority (hereinafter referred to as “authority of representation”) by the principal to perform a juridical act in the name of the principal (hereinafter, in such case the representation is “agency” and the authority of representation is the “power of agency”) or possesses authority in accordance with the provisions of law (hereinafter, in such case the representation is “legal (statutory) representation” and the authority of representation is the “authority of legal (statutory) representation”, the juridical act which was performed by the representative, within the scope of authority of representation, and was indicated as being performed in the name of the principal shall have effect directly on the principal. (2) (1) applies mutatis mutandis to a juridical act performed by a third party to the representative. * There are some views that of (1), the “juridical act” of the “juridical act which was performed by the representative, within the scope of authority of representation, and was indicated as being performed in the name of the principal shall have effect directly on the principal” should be “manifestation of intention” and of (2) above the “juridical act” of “applies mutatis mutandis to a juridical act performed by a third party to the representative” should be “manifestation of intention”. 【1.5.25】(In cases of non-disclosure) (1) Even in cases where the representative does not indicate that the representative is acting in the name of the principal, if the other party knows or could have known that the representative was acting in the name of the principal, the representative is deemed to have acted in the name of the principal. (2) A juridical act, which was performed by the representative without indicating that it was in the name of the principal, is deemed to have been performed in the name of the representative itself except for the cases in (1). 【1.5.26】(Defect in a juridical act in representation) (1) The existence or non-existence of a fact which would have influenced the effect of the manifestation of intention made by the representative shall be determined with reference to the representative. (2) In cases of agency, the principal may not assert that the representative (hereinafter, in such case the representative is the “agent”) did not know of circumstances of which the principal itself knew; provided, however, that this shall not apply when it cannot be expected that the principal would have informed the agent of the circumstances. (3) In cases of agency, (2) also applies mutatis mutandis to circumstances of which the principal did not know through negligence. 【1.5.27】(Capacity to act of the representative) (1) The representative need not be a person with the capacity to act. (2) With respect to a juridical act which should have effect directly on the principal in accordance with 【1.5.24】, the effect shall not be precluded by reason of the representative being a person with limited capacity to act. * One view was expressed that the following provisions should be established. (1) The principal may grant authority of representation to a person with limited capacity to act. In such case, with respect to a juridical act which should have effect directly on the principal in accordance with【1.5.24】, the effect shall not be precluded by reason of the representative being a person with limited capacity to act. (2) If a person who possesses the authority of representation through the provisions of laws and regulations (hereinafter referred to as “statutory representative”) is a person with limited capacity to act, a juridical act performed by such statutory representative in the name of the principal may be rescinded only if such act could be rescinded if the statutory representative had performed it in its own name. 【1.5.28】(Scope of the authority of representation) (1) Aside from the acts fixed in the contract which was the reason for the power of agency being granted, the agent has the authority to perform acts which are necessary in achieving such objective. (2) If with respect to a person who possesses the authority of representation in accordance with the provisions of laws and regulations (hereinafter referred to as “statutory representative”), the scope of the authority of representation is not clear through the provisions of laws and regulations, the statutory representative only possesses the authority to perform the following acts: (a) An act of preservation; (b) An act whose object is the utilization or improvement of a thing or right which forms the object of representation within the limits of not changing the nature of the thing or right. 【1.5.29】(Appointment of a sub-agent by an agent) An agent may not appoint a sub-agent; provided, however, that this shall not apply if the consent of the principal has been acquired or if it is not reasonable to expect the agent to perform the act relating to the power of agency itself. 【1.5.30】(Appointment of a substitute representative by a statutory representative) (1) A statutory representative may appoint a substitute representative. (2) If a statutory representative has appointed a substitute representative, the statutory representative shall bear responsibility with respect to the acts of the substitute representative; provided, however, that if the statutory representative appointed a sub-agent in cases where it was not reasonable to expect the statutory representative itself to perform the act relating to the authority of representation, the statutory representative shall bear responsibility toward the principal only for such appointment and supervision. 【1.5.31】(Authority of the substitute representative) (1) If a substitute representative performs a juridical act within its scope of authority in the name of the principal, this shall have direct effect on the principal. (2) The substitute representative shall have the same authority and shall assume the same duties as the representative with respect to a third party. 【1.5.32】(Acts of conflicts of interest) (1) If a representative performs one of the following juridical acts, the principal may assert that the effect of the juridical act should not be imposed on it; provided, however, that this shall not apply if the principal had given consent to the representative to perform such juridical act or when it is clear that the interests of the principal have not been injured: (a) The representative performs a juridical act with itself representing the principal; (b) The representative performs a juridical act representing both the principal and the other party; or (c) Juridical acts other than those in (a) and (b) where there is a conflict of interest between the principal and the representative or with an interested party. (2) If with regard to the representative performing the juridical act in (1) (excluding the juridical acts of (1) (a) and (b)) the other party was in good faith and, there was no gross negligence, the principal may not assert that the effect of the juridical act should not be imposed on it. (3) In cases of (1), if a third party was in good faith with regard to the juridical act of (1) being performed and there was no gross negligence, the principal may not assert that the effect of the juridical act should not be imposed on it. 【1.5.33】(Abuse of the authority of representation) (1) In cases where a representative abuses its authority of representation by performing a juridical act with the other party within the scope of its authority of representation for the purpose of looking after its own interests or the interests of another person, if the other party knew of the fact of such abuse or was grossly negligent in not knowing such fact, the principal may assert that the effect of the act should not be imposed on it. (2) With respect to (1), in cases where the authority of representation abused by the representative was the authority of statutory representation, if the other party knew of the fact of such abuse or was negligent in not knowing such fact, the principal may assert that the effect of the act should not be imposed on it. (3) In cases of (1) and (2), if a third party was in good faith with regard to the fact of such abuse and there was no gross negligence, the principal may not assert that the effect of the act should not be imposed on it. 【1.5.34】(Grounds for extinguishment of the authority of representation) (1) Except in cases where there is a particular agreement, the power of agency is extinguished when the contract which was the reason for the power of agency being granted terminates; provided, however, that in accordance with【3.2.10.17】, if the agent or its heir, or a statutory representative must effect necessary dispositions, the power of agency shall not be extinguished within such extent. (2) The authority of statutory representation is extinguished through the following grounds: (a) The death of the principal or the death of the representative; (b) The representative becoming subject to a ruling of commencement of bankruptcy proceedings; and (c) The representative becoming subject to an order for commencement of guardianship. Subsection 2 Apparent Representation 【1.5.35】(Apparent representation through indication of granted authority of representation) (1) If a person indicates to the other party to the effect that the authority of representation has been granted to another person, the principal person may not assert that the effect of the act should not be imposed on it with regard to the acts performed to the other party by the other person within the scope of the authority of representation, except when falling under one of the following items: (a) The person who indicated to the other party to the effect that the authority of representation had been granted to another person did not know that the authority of representation which was indicated had not been granted; provided, however, that this shall not apply if there was gross negligence on the part of such person; (b) The other party knew that the indicated authority of representation had not been granted; or (c) The other party did not know, through negligence, that the indicated authority of representation had not been granted; provided, however, that if the person who indicated to the other party to the effect that the authority of representation had been granted to another person, knowing that the indicated authority of representation had not been granted, made the indication in order to mislead the other party into thinking that it had been granted. (2) In cases where the person indicated to the other party to the effect that the authority of representation had been granted to another person, even if the other person performed acts with the other party beyond the scope of the authority of representation, if there was justifiable reason for the other party to believe that the other person possessed the authority of representation with regard to such act, it shall be deemed to be equivalent to (1). (3) (1) and (2) shall apply mutatis mutandis to cases where the other person was given permission to perform juridical acts to the other party using the principal person’s own name. (4) In cases where the person stated in writing (in this proposal【1.5.35】including the electronic records of【3.1.1.04】) to the effect that the authority of representation was to be granted to another person and such other person presented the writing to the other party, it shall be presumed that an indication was made to the other party to the effect that the authority of representation described in writing had been granted. Moreover, in cases where the person stated in writing to the effect that the authority of representation had been granted without specifying the representative, and the person who acquired the writing presented the writing to the other party, it shall be presumed that an indication was made to the other party to the effect that the authority of representation described in the writing had been granted to such person. 【1.5.36】(Apparent representation of acts outside the area of authority) In cases where the representative performs acts outside the area of authority, if the other party believed that the representative had the authority of representation for such act and, taking into consideration the following circumstances and other factors, it is recognized that there was justifiable reason to have believed as such, the principal may not assert that the effect of such act should not be imposed on it: (a) The existence of circumstantial matters which would induce presumption that there was authority of representation for the act; (b) The process by which the representative acquired the circumstantial matters of (a) and the extent to which the principal was involved; (c) The statements and conduct of the principal toward the representative’s act; (d) The extent of the benefit acquired by the representative through the act, the extent of the disadvantage or the burden to be assumed by the principal and the existence and extent of any circumstances which suggest that the representative possesses the authority of representation with regard to the act; and (e) The existence and the extent of acts which were performed by the other party to investigate or confirm the authority of representation granted to the representative. 【1.5.37】(Apparent representation after extinguishment of the authority of representation) (1) In cases where, despite the complete or partial extinguishment of the authority of representation granted by the principal, the representative performs acts within the scope of the authority of representation as though having such authority of representation, and the other party does not know of the complete or partial extinguishment of the authority of representation, the principal may not assert that the effect of such act should not be imposed on it; provided, however, that this shall not apply if the other party does not know, through negligence, that the authority of representation of the representative has been completely or partially extinguished. (2) In cases where, despite the complete or partial extinguishment of the authority of representation granted by the principal, the representative performs acts outside the scope of the authority of representation as though having such authority of representation, and the other party does not know of the complete or partial extinguishment of the authority of representation and, taking into consideration the circumstances in【1.5.36】(a) to (e), there is justifiable reason for the other party to have believed that the representative had authority of representation for such act, the principal may not assert that the effect of such act should not be imposed on it; provided, however, that this shall not apply if the other party did not know, through negligence, that the authority of representation of the representative had been completely or partially extinguished. Subsection 3 Unauthorized Representation 【1.5.38】(Unauthorized representation for a contract) (1) If a person who does not have the authority of representation (hereinafter referred to as an “unauthorized representative”) concludes a contract as the representative for another person, the principal may ratify the contract; provided however, that if the principal refuses ratification, it may not ratify the contract afterwards. (2) In cases of (1), if the principal ratifies the contract, unless where otherwise agreed, the contract shall have a retroactive effect on the principal as from the time of concluding the contract; provided, however, that the rights of a third party are not injured. (3) The ratification or refusal of ratification may be asserted against the other party only when it was made to such other party; provided, however, that this shall not apply if the other party has come to know of such fact. 【1.5.39】(Unauthorized representation for a unilateral act) (1) If an unauthorized representative performs a unilateral act as the representative for another person, the principal may not ratify this act; provided, however, that this shall not apply when falling under one of the following: (a) The other party did not state an objection with regard to the unauthorized representative performing the act as the representative for another person; or (b) The other party agreed to the unauthorized representative performing the act without having the authority of representation. (2) If the other party performs a unilateral act to the unauthorized representative, the principal may not ratify such act; provided, however, that this shall not apply if the unauthorized representative agrees to become the other party to such act as the representative for the principal. (3) In cases of either the proviso in (1) or the proviso in (2), the provisions of【1.5.38】(2) and (3) and from【1.5.40】to【1.5.44】shall apply mutatis mutandis. 【1.5.40】(Unauthorized representation and succession – availability of ratification/refusal of ratification) (1) If a person who does not have the authority of representation concludes a contract as the representative for another person, and subsequently the unauthorized representative succeeds the principal, the unauthorized representative may not refuse such ratification. (2) If a person who does not have the authority of representation concludes a contract as the representative for another person, and subsequently the principal succeeds the unauthorized representative, the principal may ratify the contract or refuse such ratification. (3) If a person who does not have the authority of representation (unauthorized representative) concludes a contract as the representative for another person, and subsequently a further person succeeds the unauthorized representative, and then succeeds the principal, such person may ratify the contract or refuse such ratification. (4) If a person who does not have the authority of representation (unauthorized representative) concludes a contract as the representative for another person, and subsequently a further person succeeds the principal, and then succeeds the unauthorized representative, such person may ratify the contract or refuse such ratification. 【1.5.41】(Right of request of the other party to the unauthorized representation) If a person who does not have the authority of representation concludes a contract as the representative for another person, the other party may set a reasonable period of time and request the principal to give a definite answer within such period of time as to whether or not the contract is to be ratified. In such case, if the principal does not give a definite answer within such period of time, it shall be deemed that the ratification was refused. 【1.5.42】(Right of revocation of the other party to the unauthorized representation) If a person who does not have the authority of representation concludes a contract as the representative for another person, the other party may revoke its manifestation of intention for offer or acceptance within the period of the principal not ratifying the contract; provided, however, that this shall not apply if the other party knew the person did not have the authority of representation at the time of concluding the contract. 【1.5.43】(Responsibility of the unauthorized representative) A person who concludes a contract as the representative for another person, excluding cases where it possesses the authority of representation with regard to such contract, shall bear responsibility toward the other party for either performance or compensation for damage in lieu of the performance subject to the other party’s choice; provided, however, that this shall not apply in any of the following cases: (a) The principal ratified such contract; (b) The other party knew that the person concluding the contract as the representative for another person did not possess the authority of representation; (c) The other party did not know, through negligence, that the person concluding the contract as the representative for another person did not possess the authority of representation; provided, however, that this shall not apply if the person concluding the contract as the representative for another person, knew that it did not possess the authority of representation and yet made the other party believe that it did possess the authority of representation; (d) The person concluding the contract as the representative for another person had limits on the capacity to act with regard to such contract; or (e) The person concluding the contract as the representative for another person did not personally know that it did not possess the authority of representation; provided that this shall not apply if there was gross negligence on the part of such person. 【1.5.44】(Succession of the responsibility of the unauthorized representative) (1) In cases where a person who does not have the authority of representation concludes a contract as the representative for another person and subsequently the principal succeeds the unauthorized representative, if the principal refuses ratification of such contract, such principal shall be released from the responsibility of the performance in【1.5.43】. (2) (1) applies mutatis mutandis when a person who does not have the authority of representation concludes a contract as the representative for another person, and subsequently a person, who succeeds the unauthorized representative, and then succeeds the principal, refuses ratification. (3) (1) applies mutatis mutandis when a person who does not have the authority of representation concludes a contract as the representative for another person, and subsequently a person who succeeds the principal, and then succeeds the unauthorized representative, refuses such ratification. Section 2 Delegation of Power 【1.5.45】(Delegation of power) (1) In cases where a right holder grants to another person the power to dispose of the right belonging to the right holder in the name of such other person, if such other person, based on such power, performs a juridical act to the effect of disposing of such right to a third party, such right shall transfer directly from the right holder to the third party. (2) In cases where, without acquiring the consent of the right holder, another person performs a juridical act to the effect of disposing of the right of the right holder to a third party, the right holder may, in accordance with such intention, make such third party directly acquire such right. (3) In cases of (1) and (2), the right holder may assert against the third party the grounds that could have been asserted by the other person based on the juridical act between such other person and the third party. 【1.5.46】(Application mutatis mutandis of the provisions on representation) In cases of【1.5.45】, the provisions concerning representation apply mutatis mutandis; provided, however, that this shall not apply if the nature of the act does not so allow. Division 4 Invalidity and Rescission 【1.5.47】(Partial invalidity of the term of a juridical act) In cases where one part of a specific term included in a juridical act is void, only such part is void; provided, however, that when coming under one of the following items, the entire term shall be void: (a) There are special provisions in laws and regulations; (b) It is deemed unreasonable to maintain the effect of the other parts owing to the nature of such term; (c) Such term is a part of general contractual conditions (excluding cases where there are particular provisions in laws or regulations); or (d) Such term is a part of a consumer contract (excluding cases where there are particular provisions in laws or regulations). * Of the proposals listed in【1.5.47】 with regard to (c) and (d), some views were expressed concerning repetition with regard to the part prescribing regulations on unfair terms of the general conditions and consumer contracts, and other views were expressed on the possibility of moving this part to the part on unfair terms of the general conditions and consumer contracts and deleting it from this proposal. 【1.5.48】(Supplementation of a void term) If part of a juridical act is void and supplementation of such part is required, the void part shall be supplemented through contents which most likely would have been implemented had the parties known that such part was void; and if the contents are not clear then they shall be supplemented first through custom, if there is no custom through the default rules, and in cases where they cannot be supplemented through any of them, the void part shall be supplemented in compliance with the principle of good faith. 【1.5.49】(Partial invalidity of a juridical act) If part of a juridical act is void, this does not preclude the effect of the other parts of the juridical act; provided, however, that if it is reasonable to believe that the parties would not have performed such juridical act if one part was void, the entire juridical act shall be void. 【1.5.50】(Invalidity of multiple juridical acts) In cases where there is a close link between multiple juridical acts and one of the juridical acts becomes void, and it is reasonable to think that the parties would not have performed the other juridical acts which were closely linked had such juridical act been void, the other juridical acts shall also be void. 【1.5.51】(Effect of an invalid juridical act) (1) The party to a juridical act may not seek the performance of an obligation based on an invalid juridical act. (2) If the party to a juridical act has performed an obligation based on an invalid juridical act, such party may seek the return of the benefit performed to the other party. (3) In cases of (2), if the exact benefit received by the other party cannot be returned, the other party assumes the duty of returning its value. (4) In cases of (2) and (3), if the other party received the benefit without knowing that the juridical act was invalid, the other party shall assume the duty of return to the extent of the existing benefit. (5) The provision of (4) does not apply in cases where the juridical act is a bilateral contract or a onerous contract; provided, however, that a person, who received the benefit without knowing that the juridical act was invalid, shall assume the duty of return of (3) to the extent of the value which was delivered or should have been delivered based on the juridical act. 【1.5.52】(Ratification of a void act) (1) A void act shall not take effect even if ratified by a party. (2) If a party ratifies an act knowing it to be void, it is deemed to have performed a new act. 【1.5.53】(Scope of the person with the right of rescission) (1) An act which may be rescinded owing to limits on the capacity to act may be rescinded only by the person with the limited capacity to act, its representative, successor or a person who is able to give consent. (2) An act performed while in a state lacking mental capacity may be rescinded only by the person lacking mental capacity, its representative, successor or a person who is able to give consent. (3) An act which may be rescinded pursuant to 【1.5.13】,【1.5.15】,【1.5.16】,【1.5.17】,【1.5.18】or 【1.5.19】may be rescinded only by the person who manifested the intention based on such causes for rescission, its representative or successor. * If the effect of an act performed while in a state lacking mental capacity is to be void, (2) shall be deleted. 【1.5.54】(Retroactive invalidity through rescission) (1) An act which has been rescinded is deemed to have been invalid from the beginning. (2) In cases of (1), if the person with limited capacity to act or the person lacking mental capacity received a benefit based on an invalid act, it shall assume the duty of return only to the extent of the actual enrichment; provided, however, that this shall not apply to a person who came to be in a state temporarily lacking mental capacity through its own negligence. (3) In cases where an act is rescindable on the grounds of limits on the capacity to act or a lack of mental capacity, the provisions of the main text of (2) shall not apply in cases where after a manifestation of intention was rescinded, the person who received a benefit based on such act, recognizing that there was a duty of return to the person who delivered the benefit, consumed the received benefit. * If the effect of an act performed while in a state lacking mental capacity is to be void, the parts of the provisions concerning a person without legal capacity shall be deleted from the original and (4) shall be newly established as below. (4) The provisions of (2) and (3) shall apply mutatis mutandis in cases where an act becomes void by reason of lacking mental capacity. 【1.5.55】(Ratification of rescindable acts) If a person stipulated in 【1.5.53】 ratifies a rescindable act, the act may not be rescinded afterwards. 　【1.5.56】(Method of rescission/ratification) In cases where the other party to the rescindable act is identified, the rescission or the ratification shall be made through a manifestation of intention to the other party. 【1.5.57】(Requirements of ratification) (1) Ratification shall not take effect unless the circumstances which formed the cause of the rescission have been extinguished and the ratification is made after the person with the right of ratification acquired the knowledge that it was able to exercise the right of rescission. (2) The provision of (1) also applies in cases where the statutory representative or the curator or the assistant of the person with limited capacity to act makes the ratification or in cases where a person with limited capacity to act (except for adult wards) acquires the consent of such statutory representative, curator or assistant and makes such ratification itself. 【1.5.58】(Statutory ratification) Subsequent to a ratification becoming possible pursuant to 【1.5.56】, a juridical act is deemed to have been ratified if any of the following facts exists with regard to a rescindable juridical act; provided, however, that this shall not apply if an objection has been reserved: (a) Total or partial performance; (b) Total or partial receipt of performance; (c) A demand for performance; (d) A novation; (e) The prestation of security; (f) The receipt of security; (g) Total or partial assignment of a right acquired as the result of a rescindable juridical act; or (h) Execution. * With regard to the “total or partial receipt of performance” in (b), it is possible for this to be deleted. Moreover, there is room for further discussion with regard to the “receipt of security” in (f). 【1.5.59】(Period of exercising the right of rescission) The right of rescission is extinguished if not exercised within three years of the time of a ratification becoming possible. The same applies when ten years have elapsed since the time of the act. Division 5 Conditions and Due Dates 【1.5.60】(Conditions) (1) If there are provisions stipulating that the whole or a part of the effect of a juridical act shall enter into force when a fact which was uncertain as to whether or not it would occur in the future does occur, the whole or a part of the effect of the juridical act shall enter into force from the time of occurrence of such fact. (2) If there are provisions stipulating that the whole or a part of the effect of the juridical act shall be extinguished when a fact which was uncertain as to whether or not it would occur in the future does occur, the whole or a part of the effect of the juridical act shall be extinguished from the time of occurrence of such fact. (3) If there are provisions stipulating that the whole or a part of the effect of the juridical act shall enter into force or shall be extinguished when a fact which was uncertain as to whether or not it would occur in the future does not occur within a fixed period of time, the same applies as in (1) and (2). (4) In cases of (1) through to (3), if a party manifests an intention that the whole or part of the effect becoming operative or the extinguishment shall be retroactive to before the occurrence of the fact, such intention shall prevail. (5) The provision in the cases of (1) shall be referred to as a condition precedent, the provision in the cases of (2) shall be referred to as a condition subsequent, in cases of (1) and (2), if a fact which was uncertain as to whether or not it would occur in the future does occur, such fact shall be referred to as an accomplished condition and in cases of (3) when a fact which was uncertain as to whether or not it would occur in the future does not occur within a fixed time period, it shall be referred to as an accomplished condition. 【1.5.61】(Juristic relationship pending fulfillment of a condition) (1) During the time when the fulfillment of a condition is pending, the benefit to be received or the disadvantage to be borne through fulfillment of the condition may be disposed of or shall be succeeded. (2) During the time when the fulfillment of a condition is pending, in cases where the benefit to be received through fulfillment of the condition is infringed, in accordance with the provisions on defaults or torts, the person who infringed the benefit shall assume the duty of compensating for the damage incurred through infringement of the benefit. (3) During the time when the fulfillment of a condition is pending, in cases where a person, who would undergo a disadvantage through the condition being fulfilled, prevents the fulfillment of the condition through an act contrary to the principle of good faith, the other party may deem the condition to have been fulfilled. (4) During the time when the fulfillment of a condition is pending, in cases where a person, who would receive a benefit through the condition being fulfilled, causes the condition to be fulfilled through an act contrary to the principle of good faith, the other party may deem the condition not to have been fulfilled. 【1.5.62】(Fulfilled conditions, unlawful conditions, impossible conditions, potestative conditions) (1) In cases where the condition was already fulfilled at the time of performing the juridical act, such juridical act is unconditionally valid when such condition is a condition precedent and such juridical act is void when such condition is a condition subsequent. (2) In cases where it is already certain that the condition will not be fulfilled at the time of performing the juridical act, such act is void when such condition is a condition precedent and such juridical act is unconditionally valid when such condition is a condition subsequent. (3) In cases of (1) and (2), during the time when the parties were unaware that the condition had been fulfilled or that the condition had not been fulfilled, 【1.5.61】(1) and (2) shall apply mutatis mutandis. (4) A juridical act which is subject to an unlawful condition is void. The same applies to any juridical act which is subject to the condition that an unlawful act not be performed. (5) A juridical act subject to an impossible condition precedent is void. (6) A juridical act subject to an impossible condition subsequent is unconditionally valid. (7) A juridical act which is subject to a condition precedent is void if the condition depends entirely on the will of the obligor. 【1.5.63】(Assigned time) (1) If there are provisions stipulating that the whole or a part of the effect of a juridical act shall not accrue until the time when a fact which is certain to occur in the future does occur, the whole or a part of the effect of the juridical act shall not accrue until the occurrence of the fact. (2) If there are provisions stipulating that a demand for the performance of a juridical act may not be made until the time when a fact which is certain to occur in the future does occur, the demand for performance of the juridical act may not be made until occurrence of the fact. (3) If there are provisions stipulating that the whole or a part of the effect of a juridical act shall be extinguished when a fact which is certain to occur in the future does occur, the whole or a part of the effect of a juridical act shall be extinguished on the occurrence of the fact. (4) With regard to a fact which is certain to occur in the future pursuant to the cases of (1), (2) or (3), whether or not the time of occurrence was decided in advance does not matter. (5) The stipulation with regard to cases of (1), (2) or (3) shall be referred to as the assigned time and the occurrence of a fact which was certain to occur with regard to cases of (1), (2) or (3) shall be referred to as the arrival of the assigned time. 【1.5.64】(Benefit of assigned time) (1) The assigned time is presumed to have been prescribed for the benefit of the obligor. (2) A person who possesses the benefit of assigned time may waive the benefit of time through a manifestation of intention; provided, however, that the benefit of the other party is not injured through such waiver. (3) The assigned time is deemed to have arrived in the following cases: (a) The obligor destroyed, damaged or diminished the security; (b) In cases where the obligor has the duty of furnishing security, the obligor has failed to so furnish. (4) The parties may stipulate to the effect that the assigned time is deemed to have arrived in the case of the occurrence of certain circumstances. Moreover, the parties may stipulate to the effect that the assigned time shall be deemed to have arrived through a manifestation of intention by the obligee to the effect that the assigned time shall be deemed to have arrived in the case of the occurrence of certain circumstances.

	Chapter 6 Calculation of Time Period 【1.6.01】(Calculation of time period) (1) When fixing a period of time by hours, the time period shall commence to run immediately. (2) When fixing a period of time by days, weeks, months or years, and where the calculation of the period of time is from a certain point in time heading into the future, the starting day of counting the period of time (first day) is not included in the calculation (when the period of time starts at 00.00, the starting day of counting the period (first day) is included in the calculation), and the time period expires at the end (24.00) of the finishing day of counting the period (last day). (3) When stipulating a period of time by days, weeks, months or years, and where the calculation of the period of time is from a certain point in time heading back into the past, the starting day of counting the period is not included in the calculation (when the period starts from 24.00, the starting day of counting the period is included), and the expiry of the period is at the commencement (00.00) of the finishing day of counting the period. (4) When stipulating a time period by weeks, months or years, the period is calculated according to the calendar. (5) When a time period does not commence at the beginning of the week, month or year, such period expires in the last week, month or year on the day preceding the day corresponding to the commencement day; provided, however, that if the period is stipulated by months or years and the last month does not contain the corresponding day, the period expires on the last day of such month. (6) With regard to (2), if the last day of the period is a Sunday, a holiday as provided for in the Act on National Holidays (Act No. 178 of 1948) or any other holiday, in cases where it is customary not to conduct business on that day, the period shall expire on the day following such day. 【1.6.02】(General principle nature of the provisions on calculation of a period of time) (1) The provisions relating to the calculation of the time period shall have a general principle nature and shall be prescribed to the effect of being subject to the provisions of 【1.6.01】, except when there are special stipulations in laws and regulations or in any judicial order or in cases where otherwise stipulated in the juridical act. (2) Separate consideration shall be given to the positioning of the provisions relating to calculation of the period of time.

	Chapter 7 Prescription 【1.7.01】(Subject matter of acquisitive prescription and extinctive prescription) (1) The subject matter of acquisitive prescription is ownership and any other property right. (2) The subject matter of extinctive prescription is any property right other than ownership and claims (excluding the rights of immovable property leases). (3) With regard to a period limit on constitutive rights, it shall be in accordance with the provision of【1.7.13】. 【1.7.02】(Acquisitive prescription of ownership) (1) A person who possesses the property belonging to another person for 20 years peacefully and publicly with the intention of owning it acquires ownership retroactively from the day of commencement. (2) The same applies to a person who possesses the property belonging to another person for 10 years peacefully and publicly with the intention of owning it when the person was without knowledge or negligence at the time of commencement of the possession. 【1.7.03】(Acquisitive prescription of property rights other than ownership) A person who exercises a property right other than ownership peacefully and publicly, with the intention of doing so on its own behalf, acquires such right retroactively to the day of commencement after the elapse of 20 years or 10 years in accordance with the distinction of 【1.7.02】. 【1.7.04】(Extinctive prescription of property rights) (1) A property right other than ownership or claims (excluding the rights of immovable property leases) is extinguished retroactively to the day of commencement if the right is not exercised within twenty years of the time the right could have been exercised. (2) If a third party possesses the object thing of a right subject to time of commencement or to a condition precedent, the running of the acquisitive prescription from the time of commencement of the possession shall not be precluded for the benefit of the third party even if prior to the arrival of the time of commencement or fulfillment of the condition precedent; provided, however, that the right holder may request an acknowledgement from the possessor at any time in order to renew the prescription period. 【1.7.05】(Types of prescriptive impediments relating to acquisitive prescription or extinctive prescription) The three types of prescriptive impediments relating to acquisitive and extinctive prescriptions are renewal of the prescription period, suspension of the running of the prescription period and extension of the expiry of the prescription period. 【1.7.06】(Renewal of the prescription period of acquisitive prescription and extinctive prescription) (1) The grounds given below shall be the grounds for renewal with regard to acquisitive prescription and extinctive prescription: (a) A final and binding judgment, a final and binding adjudication on domestic relations, a conciliation in accordance with the Act on Adjudication of Domestic Relations or a conciliation in accordance with the Act on Conciliation of Civil Affairs, a judicial settlement or an arbitral award recognizing a right or any other decision which has the same effect as a final and binding judgment; (b) Civil execution; and (c) Acknowledgement. (2) The point of time when the renewal takes effect shall be as follows: (a) With respect to the renewal pursuant to (1) (a), at the time of the final and binding judgment, at the time of a final and binding adjudication on domestic relations or when the same effect as that of a final and binding judgment comes into force; (b) With respect to the renewal pursuant to (1) (b), at the time of termination of the execution procedure; provided, however, that when this is not executed against the person receiving the benefit of the prescription, the renewal shall not take effect until after such person has been notified of such; or (c) With respect to the renewal pursuant to (1) (c), at the time of the acknowledgment being made. (3) A renewal of the prescription period on the ground of (1) has its effect only among the parties with respect to whom the ground for renewal arose and their respective successors. (4) The period of acquisitive prescription of ownership terminates at the time of the possessor voluntarily discontinuing such possession or being deprived of possession by another person. In such case, if the possessor recommences possession, the period in (1.7.02) shall commence from the time of recommencement of possession. (5) (4) applies mutatis mutandis to the period of acquisitive prescription of property rights other than ownership. 【1.7.07】(Suspension of the running of the prescription period of acquisitive prescriptions and extinctive prescriptions) With regard to suspension of the running of the prescription period of an acquisitive prescription or extinctive prescription, excluding the points given below, the same shall apply as【3.1.3.56】to【3.1.3.61】 concerning suspension of the running of the prescription for claims. (a) The wording which specializes claims shall be amended to conform to rights in general. (b) 【3.1.3.56】(2),【3.1.3.57】(2),【3.1.3.57】(4), (5) which are proposals for particular provisions on claims shall be removed. (c) 【3.1.3.56】(1) (d),【3.1.3.60】,【3.1.3.61】(2) (c) and (d), 【3.1.3.61】(3) (d) and (e) which are proposals to recognize the suspension of the running through an agreement shall be removed. (d) Suspension of the running of the prescription period of an acquisitive prescription or extinctive prescription shall have its effect only between the parties with respect to whom the grounds for suspension of the running arose and their successors. 【1.7.08】(Extension of the expiry of the prescription period of acquisitive prescriptions and extinctive prescriptions) With regard to extension of the expiry of the prescription period, excluding the points given below, the same shall apply as【3.1.3.62】to【3.1.3.67】relating to the extension of the expiry of the prescription for claims: (a) The wording which specializes claims shall be amended to conform to rights in general; (b) 【3.1.3.62】(2) which is a proposal for a particular provision on claims shall be removed; and (c) The extension of the expiry of the prescription period through a notification shall have its effect only between the parties to the notification and their successors. 【1.7.09】(Special provisions relating to the extinctive prescription of mortgages) The Commission reserved the room for consideration with regard to the principle that a mortgage is not extinguished through a prescription unless the secured claim is extinguished at the same time. 【1.7.10】(Invocation of prescription of an acquisitive prescription or an extinctive prescription) The court may not make a judgment based on an acquisitive prescription or an extinctive prescription unless invoked by a person with a legally justifiable interest. 【1.7.11】(Waiver of the benefit of prescription of an acquisitive prescription or an extinctive prescription) The benefit of the acquisitive prescription and the benefit of the extinctive prescription may not be waived beforehand. 【1.7.12】(Forfeiture of the benefit of the acquisitive prescription or the extinctive prescription) (1) A person who acknowledges after the expiry of an acquisitive prescription the continued existence of a right which should have been extinguished as a result of a right acquired through prescription or a person who acknowledges after the expiry of an extinctive prescription the continued existence of a right which should have been extinguished through prescription, even if it did not have the intention of waiving the benefit of prescription, may not invoke the acquisitive prescription or extinctive prescription due to its expiry for the sake of the right whose continued existence the person acknowledged. (2) In cases of (1), the acquisitive prescription or extinctive prescription shall commence running anew from the time of acknowledging the continued existence of the right. 【1.7.13】(Restrictions on the period for a constitutive right) (1) A right which causes the accrual, change, extinguishment of a right or a duty with another person through a unilateral manifestation of intention (hereinafter referred to as a “constitutive right”) is extinguished through the elapse of any one of the following periods of time. (a) (Ten years) from the time of being able to exercise the right. (b) (Three/four/five years) from the time of being able to exercise the right and the right holder coming to know of the cause for accrual of the right and of the other party to the exercising of the right. (2) With regard to the periods of time listed in (1);【3.1.3.57】(1), (3) (excluding the third sentence), 【3.1.3.60】, 【3.1.3.61】(excluding the third sentence of (2) (b), (3) (b), excluding the third sentence of (3)(c)) relating to suspension of the running of the prescription for claims, and【3.1.3.64】, 【3.1.3.65】, 【3.1.3.66】and【3.1.3.67】relating to extension of the expiry of the prescription for claims shall apply mutatis mutandis. (3) [Proposal A] A provision relating to invocation of the effect of the expiry of the period shall not be established. [Proposal B] With regard to invocation of the effect of the expiry of the period,【1.7.10】 relating to invocation of prescription,【1.7.11】relating to waiver of the benefit of prescription, 【1.7.12】relating to forfeiture of the benefit of prescription shall apply mutatis mutandis. (4) With regard to a right which accrues as the result of exercising a constitutive right, it shall be subject to the provisions on prescription of claims or extinctive prescription from the time of exercising the constitutive right. (5) If a constitutive right is exercised in order to prevent the demand of another person, such exercise is not affected by the extinguishment through the constitutive right of (1). (6) (1) to (5) shall not apply if otherwise provided for by law. * With regard to (2), it is possible to allow renewal of the period through acknowledgment.

	Civil Code Book III 　Obligations Part One. Contracts and Obligations in General Chapter 1 Obligations Based on Contracts 【3.1.1.A】(Surprise terms) The Commission proposes that provisions shall not be established concerning terms on surprises of the general conditions. * One view was expressed that with regard to the surprise terms of general conditions, notwithstanding 【3.1.1.26】, provisions should be established that terms, which are unusual in light of business customs or terms which will be a surprise to the counterparty of the person supplying the general conditions from the perspective of the state of business or the outward appearance of the contract, should not constitute the contents of contracts. 【3.1.1.B】(List of unfair terms common to general conditions and consumer contracts) The Commission proposes that a list of unfair terms common to general conditions and consumer contracts shall be drawn up. If coming under such unfair terms, one list of unfair terms shall be a list where the terms are deemed to harm the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith, and a separate list shall be established as terms which are merely presumed to harm the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith. 【3.1.1.C】(List of unfair terms regarding consumer contracts) The Commission proposes that with regard to consumer contracts, one list shall be drafted of unfair terms to be applied only to the terms of consumer contracts regardless of whether or not the contract was based on general conditions, and a separate list shall be drafted of unfair terms common to both general conditions and consumer contracts. If coming under such unfair terms, one list of unfair terms shall be a list where the terms are deemed to harm the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith, and a separate list shall be established as terms which are merely presumed to harm the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith. 【3.1.1.D】(Clear wording of the general rules relating to interpretation of contracts) The Commission proposes as follows. (1) General rules on the interpretation of contracts, not with regard to juridical acts or manifestation of intention in general but with regard to basic interpretation, shall be established. (2) General rules on individual interpretations regarding interpretation of contracts, excluding general rules on ambiguity, shall not be clearly stipulated as black letter law. 【3.1.1.E】(Positioning of the provisions) The Commission proposes as follows. (1) The standpoint shall be that provisions on the “subjects of claims” do not need to be positioned together in one block. The standpoint shall be that there is also no need for the part (division) on the “subjects of claims” to be placed at the opening of the Obligations Book. Division 1 Common Principles Section 1 General Principles 【3.1.1.01】(Principle of freedom of contract)　 Parties may freely conclude a contract and determine its contents. 【3.1.1.02】(Principle of consent) A contract shall be entered into through the parties simply reaching an agreement; provided, however, that this shall not apply when otherwise provided for in laws and regulations or where otherwise agreed by the parties. 【3.1.1.03】(Relations of claims and obligations and the principle of good faith) (1) An obligor must act in accordance with good faith when performing an obligation. (2) An obligee must act in accordance with good faith when exercising the right. (3) Other than (1) and (2), with regard to the relations of claims and obligations, the parties shall assume the duty of acting in accordance with good faith. Section 2 Definition 【3.1.1.04】(Definition of writing) [Proposal A] In Book III, “writing” includes electronic records (electronic, optical, electromagnetic and other records created through similar means which are accessible so as to be usable for subsequent reference). [Proposal B] In Book III, “writing” includes electronic records (records created through electronic means, magnetic means and other means which cannot be recognized by the sensory perception of a person, and which are provided for the use of data processing by a computer). 【3.1.1.05】(Definition of defect) With regard to a contract which has as its object the delivery of things, a defect in the thing means a delivered thing not conforming to the contract in light of the agreement of the parties and the intent and the nature of the contract (nongratuitous, gratuitous etc.) such as the function, quality or quantity which should be furnished of the thing but is not furnished. * There is one view to make the wording of “a defect in the thing” “a thing not conforming to the contract.” 【3.1.1.06】(Concept stipulating the scope of application of the provisions to be applied to the designated business of business operators) With regard to the scope of application of the proposals in Book III where the application shall be limited to certain kinds of acts out of the activities of the business operators, the application shall be demarcated by the concept of “economic operation.” “Economic operation” means repeated continuous operation whose object is to obtain income equal to or larger than expenditure. Division 2 Formation of Contracts Section 1 Conclusion of Contracts Subsection 1 General Principles 【3.1.1.07】(Agreement forming the contract) (1) A contract comes into existence when an agreement has been reached on the matters that should be stipulated in light of the intention of the parties and the nature of the contract. (2) Notwithstanding the provision of the preceding paragraph, if an additional agreement is required to form the contract pursuant to the intention of the parties, the contract comes into existence when such agreement has been reached. 【3.1.1.08】(Impossibility of performance/impossibility of expectation existing at the time of conclusion of the contract) Even if the performance of the contractual obligation was already impossible to perform at the time of conclusion of the contract or it was otherwise unreasonable to expect the obligor to perform as such in light of the intent of the contract, such contract is valid provided that the parties have not agreed otherwise. Subsection 2 Duty of the Negotiating Parties 【3.1.1.09】(Liability for damages caused by persons unfairly breaking off negotiations) (1) A party is not liable solely on the grounds of having broken off the contract negotiations. (2) Notwithstanding the provision of the preceding paragraph, if contrary to good faith a party either continues negotiating even when there is no prospect of the contract being concluded or rejects conclusion of the contract, the party is liable for the damage incurred through the other party trusting in the contract being formed. 【3.1.1.10】(Duty of provision of information/duty of explanation of the negotiating parties) (1) If in the contract negotiations, there is a matter relating to the contract which will influence the decision of the other party as to whether or not to conclude the contract, the parties shall, in light of factors such as the nature of the contract, the status of each party, the conduct in the negotiations, or the existence and contents of an arrangement between the parties reached in the process of negotiations, provide information and give an explanation in accordance with the principle of good faith. (2) A person who violates the duty in (1) is liable for the damage which would not have been incurred had the other party not concluded such contract. 【3.1.1.11】(Acts of negotiation assistants et al. and liability for damages of the negotiating parties) If a person such as an employee or other assistant used in contract negotiations, a person who jointly negotiated in the contract, a person who was entrusted to mediate in the conclusion of the contract, a person who possesses authority of representation with regard to conclusion of the contract or other such person used by a party in the contract negotiations or contract conclusion performs one of the acts listed in【3.1.1.09】or【3.1.1.10】, such party is liable for the damage incurred on the other party in accordance with the provisions of 【3.1.1.09】or【3.1.1.10】. Subsection 3 Offer and Acceptance 【3.1.1.12】(Offer) (1) An offer is a manifestation of intention to enter into a contract through the acceptance of the offer. (2) An offer shall not take effect if the contents of the contract cannot be fixed through such offer. 【3.1.1.13】(Revocation/lapse of an offer with a fixed term) (1) An offer for a contract stipulating a fixed term for acceptance loses its effect if an acceptance is not made within such term. (2) The offer of (1) may not be revoked; provided, however, that this shall not apply if the offeror reserved the possibility of revocation. 【3.1.1.14】(Late arrival of acceptance which should have arrived within the term for acceptance) Article 522 of the present Civil Code shall be deleted. 【3.1.1.15】(Effect of late acceptance) If the offeror notifies the offeree without delay to the effect that the late acceptance shall be treated as acceptance, it shall take effect as an acceptance. In such case, the effect of the offer is deemed not to have lapsed. 【3.1.1.16】(Revocation/lapse of an offer without a fixed term) (1) If with regard to an offer not stipulating a fixed term for acceptance, an acceptance is not made within a period of time which is reasonable for the offeror to believe the other party is unlikely to accept, such offer shall lose its effect. (2) Even before the expiry of the reasonable period of time in the preceding paragraph, the offeror may revoke such offer after an appropriate period of time for accepting the offer has passed. (3) The offeror may reserve the possibility of revocation even within the appropriate period of time in the preceding paragraph. In such case, even if the offer is not revoked the offer loses its effect through the passing of the appropriate period of time. (4) Notwithstanding the provision of (1), an offer without a fixed term made to an unspecified person loses its effect after the passing of the appropriate period of time for acceptance of such offer. (5) If an acceptance reaches the offeror after the reasonable period of time in (1) has passed, the provision of【3.1.1.15】shall apply mutatis mutandis. 【3.1.1.17】(Revocation/lapse of an offer between persons engaging in a dialogue) (1) If between persons engaging in a dialogue, the person who receives the offer of a contract does not accept by the close of the dialogue, such offer shall lose its effect; provided, however, that this shall not apply if the offeror manifests an intention otherwise. (2) An offer made between persons engaging in a dialogue may be revoked at any time up until the close of the dialogue. 【3.1.1.18】(Presentation of contract contents to an unspecified person by a business operator) If a business operator within the scope of such business presents matters which should become the contents of a contract to an unspecified person, the presentation shall be presumed to be an offer when it is possible to determine the contents of the contract through the matters which were presented. 【3.1.1.19】(Death or limited capacity to act of the offeror) If before sending the acceptance, the other party knew of the death of the offeror or, with regard to the manifestation of intention, knew that the offeror was in a state lacking mental capacity or had limited capacity to act, the provision of【1.5.21】shall not apply. 【3.1.1.20】(Duty of the business operator receiving an offer to retain goods) If a business operator, within the scope of such business, receives an offer for a contract and the business operator receives goods together with such offer, even if it rejects such offer the business operator shall retain such goods bearing the offeror’s expenses; provided, however, that this shall not apply if the value of the goods is not sufficient to warrant such expense or if the business operator would incur damage through such retention. 【3.1.1.21】(Acceptance) An acceptance is a manifestation of intention to enter into a contract agreeing to the offer. 【3.1.1.22】(Time of formation of a contract between persons at a distance) (1) A contract between persons at a distance is entered into at the time of the acceptance reaching the offeror. (2) If through the manifestation of intention of the offeror or through business customs, it is not necessary for the manifestation of intention of acceptance to reach the offeror, the contract is entered into at the time of there being a fact which should be acknowledged as a manifestation of intention of acceptance. (3) In cases of the preceding paragraph, if at the time of the fact which should be acknowledged as a manifestation of intention of acceptance there was no intention of acceptance on the part of the counterparty to the offer, the provision on mistakes shall apply mutatis mutandis. 【3.1.1.23】(Late arrival of the revocation notice of the offer) Article 527 of the present Civil Code shall be deleted. 【3.1.1.24】(Acceptance adding modifications to the offer) (1) If the offeree adds modifications to the offer and then accepts it, it is deemed that the original offer was rejected and a new offer was made; provided, however, that if in light of the intention of the parties and the nature of such contract, no substantive modifications have been made to the offer, the contract is formed through the contents excluding the parts which were modified. (2) The proviso of (1) does not apply in the following cases. (a) The offeror manifests an intention beforehand rejecting the modifications by the offeree be made into the contents of the contract. (b) The offeror states an objection to the offeree without delay after the arrival of the acceptance. (c) The offeree manifests an intention that if the modifications made by it do not become the contents of the contract, it will not conclude the contract. Subsection 4 Contract through General Conditions 【3.1.1.25】(Definition of general conditions) (1) General conditions are the aggregate of contract terms which are formulated in advance for use in multiple contracts. (2) Of the contract terms making up the general conditions, the provisions of Subsection 4 of Section 1 and Subsection 2 of Section 2 do not apply to the terms adopted through the process of individual negotiations. 【3.1.1.26】(Requirements of incorporation of the general conditions) (1) The person supplying the general conditions shall present (hereinafter referred to as “disclose”) the general conditions to the other party by the time of conclusion of the contract, and when both parties agree to using such general conditions in the contract, the general conditions shall become the contents of the contract; provided, however, that in cases where, owing to the nature of the contract, it is extremely difficult to disclose the general conditions at the time of conclusion of the contract, the person supplying the general conditions shall indicate to the other party to the effect that the general conditions will be used at the time of conclusion of the contract, and when the other party was placed in a position of being able to know the general conditions by the time of conclusion of the contract, the general conditions shall be deemed to have been disclosed at the time of conclusion of the contract. (2) Notwithstanding the provision of (1), with regard to contents of terms which the other party to the person supplying the general conditions knew of at the time of conclusion of the contract, it may not assert that those terms should not be the contents of the contract on the grounds that the general conditions were not disclosed. Subsection 5 Advertisements Offering Prizes 【3.1.1.27】(Advertisements offering prizes) A person, who advertises to the effect that a set reward will be given to a person who performs a certain act (hereinafter referred to as an “advertisement offering a prize”), assumes the duty of giving such reward to the person who performed the act. The same applies when the person performing the act did not know of such advertisement. 【3.1.1.28】(Revocation/lapse of an advertisement offering a prize) (1) 【3.1.1.13】applies mutatis mutandis to cases where the advertiser stipulated a fixed term within which the designated act should be performed. (2) 【3.1.1.16】(4) applies mutatis mutandis to cases where the advertiser did not stipulate a fixed term within which the designated act should be performed. (3) If the advertiser offering a prize did not stipulate a fixed term within which the act should be performed, it may revoke such advertisement as long as there is no person who has completed the designated act. (4) If the revocation in (3) is not made using the same method as the one used in the advertisement, such revocation shall take effect only with regard to those persons who knew of such revocation. 【3.1.1.29】(Simultaneous performance of the designated act by several persons) If the advertisement states that only the first person to perform the designated act will receive the reward and several persons perform such act simultaneously, each person has the right to receive an equal share of the reward; provided, however, that if the reward, due to its nature, cannot be divided or if, according to the advertisement, only one person is to receive the reward, the person to receive the reward shall be determined by lot. 【3.1.1.30】(Advertisement offering a prize to the most meritorious person) (1) If several persons perform the act designated in the advertisement and only one meritorious person should be given the reward, such advertisement shall be valid only if a time period for submission has been set. (2) In cases of (1), the person stipulated in the advertisement shall judge or, if the advertisement does not stipulate who will judge, the advertiser shall judge whose act was the most meritorious out of all the participants. (3) The participants may not state an objection to the judgment of (2). (4) 【3.1.1.29】applies mutatis mutandis in cases where a judgment is made that the acts of several persons are of equal merit. Section 2 Voidance and Rescission of Contracts [Validity of Contracts] Subsection 1 Causes for Voidance and Rescission 【3.1.1.31】(Causes for voidance and rescission of contracts) The following type of provision shall be established in Book III, Part 1, Chapter 1, Division 1, Section 2, Subsection 1 “Causes of Voidance and Rescission of Contracts”. [Proposal A] (1) A contract is void or rescindable in the following cases: (a) Cases listed in【1.5.02】; (b) Cases listed in【1.5.11】and【1.5.12】; (c) Cases listed in Article 5, Article 9, Article 13, Article 17 of the present Civil Code; or (d) Cases listed in【1.5.09】,【1.5.13】,【1.5.15】,【1.5.16】, and【1.5.17】. (2) With regard to consumer contracts, aside from (1), the cases listed in【1.5.18】and 【1.5.19】 are also rescindable. [Proposal B] With regard to the voidance or rescission of a contract, in addition to being subject to the items provided as follows, they shall be subject to Article 5, Article 9, Article 13, Article 17 of the present Civil Code, 【1.5.02】, 【1.5.09】, 【1.5.11】, 【1.5.12】, 【1.5.13】, 【1.5.15】, 【1.5.16】, and【1.5.17】: (a) Cases listed in【1.5.18】; and (b) Cases listed in【1.5.19】 Subsection 2 Voidance of Contract Terms 【3.1.1.32】(General provisions relating to the effect of unfair terms) (1) A term of general conditions or consumer contracts (excluding the terms of a consumer contract adopted through the process of individual negotiations) is void if, when compared to cases where such term does not exist, the term harms the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith. (2) When judging whether or not such term injures the interests of the counterparty to the degree of violating the principle of good faith, in cases where business customs or discretionary provisions exist relating to the nature of the contract or the intent of the contract, the attributes of the parties or contracts of the same type, such contents shall be taken into consideration. 【3.1.1.33】(Examples of terms deemed to be unfair terms) A term of general conditions or consumer contracts (excluding the terms of a consumer contract adopted through the process of individual negotiations) which is a term prescribed in the following is deemed, when compared to cases where such term does not exist, to harm the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith. (Examples) (a) A term which allows the person supplying the term to voluntarily not perform an obligation. (b) A term which, by restricting the responsibility for non-performance of the obligation of the person supplying the term or by stipulating a maximum limit on the damages, makes the object for which the other party concluded the contract impossible to achieve. (c) A term which wholly exempts the person supplying the term from liability for damages based on non-performance of an obligation. (d) A term which partially exempts the person supplying the term from liability for damages based on an intentional non-performance of an obligation or through a serious violation of duty. (e) A term which wholly exempts the person supplying the term from being liable to the other party for damage based on the tort of the person supplying the term committed in the performance of the obligation by such person. (f) A term which partially exempts the person supplying the term from being liable to the other party for damage based on the tort of the person supplying the term committed either intentionally or through gross negligence in the performance of the obligation of such person. (g) A term which wholly or partially exempts the person supplying the term from being liable to the other party for appropriate damages with regard to personal damage incurred in the performance of the obligation of the person supplying the term, which based on the nature of the contract, should be borne by the person supplying the term; provided, however, that when liability for damages is limited through laws and regulations, only the part which further limits the liability shall be deemed as harming the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith. 【3.1.1.34】(Examples of terms presumed to be unfair terms) A term of general conditions or consumer contracts (excluding terms of a consumer contract adopted through the process of individual negotiations) which is a term prescribed in the following items shall be presumed, when compared to cases where such term does not exist, to harm the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith. (Examples) (a) A term which restricts the responsibility of the person supplying the term with regard to the acts of a third party employed by the person supplying the term for performance of the obligation. (b) A term which grants authority to the person supplying the term to unilaterally change the contents of the contract. (c) A term of a continuous contract not stipulating a period of time, which grants authority to the person supplying the term to immediately terminate the contract through a request for cancellation. (d) A term of a continuous contract which restricts the other party’s right to cancellation compared to the application of default rules. (e) A term which does not allow the other party to cancel the contract even if there is a serious non-performance of obligation on the part of the person supplying the term. (f) A term which stipulates a court to have exclusive jurisdiction differing from statutory jurisdiction or such like or terms which are restrictive when compared to cases where the other party’s right to undergo a trial depends on the application of discretionary provisions. 【3.1.1.35】(Examples of terms deemed to be unfair terms regarding consumer contracts) A term of general conditions or consumer contracts (excluding terms of a consumer contract adopted through the process of individual negotiations) which is a term prescribed in the following items shall be deemed, when compared to cases where such term does not exist, to harm the interests of the counterparty to the person supplying the term to the degree of violating the principle of good faith. (Examples) (a) A term where the business operator makes conclusion of a contract of guarantee for the benefit of the contractual claim vis-à-vis the consumer, a requirement for entering into the contract even where there is no such reasonable need to do so. (b) A term which eliminates or limits the right of defense of the consumer against the business operator. (c) A term which eliminates set-offs of the consumer against the business operator. (d) A term whose contents are more disadvantageous for the consumer with regard to the commencement of the prescription or the length of the prescription than in cases depending on statutory provisions. (e) [Proposal A] A term which estimates the amount of damages or stipulates a penalty in cases where the consumer makes a whole or partial default (in cases where the number of payment times is two or more, every failure of payment is a default; the same shall apply hereinafter in this item), and where the sum total of liquidated damages and the penalty exceeds the amount calculated by deducting the amount of money actually paid from the amount of money which should have been paid on the due date multiplied with a percentage of 14.6% per annum in accordance with the number of days from the due date to the day on which the money was actually paid. [Proposal B] No provisions should be established. 【3.1.1.36】(Examples of terms presumed to be unfair terms regarding consumer contracts) A term of a consumer contract (excluding terms of a consumer contract adopted through the process of individual negotiations) which is a term prescribed in the following items shall be presumed, when compared to cases where such term does not exist, to harm the interests of the consumer to the degree of violating the principle of good faith. (Examples) (a) A term which stipulates that with regard to the conclusion of a contract, advance payments, tuition fees, deposits, security and other such payments made to the business operator shall not be refunded; provided, however, that if there is a part where the refund duty of the business operator is not incurred in accordance with this Act or other laws and regulations, the part stipulating as such shall not be presumed to harm the interests of the consumer to the degree of violating the principle of good faith. (b) A term which stipulates that the agreement of the business operator is required or that a consideration must be paid to the business operator in order for a consumer to exercise a statutory right. (c) A term which reserves the right of cancellation of the contract only to the business operator. (d) A term which restricts the other party’s right accruing in cases of non-performance of the obligation by the person supplying the term compared to default rules. (e) A term which estimates the amount of damages or stipulates a penalty to be paid by the consumer in cases of non-performance of an obligation by the consumer; provided, however, that with regard to the contract, if damage is incurred on the business operator which was foreseen or could have been foreseen by both parties at the time of conclusion of the contract, the part stipulating the amount of damages shall not be presumed to harm the interests of the consumer to a degree violating the principle of good faith. (f) [Proposal A] A term which estimates the amount of damages or stipulates a penalty in cases where the consumer does not pay the whole or a part of the money that should be paid based on the contract by the payment date (in cases where the number of payment times is two or more, each payment date); provided, however, that, with regard to the contract, if damage is incurred on the business operator which was foreseen or could have been foreseen by both parties at the time of conclusion of the contract, the part stipulating the amount of damages shall not be presumed to harm the interests of the consumer to the degree of violating the principle of good faith. [Proposal B] No provisions shall be established. 【3.1.1.37】(Effect of the term in cases where one part of the term is void) If one part of a specific term included in the general conditions or the consumer contract is void, the whole of the term is void provided that there are no provisions otherwise in laws and regulations. 【3.1.1.38】(Invalidity of terms and effect of the contract) With regard to the effect of void terms and the supplementing of terms where necessary, the provisions relating to the invalidity of juridical acts shall apply. 【3.1.1.39】(Damages incurred on the other party through the use of an unfair term) A person who uses a void term coming under【3.1.1.32】to【3.1.1.36】is liable for the damage which would not have been incurred on the other party had the term not existed. Division 3 Contract Contents Section 1 Interpretation of Contracts 【3.1.1.40】(Essential interpretation) A contract shall be interpreted according to the common intention of the parties. 【3.1.1.41】(Normative interpretation) If the intentions of the parties differ, the contract shall be interpreted according to the meaning which would have been understood if thinking reasonably with regard to the circumstances of the parties. 【3.1.1.42】(Supplemental interpretation) If through【3.1.1.40】and【3.1.1.41】, there is still an indeterminate matter in the contents of the contract, but it is possible to determine the contents which the parties would have agreed to had they known of such matter, it shall be interpreted accordingly. 【3.1.1.43】(General principles on disadvantages for the person supplying the term) (1) With regard to interpretation of the general conditions, when multiple interpretations are still possible even through【3.1.1.40】and【3.1.1.41】, an interpretation which is disadvantageous to the person supplying the term shall be adopted. (2) With regard to terms of consumer contracts presented by a business operator, when multiple interpretations are still possible even through【3.1.1.40】and【3.1.1.41】, an interpretation which is disadvantageous to the business operator shall be adopted (provided that this shall not apply with regard to terms which were adopted through the process of individual negotiations). Section 2 Types of Claims Accruing from Contracts 【3.1.1.44】(Possibility of monetary evaluation of the subject) The provisions concerning the subject of claims (possibility of monetary evaluation not required; Article 399 of the present Civil Code) shall be deleted. 【3.1.1.45】(Quality of the subject matter) Of the provisions relating to fungible claims, the parts relating to quality (paragraph 1 of Article 401 of the present Civil Code) shall be deleted. 【3.1.1.46】(Duty of care in cases of delivery of specified things) (1) With regard to provisions relating to the duty of care in cases of the delivery of specified things (Article 400 of the present Civil Code), provisions shall be established that “they shall be retained through methods stipulated in accordance with the nature of the contract or the subject matter”. (2) The Commission reserved the room for further consideration on whether or not to establish provisions on duty of retention with regard to statutory obligations. * The Commission reserved the room for further consideration with regard to the possibility of replacing “through methods stipulated in accordance with the nature of the contract or the subject matter” with “through the care of a sound administrator (stipulated through the contract)”. 【3.1.1.47】(Specification of subject matter of claims) With regard to a contract which has as its subject the delivery of things and where the subject matter are specified only as fungibles, if in accordance with the contract the obligor completes a necessary act for delivery of the thing or exercises a specified right contractually granted to the obligor with respect to the thing to be delivered, such thing shall from this point afterwards be the subject matter of the claim. 【3.1.1.48】(Statutory interest rate) (1) The method of stipulating the statutory interest rate shall be changed from fixed interest to variable interest. (2) Two types of statutory interest rates (short-term and long-term) shall be prescribed in the corpus of the Civil Code. The Commission reserved the room for further consideration on whether the short-term interest rate shall further be divided into two types, but whether or not special provisions are to be established for commercial matters shall be left to the Commercial Code. (3) The method of deciding the interest rate shall be the method used in measuring the movement of the market interest rate. (4) The Commission reserved the room for further consideration on the positioning of the provisions. 【3.1.1.49】(Deduction of the intermediate interest) (1) In cases where the intermediate interest for calculation of the amount of damages in cases of personal damages is to be deducted, it shall be according to the long-term statutory interest rate. (2) With regard to deduction of the intermediate interest in other cases, a base point in time shall be fixed and it shall be according to the short-term statutory interest rate at that point. (3) The Commission reserved the room for further consideration on the positioning of the provision. 【3.1.1.50】(Other rules relating to the interest) (1) A definition provision relating to the interest shall be established. (2) A provision shall be established clearly stating that the parties may agree on interest rate. (3) The provision relating to incorporation of the interest into the principal (Article 405 of the present Civil Code) shall be maintained. “If more than one year of the payment interest is overdue and the obligor does not pay the interest even though the obligee has made a demand, the obligee may incorporate the interest into the principal.” (4) Provisions on incorporating the agreed interest rate into the principal shall not be established in the Civil Code. 【3.1.1.51】(Monetary claims) 1. The provisions below relating to monetary claims ((a) and (b) of Article 402 and Article 403 respectively of the present Civil Code) shall be maintained in their present state. (a) “If the subject of the claim is money, the obligor may make payment in any currency denomination of its choice; provided, however that this shall not apply if the subject of the claim is a payment in a specific currency denomination. 2. If the specific currency which is the subject of the claim is no longer valid as compulsory and legal tender at the time of payment, the obligor shall make payment in a different currency. 3. The provisions of the preceding two paragraphs apply mutatis mutandis to cases where the subject of the claim is payment in a foreign currency.” (b) “If the amount of the claim is specified in a foreign currency, the obligor may make the payment in Japanese currency through the exchange rate of the place of performance.” (2) The fact that the provision of (1) is a discretionary provision shall be clearly stated. (3) The Commission reserved the room for further consideration on whether or not to establish provisions stipulating the time of conversion into yen. 【3.1.1.52】(Alternative claims) (1) The provisions below relating to alternative claims (Article 406 to Article 411 of the present Civil Code, (a) to (f) below corresponding to each provision) shall be maintained in their existing state. (a) “If the subject of the claim is to be determined by selection from among two or more performances, the right of choice belongs to the obligor.” (b) “The right of choice under the preceding article shall be exercised through a manifestation of intention to the other party. 2. The manifestation of intention in the preceding paragraph may not be revoked without the consent of the other party.” (c) “If a claim is due and, regardless of a demand by the other party stipulating a reasonable period of time, the party who holds the right of choice does not exercise the right within such period of time, the right of choice shall be transferred to the other party.” (d) “If a third party should make the choice, such choice shall be made through a manifestation of intention to either the obligee or the obligor. 2. In cases prescribed in the preceding paragraph, if the third party is unable to make a choice or has no intention of making a choice, the right of choice shall be transferred to the obligor.” (e) “If anything in the performance which is included in the subject of a claim was impossible from the beginning, or subsequently becomes impossible, the claim shall exist to the extent of the thing which still remains. 2. If any performance has become impossible due to the negligence of the party who does not have the right of choice, the provision of the preceding paragraph shall not apply.” (f) “The choice takes effect retroactively as of the time of the accrual of the claim; provided, however, that this shall not injure the rights of a third party.” (2) In (1) (e) (corresponding to Article 410 of the present Civil Code) the wording shall be revised. Division 4 Effect of Contracts Section 1 Basic Effect of Claims 【3.1.1.53】(Claims and the power of demand) The obligee may make a demand to an obligor for the performance of an obligation. 【3.1.1.54】(Demands for performance and the right of defense of simultaneous performances) With regard to a bilateral contract, if the obligee makes a demand to the obligor for the performance of an obligation, the obligor may refuse to perform its own obligation until the obligee provides performance of its own counter obligation; provided, however, that this shall not apply in cases where the counter obligation is not yet due. 【3.1.1.55】(Demands for performance and defense of insecurity) (1) With regard to a bilateral contract, if the obligee makes a demand to the obligor for the performance of an obligation, the obligor may refuse to perform its own obligation on the grounds of the emergence of a concrete risk where the performance of the counter obligation might not be received due to insufficient financial resources accompanying the credit instability of the obligee or due to other circumstances occurring after conclusion of the contract which neither of the parties could have anticipated; provided, however, that this shall not apply in cases where the obligee made a payment or provided reasonable security. (2) In cases where the circumstances in (1) had already arisen at the time of conclusion of the contract but the obligor could not have reasonably known of such, they shall be treated the same as (1). 【3.1.1.56】(Cases where a demand for performance may not be made) In cases where performance is impossible or, in light of the intent of the contract, the obligor cannot reasonably be expected to make the performance, the obligee may not make a demand to the obligor for performance. 【3.1.1.57】(Right to demand subsequent completion of performance) (1) If the obligor has made an incomplete performance, the obligee may demand subsequent completion. (2) In cases of (1), if the obligee has demanded subsequent completion but the obligor has not made the performance even though a reasonable period of time has passed, the obligee may demand compensation of damages in lieu of the subsequent completion. (3) Notwithstanding (1) and (2), if in light of the intent of the contract it is not reasonable to expect a demand for subsequent completion to be made to the obligor, then the obligee may make a demand immediately to the obligor for compensation of damages in lieu of the subsequent completion. (4) In cases of (3), by performing the subsequent completion in accordance with 【3.1.1.58】 the obligor may be exempted from the duty of compensation of damages in lieu of the subsequent completion. (5) With regard to the prescription for subsequent completion and the claim for damages in lieu of the subsequent completion, the period of time provided for in (3.1.3.44) (1) shall be calculated from the time the fact of the incomplete performance occurred and the time period of 【3.1.3.44】(2) shall be calculated from the time the obligee knew of the fact that an incomplete performance had occurred. 【3.1.1.58】(Right of subsequent completion) (1) If the obligor has made an incomplete performance, the obligor has the right to perform the subsequent completion at its own expense when satisfying the following requirements: (a) The obligor gives notification without undue delay of the time and contents of the subsequent completion to be performed; (b) The time and contents of the subsequent completion to be performed are reasonable in light of the intent of the contract; and (c) The subsequent completion to be performed by the obligor does not place an unreasonable burden on the obligee. (2) In cases where an incomplete performance comes under a serious non-performance of the contract, the right of the obligor for subsequent completion does not preclude the obligee’s right to cancellation. 【3.1.1.59】(Right to demand compensation in lieu) In cases where one of the grounds prescribed in【3.1.1.56】under the obligor arises, if the obligor has acquired a benefit or a right in lieu (hereinafter referred to as “compensation in lieu”) of the subject matter of the performance through the same cause, the obligee may make a demand to the obligor for the transfer of the compensation in lieu within a limit where the value of the compensation in lieu does not exceed the value of the subject matter. 【3.1.1.60】(Performance of an obligation and third parties) (1) The obligor may use a third party to perform the obligation unless otherwise provided in the contract or in laws. (2) In cases where the obligor may use a third party, any act performed by the third party for the sake of performance of the obligation shall be viewed in the same way as the act of the obligor itself with regard to performance of the obligation or non-performance of the obligation. Section 2 Non-Performance of Obligations Subsection 1 Compulsory Performance 【3.1.1.61】(Compulsory execution) (1) If an obligor does not perform an obligation voluntarily, the obligee may make a demand to the court for compulsory performance; provided, however, that this shall not apply if the nature of the obligation does not so allow. (2) Direct enforcement may be used in monetary obligations or non-monetary obligations whose object is the delivery of things. (3) Indirect enforcement may be used in the compulsory execution of all non-monetary obligations. Indirect enforcement of monetary obligations shall be allowed only when provided for by law. (4) With regard to the performance of an obligation whose object is action, the obligee may make a demand to the court that a third party be made to do such at the expense of the obligor; provided, however, that with regard to an obligation which has a manifestation of intention as its subject, the judgment of the court may be used to substitute the manifestation of intention of the obligor. (5) With regard to an obligation whose subject is inaction, the obligee may make a demand to the court for the removal of the outcome of the action performed by the obligor at the obligor’s expense or for an appropriate disposition for the future. (6) The demand for compulsory performance does not preclude a claim for damages. Subsection 2 Damages 【3.1.1.62】(Damages caused by non-performance of an obligation) The obligee may demand compensation from the obligor for damage incurred through non-performance of an obligation. 【3.1.1.63】(Grounds for exemption from damages) (1) If an obligation is not performed through causes which had not been accepted by the obligor with regard to the contract, the obligor shall not be liable for the damages of 【3.1.1.62】. (2) If the obligor has the right of defense provided for in【3.1.1.54】or【3.1.1.55】 the obligor shall not be liable for the damages of【3.1.1.62】. 【3.1.1.64】(Damages caused by a delayed performance) Under【3.1.1.62】, the obligee may make a demand to the obligor for compensation of damage caused by a delayed performance calculating from each of the following points in time: (a) If there is a specific due date for the performance of the obligation, the time of arrival of the specific due date; (b) If there is a non-specific due date for the performance of the obligation, the time the obligor became aware of the arrival of the due date or the time of the obligee notifying the obligor of the fact of the arrival of the due date; or (c) If no due date is specified for performance of the obligation, the time at which the obligor received a demand for performance. 【3.1.1.65】(Damages in lieu of performance) (1) If one of the grounds listed in any of the following items emerges, the obligee may make a demand under【3.1.1.62】to the obligor for compensation of damage in lieu of performance: (a) The performance is impossible or some other cause where the obligor cannot be reasonably expected to make the performance in light of the intent of the contract; (b) Regardless of whether it is before or after the arrival of the due date of performance, the obligor manifested an intention categorically rejecting performance of the obligation; (c) In cases where the obligor does not perform the obligation, the obligee makes a demand for performance to the obligor stipulating a reasonable period of time but the performance is not made within such period; or (d) The contract which incurred the obligation was cancelled. (2) With regard to (1) (a) to (c), the prescription of the claim for damages shall for the time period stipulated in【3.1.3.44】(1) be calculated from the time of occurrence of the fact of non-performance of the obligation stipulated in each of the items and the time period stipulated in【3.1.3.44】(2) shall be calculated from the time the obligee knew of the occurrence of the aforementioned fact. Moreover, with regard to (1) (d) the time period stipulated in【3.1.3.44】(1) shall be calculated from the time the fact of non-performance which was the cause for the cancellation arose and the time period stipulated in【3.1.3.44】(2) shall be calculated from the time the obligee knew of the occurrence of the aforementioned fact. 【3.1.1.66】(Impossibility of performance/impossibility to expect performance after an overdue performance and damages in lieu of performance) If after an overdue performance, the obligee has become unable to demand performance through【3.1.1.56】, the obligee may make a demand to the obligor for compensation of damage in lieu of performance; provided, however, that this shall not apply in cases where the same result would have occurred even if the obligation had been performed without delay. 【3.1.1.67】(Scope of damages) (1) With regard to a claim accruing based on the contract, the obligee may make a demand to the obligor for compensation of damage as the result of non-performance which, at the time of conclusion of the contract, both parties foresaw or should have foreseen. (2) Even in cases where the obligor foresaw or should have foreseen the damage after the conclusion of the contract up until the point of non-performance of the obligation, if the obligor did not take reasonable measures to avoid the damage, the obligee may make a demand to the obligor for such compensation. * The wording of (2) was corrected on January 18, 2010. 【3.1.1.68】(Monetary compensation) (1) Compensation of damage through non-performance of an obligation shall be made through the payment of money unless there is a manifestation of intention otherwise. (2) With regard to evaluation of the damage in monetary terms, aside from the value of the performance which is the object of the obligation, the compensatory amount shall be fixed by taking into consideration the active damage incurred on the obligee through non-performance of the obligation, future interest of which the obligee has been deprived and the non-property damages incurred on the obligee. 【3.1.1.69】(Base time for calculation of the value of the thing) In cases where the value of the thing should be compensated, the obligee may demand to select the value of the thing at any of the times of occurrence of the grounds listed in the items of 【3.1.1.65】(1). 【3.1.1.70】(Base time for calculation of the value of the thing – in cases of appreciation of the value after the non-performance) With regard to cases where the value of the thing should be compensated, if the value of the thing increased after the non-performance of the obligation and the appreciated value was further maintained and the obligor should have foreseen the value appreciation, the calculation of the value of the thing to be compensated may be calculated based on such appreciated value; provided, however, that if the obligee should have made an alternative trade as a measure to avoid the occurrence or expansion of the damage suffered by the obligee in light of the contract, the compensatory amount shall be reduced through【3.1.1.73】. 【3.1.1.71】(Base time for calculation of the value of the thing – in cases of alternative trades) (1) With regard to cases where the value of the thing should be compensated, if the obligee makes an alternative trade after the non-performance of an obligation, and the alternative trade was made within a reasonable period, excluding cases where the amount of the alternative trade is unreasonably high, notwithstanding【3.1.1.69】and【3.1.1.70】the value of the thing to be compensated shall be based on the amount of the alternative trade. (2) If the amount of the alternative trade is unreasonably high, the value of the thing to be compensated shall be based on a reasonable amount required for the alternative trade at the time of the alternative trade being made. (3) If the alternative trade is made at any unreasonable time, the calculation of the value of the thing to be compensated shall be based on【3.1.1.69】or【3.1.1.70】. 【3.1.1.72】(Special provisions on monetary obligations) (1) With regard to damages caused by non-performance of a monetary obligation, the obligee may demand compensation of the amount stipulated by the statutory interest rate (if the agreed interest rate exceeds the statutory interest rate, the amount stipulated by the agreed interest rate). (2) With regard to damages in (1), the obligee is not required to prove the damage. (3) The obligee, in accordance with the provisions of【3.1.1.67】may not be precluded from demanding compensation of damage exceeding the amount stipulated in (1). 【3.1.1.73】(Duty of the obligee to lessen the damage) (1) With regard to the damage incurred on the obligee through non-performance of the obligation, if the obligee would have been able to prevent occurrence or the expansion of damage had the obligee taken reasonable measures, the court may reduce the amount of damages. (2) The obligee may make a demand to the obligor within a reasonable extent for compensation of expenses required for the prevention of the occurrence or expansion of the damage. 【3.1.1.74】(Profit and loss set-offs) If the obligee acquires a profit through non-performance of the obligation, the amount of profit shall be deducted from the amount of damages to be compensated. 【3.1.1.75】(Liquidated damages) (1) The parties may agree on an amount of liquidated damages with regard to non-performance of an obligation. (2) If the liquidated damages are excessive when compared to the damage incurred on the obligee, the court may reduce the amount to a reasonable amount. (3) The liquidated damages may not preclude a demand for performance or exercise of the right of cancellation. (4) Any penalty is presumed to constitute liquidated damages. (5) The same treatment shall be applied to cases where the parties agree to the effect that a non-monetary thing should be used for the liquidated damages. 　　【3.1.1.76】(Subrogation of the compensator) If the obligee has received as compensation for damage the payment of the full value of the thing or the right which was the subject of the claim, the obligor shall be subrogated for the obligee in relation to the thing or right by operation of law. Subsection 3 Cancellation 【3.1.1.77】(Requirements of accrual of the right to cancellation) (1) If there is a serious non-performance of the contract on the side of one of the parties to the contract, the other party may cancel the contract. (a) A serious non-performance of the contract shall be when one of the parties to the contract does not perform an obligation and as a result the other party loses reasonable expectation with regard to the contract. (b) In cases where, through the nature of the contract or manifestation of intention of the parties, the object of the contract cannot be achieved unless the obligation is performed by a specified date or within a certain period, when that time has passed without one of the parties performing the obligation, this shall fall under a serious non-performance of the contract. (2) In cases where one of the parties to the contract does not perform an obligation, if the other party has demanded performance stipulating a reasonable period of time and non-compliance with the demand constitutes a serious non-performance of the contract, the other party may cancel the contract. (3) With regard to a contract concluded between business operators, in cases where one of the parties to the contract does not perform an obligation, if the other party demands performance stipulating a reasonable period of time and no performance is made within this period, the other party may cancel the contract; provided, however, that this shall not apply if non-compliance with the demand does not constitute a serious non-performance of the contract. 【3.1.1.78】(Impediment requirements of the right to cancellation) (1) If the obligor has the right of defense provided for in【3.1.1.54】or【3.1.1.55】, the obligee may not cancel the contract. (2) In cases where a serious non-performance of the contract occurred through the violation of a duty of the obligee provided for in【3.1.1.88】, the obligee may not cancel the contract. 【3.1.1.79】(Exercise of the right to cancellation) (1) If one of the parties has the right to cancellation in accordance with the contract or the provisions of law, the cancellation shall be made through a manifestation of intention made to the other party. (2) The manifestation of intention in (1) may not be revoked. 【3.1.1.80】(Indivisible nature of the right to cancellation) (1) Where one party consists of several persons, the cancellation of the contract may only be made collectively by and against all of those persons. (2) In cases of (1), if the right to cancellation is extinguished with respect to one of the persons of the party, it shall also be extinguished with respect to the other persons. 【3.1.1.81】(Cancellation of multiple contracts) In cases where there are close connections between multiple contracts concluded between the same parties, if there is a cause for cancellation in one of the contracts and through this the object of the conclusion of the multiple contracts can no longer be achieved as a whole, the parties may cancel all of the multiple contracts in accordance with【3.1.1.77】. 　　【3.1.1.82】(Effect of the cancellation) (1) If one of the parties exercises its right to cancellation, the parties may not demand performance of such contract. (2) If one of the parties exercises its right to cancellation, and one of the parties has already performed the whole or a part of the contract, such party may make a demand to the other party for restoration to its original state; provided, however, that this does not injure the interests of a third party. (3) The exercise of the right to cancellation may not preclude a claim for damages. (4) In cases of cancelling a contract whose object is the transfer of ownership, if the subject matter is lost or damaged, the party shall assume the duty of reimbursement to the limit of contractual consideration with regard to the value of the subject matter or the part of value depreciated through the damage. (5) 【3.1.1.54】applies mutatis mutandis to the cases of (2) and (3). 【3.1.1.83】(Extinguishment of the right to cancellation) (1) The other party may with regard to the person with the right to cancellation, set a reasonable period of time and request that an answer be given within this period as to whether or not a cancellation is to be made. In such case, if a notification of cancellation is not received within this period, the right to cancellation shall be extinguished; provided, however, that if the other party is exempted from the duty to perform the obligation pursuant to【3.1.1.56】and exempted from the duty of compensating damages in lieu of performance pursuant to【3.1.1.65】, the right to cancellation shall not be extinguished. (2) In cases where the person with the right to cancellation has significantly damaged the subject matter of the contract or is unable to return it, or has changed the subject matter into another type of thing through processing or alteration, if in light of the contract this is a violation of the duty assumed by the person with the right of cancellation, the right to cancellation shall be extinguished. (3) If the subject matter of the contract is lost or damaged through a cause not attributable to violation of the duty assumed, in light of the contract, by the person with the right of cancellation, the right to cancellation shall not be extinguished. 【3.1.1.84】(Periods of time for exercising the right of cancellation) (1) With regard to the limitation period for the right to cancellation in【3.1.1.77】(1), the period stipulated in【3.1.3.44】(1) shall be calculated from the time of occurrence of the fact falling under a serious non-performance of the contract and the period stipulated in 【3.1.3.44】(2) shall be calculated from the time the person with the right to cancellation knew of the occurrence of the fact falling under the serious non-performance of the contract. (2) With regard to the limitation period for the right to cancellation in【3.1.1.77】(2), the period stipulated in【3.1.3.44】(1) shall be calculated from the time of occurrence of the fact of non-performance of the obligation and the period stipulated in【3.1.3.44】(2) shall be calculated from the time the person with the right to cancellation knew of the fact of non-performance of the obligation. (3) With regard to the limitation period for the right to cancellation in【3.1.1.77】(3), the period stipulated in【3.1.3.44】(1) shall be calculated from the time of occurrence of the fact of non-performance of the obligation and the period stipulated in【3.1.3.44】(2) shall be calculated from the time the person with the right to cancellation knew of the fact of non-performance of the obligation. 　【3.1.1.85】(Deletion of the provisions concerning the assumption of risk) Article 534, Article 535 and paragraph 1 of Article 536 of the present Civil Code shall be abolished. 【3.1.1.86】(Right to demand counter performance in cases of violation of duty by the obligee) In cases of 【3.1.1.78】(2) the obligor may demand counter performance; provided, however, that if a benefit is acquired through being exempted from performance of the contract, this shall be returned to the obligee. Section 3 Delay in Acceptance 【3.1.1.87】(Delay in acceptance/rejection of acceptance) (1) In cases where despite the obligor tendering the performance of the obligation, the obligee does not accept such performance or the intention of the obligee to refuse acceptance is apparent, the obligor may suspend performance of its own obligation until the obligee has made the necessary preparations for acceptance and has notified the obligor of such. (2) In cases of (1), the costs which have increased through the obligee not accepting the performance shall be borne by the obligee. (3) With regard to an obligation whose object is the delivery of things, in cases of (1), the duty of care of the obligor shall be mitigated. (4) In cases of (1) with regard to the contract, if the performance has become impossible despite the obligor taking action afterwards striving to fulfill the contractual obligation or, in light of the contract, it has become unreasonable to expect the obligor to make the performance, the obligee may not cancel the contract. (5) With regard to bilateral contracts, in cases of (1) the obligee may not refuse a demand for performance of a counter obligation from the obligor. 【3.1.1.88】(Damages and cancellation caused by violation of duty by the obligee) In cases where the obligee bears the duty of acceptance or any other duty to act in accordance with the principle of good faith, if the obligee violates this duty the obligor may make a claim for damages to the obligee in accordance with the rules relating to non-performance of an obligation and may cancel the contract which incurred the obligation. 【3.1.1.89】(Compulsory acceptance) If the obligee agreed to accept performance with regard to a contract, the obligor may compel acceptance on the obligee. Section 4 Limitation Periods 【3.1.1.90】(Prescription periods for claims and other limitation periods with regard to remedies due to non-performance of an obligation) (1) The commencement of calculation for the prescription period for the claim and other limitation periods for rights acquired by the obligee vis-à-vis the obligor because of non-performance of an obligation due to the same cause (hereinafter including the right to demand compensation in lieu), shall be consolidated, excluding cases where there are special provisions. (2) With regard to the prescription period for the claim and other limitation periods for rights acquired by the obligee vis-à-vis the obligor because of non-performance of an obligation due to the same cause, excluding special provisions, the period stipulated in【3.1.3.44】(1) shall be calculated from the time of occurrence of the fact falling under non-performance of the obligation and the period stipulated in【3.1.3.44】(2) shall be calculated from the time the obligee knew of the occurrence of the aforementioned fact. (3) If one of the grounds for renewal, suspension of the running or extension of the expiry of the period relating to the prescription period for the claim or other limitation periods occurs for one of a number of rights acquired by the obligee vis-à-vis the obligor because of non-performance of an obligation due to the same cause, the ground shall have an equal effect with regard to the remaining rights. Section 5 Changes in Circumstances 【3.1.1.91】(Requirements for changes in circumstances) (1) Even in cases where there are changes in the circumstances which formed the basis for the parties in the conclusion of the contract, the parties shall not be exempted from the duties based on the contract. (2) However, if the changes in circumstances satisfy the following requirements, the parties may make a claim provided for in【3.1.1.92】: (a) The changes in circumstances incur significant inequality in the interests of the parties or they are serious enough to make actualization of the object for which the contract was concluded impossible; (b) The changes in circumstances occurred after the conclusion of the contract; and (c) The changes in circumstances could not have been foreseen by either of the parties at the time of conclusion of the contract and surpass control. 【3.1.1.92】(Effect of changes in circumstances) (1) If the changes in circumstances satisfy the requirements of【3.1.1.91】(2), a party may request renegotiation for revision of the contract. The party shall make the request for renegotiation without delay. (2) If a request for renegotiation is made, the other party is bound to comply with the renegotiations. (3) Both parties shall renegotiate in accordance with good faith. [Proposal A] (4) If through a party violating a duty stipulated in (2) or (3) or, despite having striven to renegotiate, an agreement on revision of the contract is not reached, the parties (excluding persons who have violated the duty stipulated in (2) or (3)) may: (a) Request the court for cancellation of the contract; provided, however, that this shall not apply if in accordance with (b), the court finds the revision of the contract to be reasonable. In the event of allowing cancellation, the court may attach conditions to the proposal of appropriate monetary adjustment of the parties. (b) Request the court for revision of the contract presenting the revision proposal. The court may order revision of the contract based on the revision proposal only if the court judges the contents of the revision proposal to be reasonable in light of the changed circumstances and the contract; provided, however, that if the court judges the contents of both revision proposals submitted by both parties to be reasonable, the court may order revision of the contract based on the revision proposal recognized as being the more reasonable of the two. [Proposal B] (4) If through a party violating a duty stipulated in (2) or (3) or, despite having striven to renegotiate, an agreement on revision of the contract is not reached, the parties (excluding persons who have violated the duty stipulated in (2) or (3)) may: (a) Request the court for cancellation of the contract; provided, however, that in the event of permitting cancellation, the court may attach conditions to the proposal of appropriate monetary adjustment of the parties. (b) Request the court for revision of the contract presenting the revision proposal. The court may order revision of the contract based on the revision proposal only if the court judges the contents of the revision proposal to be reasonable in light of the changed circumstances and the contract; provided, however, that this shall not apply in cases where the court allows cancellation of the contract in accordance with (a). In addition, if the court recognizes the contents of both revision proposals submitted by both parties to be reasonable, the court may order revision of the contract based on the revision proposal recognized as being the more reasonable of the two. 【3.1.1.93】(Refusal of performance based on changes in circumstances) If a request for renegotiation is made through【3.1.1.92】(1), both parties may refuse performance of their own obligation for a period judged to be reasonable for renegotiation; provided, however, that even in such case, the parties shall not be exempted from liability for the damages stipulated in【3.1.1.64】.

	Chapter 2 Preservation of Non-Exempt Property Division 1 Right of Subrogation of the Obligee 【3.1.2.01】(Right of subrogation of the obligee) (1) The obligee may, for the purpose of preserving its own claim, exercise the right belonging to the obligor in the following cases: (a) If the obligor is in a state where it is unable to perform its assumed obligation through its own property (including cases where the state is incurred through the obligor not exercising such right); or (b) In cases where the obligee is able to request the obligor to exercise the right belonging to the obligor, if through the obligor not exercising the right, the actualization of the claim of the obligee is precluded. (2) Excluding cases where exercise of the right of the obligor by the obligee would constitute an act of preservation (acts which maintain the property state of the obligor), if the due date of performance of the claim has not arrived, the obligee may not exercise the right belonging to the obligor pursuant to (1). (3) If the claim belonging to the obligee is a claim without legal force, the obligee may not exercise the right belonging to the obligor pursuant to (1). (4) Notwithstanding (1), if the right belonging to the obligor is one of those listed in the following, the obligee may not exercise such right: (a) A right which is exclusive and personal to the obligor with regard to its exercise; or (b) A right which prohibits attachment. * 1 With regard to (1) (a), one view was expressed that since separate procedures exist for civil preservation and execution etc., there is no need for this kind of general system. * 2 In cases of exercising subrogation of the right to apply for registration procedures for immovable property, it is possible to think about establishing provisions to the effect of permitting the exercising of subrogation of the right to apply for registration “when it is necessary for the obligee in preserving its own claim” taking into particular consideration the registration system (refer to item 7 of Article 59 of the Real Estate Registration Act). The Commission reserves a room for consideration on the contents and also the positioning of the provision including whether to establish it in the Real Estate Registration Act. * 3 With regard to (1) (b), one view was expressed that specific provisions should be provided for individual necessities, and such a general system as this provision prescribes should not be established because of the risk of it being used in a way far beyond the original purpose of this provision. 【3.1.2.02】(Exercising subrogation of a right requiring receipt) (1) If the right of the obligor to be exercised in subrogation requires an act of receipt by the obligor, the obligee may ask for delivery to itself in the following cases: (a) In cases of【3.1.2.01】(1) (a) and where it is difficult to expect receipt by the obligor; or (b) In cases of【3.1.2.01】(1) (b) and where there are none of the grounds listed below. (i) The obligor is in a state where it is unable to pay its obligation in full out of its own property (provided that this shall not apply if the exercise of the right of the obligee pursuant to【3.1.2.01】(1) (b) does not injure the other obligees of the obligor or fall under (a)). (ii) The obligor has grounds that it is able to assert against the obligee. (iii) Other than the above, it is unreasonable to request delivery to the obligee. (2) With regard to cases of (1) (a), the obligee shall assume the duty of returning received property to the obligor. (3) With regard to cases of (1) (a), the obligee who received money may not set off the obligation of return vis-à-vis the obligor or the obligation of payment of an equivalent amount of money against its own claim vis-à-vis the obligor. (4) With regard to cases of (1) (b), the other party to the right of the obligor may, aside from the grounds which could have been asserted against the obligor, assert the grounds which may be asserted against the obligee. 【3.1.2.03】(Status of the other party) (1) In cases where the right of the obligor to be exercised in subrogation requires an act of receipt by the obligor, the other party, (referring to the other party of the right of the obligor to be exercised in subrogation, hereinafter the same with regard to【3.1.2.03】and 【3.1.2.05】(3)) may deposit the right for the benefit of the obligor in the following cases: (a) In cases of receiving a demand from the obligee as exercise of the obligor’s right outside of the court; (b) In cases of receiving a demand from multiple obligees as exercise of the obligor’s right; or (c) In cases where the obligor refused receipt or where it is not possible to expect receipt such as through the obligor going missing. (2) If the deposit in (1) is made, the other party is exempted from the obligation. (3) The other party may assert against the obligee the grounds that could have been asserted against the obligor. (4) In cases where a judgment ordering the payment of money or some other delivery to multiple obligees is made through【3.1.2.02】(1), if the other party makes a delivery to any of the obligees, the other party is exempted from the obligation through such. 【3.1.2.04】(Notification to the obligor) (1) If the obligee is to exercise the right of the obligor based on【3.1.2.01】(1), it shall notify the obligor to such effect; provided, however, that this shall not apply in cases where it is difficult to notify the obligor through such reasons as the whereabouts of the obligor being unknown or in cases where the obligee made a demand to the obligor for exercise of the right. (2) After the notification in (1) has been made, the obligee may not exercise subrogation of the obligor’s right until (1 month) has passed since the time of the notification; provided, however, that this shall not apply in cases of urgency or in other cases where there is a justifiable reason as to why notification was not made beforehand. (3) In cases of the proviso of (2), the obligee shall notify the obligor after the fact without delay. 【3.1.2.05】(Subrogation action) (1) If the obligee has filed an action in order to exercise the right of【3.1.2.01】(1), the obligee shall send a notification of the action to the obligor without delay. (2) If the obligor receives the notification in (1), it may not exercise the right itself independently separate of the exercise of the right by the obligee. In addition, the obligor may not waive the right or perform an act of disposal through such means as assignment. (3) (2) shall not preclude the other party from payment vis-à-vis the obligor. (4) In cases of (1), the obligor or other obligees may participate in the action of (1). (5) Even in cases where the obligee files an action in order to exercise the right in【3.1.2.01】 (1) and a notification of the action is made to the obligor due to such, other obligees may further attach the right of such obligor. (6) If the attachment in (5) is made, the obligee may not exercise the right of【3.1.2.01】(1) with regard to a right which has been attached. 【3.1.2.06】(Rights and duties of the obligee) (1) With regard to exercising the right of【3.1.2.01】(1) the obligee shall assume the duty of care as a prudent manager. (2) If the obligee has paid necessary costs in order to exercise the right of (3.1.2.01) (1), the obligee may demand reimbursement from the obligor. (3) In cases of (2) with regard to the right of reimbursement of the expenses required to exercise the right of【3.1.2.01】(1) (a), the obligee may preferentially collect from the obligor’s property, in accordance with the provisions on the right of general liens concerning common benefit expenses. 【3.1.2.07】(Judicial subrogation) The system of judicial subrogation shall be abolished. Division 2 Right to request avoidance of fraudulent acts 【3.1.2.08】(Right to request avoidance of a fraudulent act) The obligee may make a request to the court for the avoidance of an act which the obligor, in a state where it is unable to pay its obligation in full through its own property (including cases where the state is incurred through such act), knew would injure the obligee (hereinafter referred to as “avoidance of a fraudulent act”). 【3.1.2.09】(Subjective requirements of the beneficiary) The request for avoidance of a fraudulent act in【3.1.2.08】may not be made if a person who received a benefit through the act of the obligor (hereinafter referred to as “beneficiary”) did not know, at the time of the act, of the fact that would injure the obligee. 【3.1.2.10】(Requirements of subject acts) Notwithstanding the provisions of【3.1.2.08】, a request for avoidance of a fraudulent act may not be made with regard to the acts listed as follows: [Proposal A] (a) An act which does not have as its object a property right; (b) An act related to the performance of the obligation or extinguishment of other obligations; provided, however, that the following are excluded: (i) Cases of an act of extinguishment of an obligation whose payment is before its due date or other non-obligatory act, and where the act is performed through the collusion of the obligor and the obligee, who is the beneficiary, for the purpose of only the obligee acquiring preferential satisfaction of a claim; or (ii) Cases of an excessive substitute payment; and (c) The provision of security; provided, however, that this excludes cases where the obligor performs an act, with regard to an already existing obligation, which does not belong to the duty of the obligor, and the act is performed through the collusion of the obligor and the obligee, who is the beneficiary, for the purpose of only the obligee acquiring preferential satisfaction of a claim. [Proposal B] (a) An act which does not have as its object a property right; (b) An act related to the performance of the obligation or extinguishment of other obligations (excluding excessive substitute performances); and (c) The provision of security. * With regard to (b) and (c) of (Proposal A), since there is room for an act which does not fall under denial of a prejudiced act to fall under avoidance of a fraudulent act, the Commission reserves a room for further consideration with regard to the manner in which this matter will be adjusted including the necessity for adjustment measures (such as allowing the exercise of the right of avoidance of a fraudulent act to a bankruptcy trustee in certain cases). 【3.1.2.11】(Acts performed to acquire reasonable value) (1) Notwithstanding the provisions of【3.1.2.08】, in cases where the obligor performed an act to dispose of its property, if it acquired a reasonable value from the other party to the act, a request may be made to the court for avoidance of the act as a fraudulent act only when coming under one of the requirements listed as follows: (a) There is the real risk that owing to changes in the type of property through conversion of the immovable into money or other disposals, the act by the obligor constitutes concealment, a gratuitous conveyance or some other disposal which will injure the obligee (hereinafter referred to as “disposal of concealment or the like”); (b) The obligor had the intention of a disposal of concealment or the like with regard to the money or other property acquired as consideration at the time of the act; and (c) The other party knew the obligor had the intention of the disposal of concealment or the like of (b) at the time of the act. (2) (1) shall apply mutatis mutandis if the obligor promised repayment and acquired money or some other property anew from the other party, and in order to secure the obligation to be newly assumed, performed an act to provide its property as security. (3) With regard to the application of (1) (including cases applied mutatis mutandis to (2)), if the other party to the act is one of the persons listed below, it shall be presumed that the other party knew that the obligor had the intention to make the disposal of concealment or the like of (1) (b) at the time of the act. (a) In cases where the obligor is a juridical person; an executive board member, director, executive officer, inspector, auditor, liquidator or equivalent person. (b) In cases where the obligor is a juridical person and is one of the persons listed in the following (i) or (ii) with regard to such obligor: (i) A person who holds the majority of voting rights of all of the shareholders of the stock company which is the obligor; or (ii) The parent juridical person in cases where the subsidiary stock company of a parent juridical person independently or the parent juridical person and its subsidiary stock company jointly hold the majority of voting rights of all of the shareholders of the stock company which is the obligor; (iii) A person equivalent to those persons listed in (i) or (ii) in cases where a juridical person other than a stock company is the obligor; (c) Relatives or persons cohabiting with the obligor. 【3.1.2.12】(Requirements of claims of obligees exercising the right of avoidance) The request for avoidance of a fraudulent act in【3.1.2.08】may not be made based on the claim if the claim of the obligee comes under any one of the following: (a) The claim accrued after the act of the obligor which is to be the subject of avoidance was performed; or (b) The claim is a claim which is not enforceable. 【3.1.2.13】(Special provisions on gratuitous acts) 【3.1.2.09】does not apply to cases where the act of the obligor is a gratuitous act or an act for value which should be viewed similarly. 【3.1.2.14】(Scope of the avoidance) (1) Notwithstanding the amount of the claim, the obligee may avoid the whole or a part of the act of the obligor through the request for avoidance of a fraudulent act of【3.1.2.08】. (2) Notwithstanding (1), with regard to cases of (b) (ii) of [Proposal A] and the part in brackets of (b) of [Proposal B](cases of an excessive substitute payment) of【3.1.2.10】, avoidance may be made only with regard to the parts other than the part proportionate to the amount of the extinguished claim due to the request for avoidance of a fraudulent act in【3.1.2.08】; provided, however, that this excludes cases of【3.1.2.10】[Proposal A](b) (i). 【3.1.2.15】(Effect of avoidance of a fraudulent act) The effect of the avoidance of a fraudulent act of【3.1.2.08】extends to all of the obligees of the obligor. 【3.1.2.16】(Demand for the return of property vis-à-vis the beneficiary) (1) With regard to the request for avoidance of a fraudulent act of【3.1.2.08】the obligee exercising the right of avoidance may make a demand to the beneficiary that the property acquired from the obligor through the act of the obligor be returned to the obligor using one of the methods listed in (2) to (5). (2) If the property in (1) is property which has a registration or record, the obligee exercising the right of avoidance may make a demand to the beneficiary for erasure procedures of the registration or the record which is the cause of the fraudulent act, or for procedures of transfer of the registration or the record to the obligor. (3) If the property in (1) is money or some other movable property, the obligee exercising the right of avoidance may make a demand to the beneficiary for delivery to the obligor or, in lieu of such, delivery to itself or a demand for a deposit. (4) If the property in (1) is a claim, the obligee exercising the right of avoidance may make a demand to the beneficiary that the third party obligor be notified to the effect that the assignment of the claim to the beneficiary has been avoided. In addition, if a registration of the claim assignment has been made, it may demand its erasure or procedures for transfer to the obligor. (5) Other than the above, the obligee exercising the right of avoidance may make a demand to the beneficiary for performance of an act necessary for recovery of the property to the obligor in accordance with the nature of the property of (1). (6) If the return of the property in (1) is impossible or difficult, or the avoidance is limited to only a part of the property in (1), the obligee exercising the right of avoidance may make a demand to the beneficiary for reimbursement of such value. In such case, (3) applies mutatis mutandis. (7) Notwithstanding (1), with regard to cases of avoidance of a fraudulent act for a gratuitous act provided for in【3.1.2.13】, if the beneficiary did not know of the fact which would injure the obligee at the time of the act, it is sufficient for the beneficiary to reimburse the actual enrichment received. (8) With regard to acts of the same obligor through【3.1.2.08】, in cases where two or more judgments on avoidance of fraudulent acts are final and binding, a beneficiary, who receives a demand for delivery to the obligee exercising the right of avoidance through (3) (including cases applied mutatis mutandis to the latter clause of (6)), may be exempted from such responsibility through delivery to any of the obligees who are exercising the right of avoidance. (9) In cases of (8) the beneficiary may make a deposit. (10) In cases of (1) through to (7), if the beneficiary who made a return, payment or deposit, made a counter performance to the obligor in exchange for the act of the obligor, the beneficiary may make a demand to the obligor for reimbursement of the value amount of the counter performance. (11) In cases where the subject act of the avoidance of a fraudulent act of【3.1.2.08】is an act relating to extinguishment of an obligation performed by the obligor, if the beneficiary returns the received performance or reimburses the value, the claim of the beneficiary shall be recovered to its original state. * With regard to the demand in (10), one view was expressed that while the action for the avoidance of a fraudulent act is pending, the beneficiary may join with this, and file an action against the obligor. 【3.1.2.17】(Exercise of the right to recovered property) (1) In cases of【3.1.2.16】, all of the obligees of the obligor (including beneficiaries) may file execution or exercise the security right with regard to the property recovered to the obligor (including the right of demand which the obligor is to have vis-à-vis the beneficiary through【3.1.2.16】) in accordance with the provisions of the Civil Execution Act. (2) In cases of (1) with regard to the recovered property, the beneficiary has a special lien and has the right prior to other obligees to receive payment of the right to demand reimbursement of the value in【3.1.2.16】(10); provided, however, that this shall not apply if the obligor had the intention of a disposal of concealment or the like with regard to the property acquired as counter performance and the beneficiary knew of such fact. (3) In cases of (1), the obligee exercising the right of avoidance has the right prior to other obligees to receive payment of the right to demand reimbursement of expenses relating to the action for avoidance of a fraudulent act with regard to the recovered property. This right has priority over the right of the beneficiary of the main text of (2). (4) In cases of【3.1.2.16】(3) (including cases where applied mutatis mutandis to the latter sentence of【3.1.2.16】(6)), if the obligee exercising the right of avoidance received the delivery of money or other movables from the beneficiary, all of the obligees of the obligor may file execution or exercise the security right with regard to the movable property (or the right to demand return from the obligee who received delivery from the obligor) in accordance with the provisions of the Civil Execution Act. (5) (2) and (3) shall apply mutatis mutandis to the cases of (4). (6) In cases where the obligee exercising the right of avoidance received the delivery of money from the beneficiary through【3.1.2.16】(3) (including the latter sentence of 【3.1.2.16】(6)), if 3 months (1 month) have passed from the time either the obligee exercising the right of avoidance received the delivery of money or from the time when an action on the avoidance of a fraudulent act with regard to the money filed by the obligee exercising the right of avoidance became final and binding, whichever is later, the obligee exercising the right of avoidance may set off the obligation of return vis-à-vis the obligor with regard to the money received as payment from the beneficiary against its own claim (including the right to demand reimbursement of the expenses in (3)) vis-à-vis the obligor. (7) In cases of (6), if there is a further surplus after the set-off, the obligee exercising the right of avoidance shall deliver the surplus to the obligor. In such case, the obligee exercising the right of avoidance may deposit it. (8) Notwithstanding (6) if an execution is filed vis-à-vis the right of the obligor to demand return with regard to money received as payment from the beneficiary within the period stipulated in (6), the set-off through (6) may not be made while the execution is pending. 【3.1.2.18】(Avoidance of a fraudulent act vis-à-vis a subsequent acquirer) (1) The request of avoidance of a fraudulent act of【3.1.2.08】, making a subsequent acquirer the counterparty, may be made only if the subsequent acquirer knew at the time of such acquisition (where there is a succeeding acquisition from the subsequent acquirer, all of the subsequent acquirers at the time of each of the acquisitions) of the fact that would injure the obligee. (2) If the subsequent acquirer (including acquirers succeeding from the subsequent acquirer) acquires the right gratuitously or the subsequent acquirer ((including acquirers succeeding from the subsequent acquirer) is one of the persons (internally related persons of the obligor) listed in【3.1.2.11】(3), it shall be presumed that the subsequent acquirer knew of the fact of (1). (3) The provisions from【3.1.2.16】(1) to (9) shall apply mutatis mutandis to cases of (1). (4) In cases of (3), if the subsequent acquirer, who made a return, payment or deposit, made a counter performance vis-à-vis the former owner, the subsequent acquirer may exercise subrogation of the right under【3.1.2.16】(10), (11), and【3.1.2.17】(2) that could have been exercised by the beneficiary had the request of avoidance of a fraudulent act been made against the beneficiary as the counterparty within the limit of the counter performance. (5) In cases of (3), if the subsequent acquirer returned the delivery received, paid the value or made a deposit as an act to extinguish the claim vis-à-vis the former owner, the subsequent acquirer may exercise subrogation of the right under【3.1.2.16】(10), (11), and【3.1.2.17】(2) that could have been exercised by the beneficiary had the request of avoidance of a fraudulent act been made against the beneficiary as the counterparty within the limit of the extinguished amount of the extinguished claim. (6) The provisions of【3.1.2.17】(1) and (3) to (8) shall apply mutatis mutandis to the cases of (1) and the provisions of the main text of【3.1.2.17】(2) shall apply mutatis mutandis to exercise of the right by the subsequent acquirer in the cases of (4) and (5). (7) In cases of (1), if through the provisions of (4) and (5) there is a scope in which the right cannot be exercised, the subsequent acquirer may request the former owner for payment of the difference provided that this shall not apply if the former owner is a beneficiary in good faith. (8) In cases where an action for avoidance of a fraudulent act making the subsequent acquirer the counterparty is pending, the subsequent acquirer may join into this action suing for payment pursuant to (7) with the former owner as the defendant. 【3.1.2.19】(Action for avoidance of a fraudulent act) With regard to an action for avoidance of a fraudulent act, the obligor and the other party (beneficiary or subsequent acquirer) to the demand for reimbursement due to avoidance of the fraudulent act shall be the defendants. 【3.1.2.20】(Exercise period of the right to avoidance of a fraudulent act) (1) The right to avoidance of a fraudulent act may not be exercised after the passing of either 2 years from the time the obligee knew of the fact of an act which the obligor performed knowing that it would injure the obligee or 10 years from the time of the act of the obligor. (2) With regard to the limitation period for the exercising of the right of (1), the existing interruption/suspension grounds, the impediment grounds in cases of the proposed prescription period for a claim, and the impediment grounds for the limitation period of a constitutive right shall neither apply nor apply mutatis mutandis.

	Chapter 3 Extinguishment of Claims Division 1 Payments Section 1 General Provisions [Effect of Payments] 【3.1.3.01】(Effect of payments) (1) If an obligation is performed, the claim is extinguished through payment. (2) The distribution of proceeds from sales in civil execution procedures or performances which are compulsorily executed such as delivery of a payment are also payments. * One view was expressed that the wording of “payment” and “performance” in the present Civil Code should not be changed, and the wording “if an obligation is performed” in (1) should be deleted. 【3.1.3.02】(Payment by a person other than the obligor) (1) A third party other than the obligor may make the payment; provided, however, that this shall not apply if the nature of the obligation does not so allow or if both parties have agreed to the effect that this should not be allowed. (2) In cases not falling under the proviso of (1), if a third party has made a payment, the third party acquires the right to obtain reimbursement from the obligor based on such rules as those on mandate, negotiorum gestio, and unjust enrichment. (3) Notwithstanding (2), in cases not falling under the proviso of (1), if a person other than a person with a justifiable interest with regard to the payment such as a (guarantor), third party pledgor or third party acquirer has made a payment against the will of the obligor, the third party shall not acquire the right to obtain reimbursement vis-à-vis the obligor. 【3.1.3.03】(Performance vis-à-vis a person other than the obligee) (1) In cases where the obligee has granted the authority of acceptance to a third party or in cases where a third party has the authority of acceptance in accordance with the provisions of law, a performance vis-à-vis such third party (in this proposal, a person who has the authority of acceptance other than the obligee) is a payment. (2) In cases of a performance rendered vis-à-vis a person who possesses exempt negotiable instruments, even if such person is a person other than the obligee or obligor and does not have the authority of acceptance, this is a valid payment; provided, however, that this shall not apply if the person rendering the performance was with knowledge or was grossly negligent when making the performance. (3) In cases where the person rendering the performance believed based on reasonable grounds that a person, judging by the standards of a reasonable individual, appeared to have the external appearance of an obligee, and made a performance vis-à-vis such person, the performance is a valid payment. (4) In cases where the person rendering the performance believed based on reasonable grounds that a person, judging by the standards of a reasonable individual, appeared to have the external appearance of a person other than the obligee who had the authority of acceptance, and made a performance vis-à-vis such person, the performance is a valid payment. (5) In cases where the performance rendered to a person who possesses exempt negotiable instruments also falls under (3) or (4), only (2) shall be applied and (3) and (4) shall not be applied. 【3.1.3.04】(Status of a third party obligor enjoined from payment) (1) If a third party obligor enjoined from payment through such means as attachment renders a payment for its own obligee, the relevant attaching obligee may demand to the effect that the third party obligor make a further payment to the extent of the damage incurred. (2) (1) does not preclude the third party obligor from exercising the right to obtain reimbursement from such obligee. 【3.1.3.05】(Substitute payment) (1) In cases where an agreement is reached between the obligor and the obligee to the effect that the obligation shall be extinguished through some other performance substituting for the performance owed being made, the obligation is extinguished when the obligor makes such substitute performance. (2) In cases where the agreement in (1) is reached, the obligee may request the obligor to render some other performance or request the rendering of the performance first owed. (3) In cases where the agreement in (1) is made, if the obligor renders the performance first owed, the obligee may not request the obligor for rendering of the other performance. (4) In cases where an agreement is reached between a third party other than the obligor and the obligee to the effect that the obligation shall be extinguished through a performance being made substituting for the performance owed by the obligor, the obligation shall be extinguished if the third party makes the substitute performance only when not falling under the proviso of【3.1.3.02】(payment by a person other than the obligor) (1). In such case, the same rules as (2) and (3) shall apply. 【3.1.3.06】(Delivery of a thing belonging to another person) (1) If the person making a payment delivers a thing belonging to another person as the payment, the person making the payment may not recover the thing unless it makes a further effective payment. (2) In cases of (1), the payment is effective if the obligee consumes or assigns without knowledge the thing accepted as payment. In such case, if the obligee receives a demand for compensation from a third party, it shall not be precluded from obtaining reimbursement from the person who made the payment. (3) Article 476 of the present Civil Code shall be abolished. 【3.1.3.07】(Delivery of a thing in its current state) Article 483 of the present Civil Code shall be abolished. 【3.1.3.08】(Place, time and other requirements of the performance) (1) In cases where there is no manifestation of intention otherwise or a custom with regard to the place of performance, the performance of the obligation shall be made at the following place: (a) The delivery of a specific thing shall be made at the place where such thing was located at the time of accrual of the claim. (b) A performance other than delivery of a specific thing shall be made at the place of the current address of the obligee. (c) Notwithstanding (b), in cases of performance other than delivery of a specific thing and where the obligee is a business operator, the performance shall be made at the current office of the obligee; provided, however, that if the obligee does not have a current office, the performance shall be made at the place of the current address of the obligee. (2) In cases where there are business hours provided through laws and regulations or custom, a demand for performance of the obligation may be made and the performance of the obligation may be made within business hours; provided, however, that this shall not apply if there is a manifestation of intention otherwise. 【3.1.3.09】(Performance costs) If there is no manifestation of intention otherwise concerning the costs of the performance, the costs shall be borne by the obligor; provided, however, that if the costs are increased through the obligee changing its address or some other act, the increase in costs shall be borne by the obligee. 【3.1.3.10】(Handling of certificate at the time of performance) (1) The person who performed the obligation may demand the issuance of a receipt from the person who accepted the performance. The performance and the issuance of the receipt shall be rendered at the same time. (2) In cases where there is a deed with regard to the claim, if the person rendering the performance rendered all of the performance, it may demand the return of the deed. The performance shall be performed ahead of the return of the claim deed. (3) The receipt and the claim deed shall be in writing, and in cases where they are created though electronic records, excluding cases based on the agreement of the parties, they shall not be deemed to be documents in writing. 【3.1.3.11】(Appropriation of the payment) (1) With regard to the appropriation of the payment of multiple claims, the order shall be appropriation through agreement, designated appropriation and statutory appropriation (excluding cases of (3)). (2) With regard to the appropriation of the principal, interest and costs of the payment of one single claim, the order of appropriation shall be appropriation through agreement, costs, interest and finally the principal. (3) With regard to the appropriation of the principal, interest and costs of the payment of multiple claims, the order of appropriation shall be appropriation through agreement, group of costs, group of interests and group of principals and within each group, it shall be the order of designated appropriation, then statutory appropriation. (4) With regard to designated appropriation, it shall be as follows. (a) In cases where the obligor assumes a number of obligations whose object is the same kind of performance vis-à-vis the same obligor, if the benefit provided as payment is insufficient to extinguish all of the obligations, the person making the payment may designate, at the time of its performance, to which obligation the payment should be appropriated. (b) If the person making a payment does not make such a designation in accordance with the provision of (1), the person accepting the payment may designate, at the time of the acceptance, to which obligation the payment should be appropriated; provided, however, that this shall not apply if the person rendering the payment immediately stated an objection with regard to such appropriation. (c) The designation of appropriation of payment in cases of (a) and (b) shall be implemented through a manifestation of intention made to the other party. (5) With regard to statutory appropriation, if neither the person making the payment nor the person accepting the payment designates the appropriation of payment, the payment shall be appropriated in accordance with the provisions of the following items: (a) If the obligations include those which are due and those which are not due, the payment shall be appropriated first to those that are due; (b) If all of the obligations are due or none of them are due, the payment shall be appropriated first to those obligations which have more benefit for the obligor; (c) If all of the benefits of the payments for the obligor are equal, the payment which is due first or whose due date should fall first shall be appropriated first; and (d) In cases where the matters listed in (b) and (c) are equal payments of obligations, they shall be appropriated in proportion to the amount of each obligation. (6) With regard to the distribution of proceeds of sales from civil execution procedures, the Commission reserves the room for further consideration with regard to whether the provisions on appropriation of payments are to be applied or whether mutatis mutandis provisions to such effect should be established. 【3.1.3.12】(Rendering of performance) (1) In cases where an obligor actually renders the performance of an obligation, the obligee may not demand compensation for damage due to a delayed performance and may not cancel due to non-performance. (2) In cases where the obligee rejected acceptance of the performance of the obligation in advance, or in cases where an act of the obligee is necessary in advance in order for the obligation to be performed, if the obligor makes the preparations for the performance, notifies the obligee to such effect and makes a demand to the obligee for acceptance, the same effect as (1) shall accrue. (3) Notwithstanding (2), even if the obligor did not notify the obligee of the preparations for the performance nor make a demand to the obligee for acceptance, based on the principle of good faith, the same effect as (1) shall not be precluded. Section 2 Subrogation through payment 【3.1.3.13】(Subrogation through payment) (1) A person who has a justifiable interest with regard to the payment being rendered shall be subrogated by operation of law into the position of the obligee when it has made a payment. (2) The person subrogated into the position of the obligee (hereinafter referred to as “subrogee”) may exercise the rights allowed as the effect of the claim extinguished by the payment (hereinafter referred to as “original claim”) within the scope of the right to obtain reimbursement acquired vis-à-vis the obligor. (3) The subrogee may exercise, within the scope of the right to obtain reimbursement acquired vis-à-vis the obligor, the real-right security for the benefit of the original claim, the guarantee claim for the benefit of the original claim or any other right possessed by the obligee as security. In such case, it shall comply with the following provisions. (a) The guarantor shall be subrogated into the position of the obligee vis-à-vis a person who received assignment of the security from the obligor (hereinafter referred to as “third party acquirer”). (b) The third party acquirer shall not be subrogated into the position of the obligee vis-à-vis the guarantor. (c) One of the guarantors (including cases where doubling as a third party pledgor) shall be subrogated vis-à-vis the other guarantors in proportion to such number involved. In such case, such guarantor may exercise the guarantee claim making the original claim as the principal claim, only within the scope of the right to obtain reimbursement which is acquired vis-à-vis the other guarantors. (d) One of the third party acquirers shall be subrogated into the position of the obligee vis-à-vis the other third party acquirers in proportion to the value of each property. (e) One of the third party pledgors shall be subrogated into the position of the obligee vis-à-vis the other third party pledgors in proportion to the value of each property. (f) The obligee shall be subrogated between the guarantors (including cases when doubling as third party pledgors) and third party pledgors, in proportion to the number of persons involved; provided, however, that in cases where the guarantor does not double as a third party pledgor and there are several third party pledgors, the obligee shall be subrogated, with regard to the residual amount of the obligation after the guarantor’s share has been deducted, in proportion to the value of each property furnished. (g) The third party pledgor shall be subrogated into the position of the obligee vis-à-vis a third party acquirer. (h) The third party acquirer shall not be subrogated into the position of the obligee vis-à-vis a third party pledgor. (i) A person who received assignment of a security from a third party pledgor shall have the same status as the third party pledgor in the cases of (e), (f), (g) and (h). (j) In cases of (a) if the property is immovable property, the guarantor may not be subrogated into the position of the obligee vis-à-vis the third party acquirer unless the subrogation is noted in the registration of the applicable statutory lien, pledge of immovable property or mortgage before the third party acquirer acquires the immovable property from the obligor. (k) In (f) and with regard to cases of (i), if the property is immovable property, the guarantor may not be subrogated into the position of the obligee vis-à-vis a person who received assignment of the secured immovable property from the third party pledgor unless the registration of subrogation is made in accordance with (j). (l) In cases of (e) or (f), if an agreement is reached to the effect of changing the proportion of the subrogation by the guarantor or the third party pledgor　provided for in (e) or (f) , such agreement shall prevail. Only in cases where there is a registration to such effect may the effect of the agreement be asserted against a third party. (4) In cases where property possessed by a third party pledgor who may be subrogated into the position of the obligee based on (1) is put up for auction and the third party pledgor is subrogated into the position of the obligee, if there are subordinated security rights which have been extinguished by the auction, the subordinated security right holder may exercise, ahead of the third party pledgor, the right which may be exercised by the third party pledgor in accordance with (3). The same applies to a person who has received assignment of the security from a third party acquirer or a third party pledgor. 【3.1.3.14】(Partial subrogation through partial payment) (1) If a person who has a justifiable interest with regard to the rendering of a payment pays part of a claim, it shall be partially subrogated into the position of the obligee. (2) The right acknowledged as the effect of the claim before the partial payment, real-right security, guarantee claim and any other right possessed by the obligee of the claim as security shall jointly belong to the person partially subrogated (hereinafter referred to as “partial subrogee”) and the obligee in proportion to the value of the partial payment; provided, however, that the obligee may exercise [the right] independently and the partial subrogee may not exercise [the right] without the consent of the obligee, and with regard to the outcome of the [right] exercised, the partial subrogee shall be subordinate to the obligee. (3) In cases of (1), only the obligee may cancel a contract through non-performance of the obligation. In such case, the obligee shall reimburse the amount paid and the interest to the partial subrogee. 【3.1.3.15】(Duty of the obligee) (1) An obligee who has received all of the payment through a payment by subrogation shall deliver any certificate with regard to the claim or security it possesses to the subrogee. In cases where there is a subrogation payment with regard to part of a claim, the obligee shall enter such subrogation into the certificate with regard to the claim and allow the subrogee to supervise the preservation of the security it possesses. (2) In cases of (1), provisions shall be established on imposing on the obligee the duty of taking procedures to note the subrogation in the registration of the transfer of a mortgage. (3) In cases where there is a person who is able to subrogate in accordance with (3.1.3.13), if, in violation of the duty to preserve the security for the person who is able to subrogate, the obligee loses such security or diminishes it, the person who is able to subrogate shall be exempted from its responsibility to the extent of not being able to receive reimbursement through such loss or diminishment. (4) In cases of (3), provisions shall be established to the effect that an assignee from a third party acquirer or a third party pledgor after the emergence of exemption from responsibility, may also assert the effect of the exemption due to the violation of the duty of preservation of the security. Section 3 Deposit of the Subject Matter of the Payment 【3.1.3.16】(Requirements and effect of deposit) (1) In the following cases, the obligor may deposit the subject matter of the payment for the obligee and be exempted from the obligation: (a) Where the obligee refuses receipt with regard to the tendering of a performance. Whether or not the tendering of the performance is a tendering of an actual performance based on【3.1.3.12】(1) or the tendering of an oral performance based on【3.1.3.12】(2) does not matter. (b) Where the obligee is unable to receive the performance. (c) Where the payer is unable without negligence to ascertain the obligee. (2) In cases of the subject matter of the payment being deposited, the obligation is extinguished from the time of the deposit; provided, however, that, excluding cases where a pledge or mortgage is extinguished through the deposit, the obligation is deemed not to have been extinguished owing to the recovery through【3.1.3.18】. 【3.1.3.17】(Method of deposit) (1) The deposit due to【3.1.3.16】shall be made with the official depositary of the district where the relevant obligation must be performed. (2) In cases where there are no provisions otherwise in laws and regulations with regard to the official depositary, the court shall, at the request of the payer, designate the depository and appoint a custodian for the deposited thing. (3) A person who makes the deposit according to【3.1.3.16】shall notify the obligee without delay of the deposit. 【3.1.3.18】(Recovery of a deposited thing by the payer) In cases where the subject matter of the payment is deposited, the payer may recover the deposited thing if the obligee does not accept the deposit or during the period while a judgment proclaiming the deposit to be valid has not yet been finalized; provided, however, that the deposited thing may not be recovered in cases where a pledge or mortgage was extinguished through the deposit. 【3.1.3.19】(Deposit of proceeds of the auction of a subject matter of payment) If the subject matter of payment is not suitable for deposit or there is the risk that it will be lost or damaged or where its value may decrease through any other cause, the payer may, with the permission of the court, put it up for auction and deposit the proceeds of the auction. The same shall apply if the preservation of the thing requires excessive costs. 【3.1.3.20】(Demand for return of a deposited thing by the obligee) (1) The obligee may make a demand to the depositary for return of the deposited thing. (2) In cases where the obligor is required to make a payment in exchange for the performance by the obligee, the obligee may not receive the deposited thing until it has rendered such performance. Division 2 Set-offs 【3.1.3.21】(Concept of set-offs) In cases where the obligor has a claim with the same type of object vis-à-vis the obligee, if the claim is at its due date of payment, the obligor may with regard to the value of both obligations, have such obligation extinguished through a set-off; provided, however, that this shall not apply if grounds exist preventing the exercising of such claim or the nature of the claim does not allow for a set-off. 【3.1.3.22】(Effect of a manifestation of intention to the effect that a set-off may not be made) A manifestation of intention of the parties to the effect that a set-off may not be made may not be used to assert against a third party who is without knowledge and without gross negligence. 【3.1.3.23】(Set-off by a person other than the obligor) A set-off may also be made by a third party who has a claim vis-à-vis the obligee in accordance with the same rules as those applied to payment by a third party. 【3.1.3.24】(Method of set-off) A set-off is effected by the obligor or the third party of【3.1.3.23】manifesting an intention to the obligee. In such case, neither conditions nor a time limit may be attached to the manifestation of intention. 【3.1.3.25】(Effect of the set-off) (1) If a manifestation of intention of a set-off takes effect, the obligations assumed mutually by the person manifesting the intention and the other party shall be extinguished at that time with regard to corresponding amounts. (2) In cases where a person who is not the obligor sets off, the obligation assumed by the obligee vis-à-vis the person manifesting the intention and the obligation assumed by the obligor vis-à-vis the obligee shall be extinguished at that time with regard to corresponding amounts. 【3.1.3.26】(Set-off of obligations with differing locations of performance) A set-off may be effected even if the performance locations of the two obligations differ. In such case, the party who sets off shall compensate the other party for any damage incurred through the set-off. 【3.1.3.27】(Set-off of a claim whose performance may be refused by the obligor asserting prescription) (1) The obligee of a claim whose performance may be refused through prescription, may set off such claim; provided, however, that this shall not apply if the obligor manifested an intention to the effect of refusing performance (if the obligor manifested an intention to the effect of invoking the prescription). (2) In cases where an obligor who did not manifest the intention in the proviso of (1), manifests an intention to assert prescription within one month of receiving a manifestation of intention of a set-off, the set-off in (1) shall not take effect. 【3.1.3.28】(Set-off for a claim for damages) The obligor of the following claims may not assert their set-off against the obligee. (a) The claim for damages based on a tort committed intentionally by the obligor to incur damage on the obligee. (b) The claim for damages based on a claim not being performed intentionally by the obligor to incur damage on the obligee. (c) The claim for damages based on infringement of a person’s life or body (excluding the claims provided in (a) and (b)). 【3.1.3.29】(Prohibition of a set-off for a claim immune from attachment) If a claim is immune from attachment, the obligor may not assert a set-off against the obligee. 【3.1.3.30】(Prohibition of a set-off for a claim enjoined from payment) (1) A third party obligor who has been enjoined from making a payment may assert a set-off against the claim possessed vis-à-vis the obligor in opposition to an attaching obligee or provisionally attaching obligee. (2) Notwithstanding (1), a third party obligor enjoined from making a payment may not assert a set-off against a claim acquired after the enjoinment in opposition to the attaching obligee or provisionally attaching obligee. (3) Notwithstanding (1), in cases where a third party obligor enjoined from making a payment acquires a claim after a motion for an attachment or a provisional attachment has been filed, if it knew at the time of the acquisition that such motion had been filed, it may not assert a set-off against such claim in opposition to the attaching obligee or provisionally attaching obligee. (4) In cases where it is possible to exercise a set-off through a manifestation of intention of the parties to the effect that it is appropriate to set off a claim using the fact of the motion for an attachment or provisional attachment being filed, an attachment order or a provisional attachment order being issued or a fact having arisen relating to grounds for commencement of the procedures for attachment or provisional attachment of the claim, the set-off using such claim may be asserted against the attaching obligee or the provisionally attaching obligee only when both the claim and the claim pertaining to the attachment or provisional attachment accrue from the specific continuous transactions of the parties. The same applies to a manifestation of intention of the parties to the effect that a set-off shall take effect using the occurrence of a fact relating to the grounds for commencement of procedures for attachment or provisional attachment of the claim. (5) In cases where a person, who is not a third party obligor but has a claim vis-à-vis a person who is enjoined from collecting a claim or from other disposals, later manifests an intention of set-off against such claim, the third party obligor may not assert such set-off against the attaching obligee or provisionally attaching obligee. The same applies to a manifestation of intention of a set-off made while knowing that a motion for an attachment or a provisional attachment had been filed. 【3.1.3.31】(Abuse of the right of set-off) With regard to cases where exercising the right of set-off is deemed to harm equity with the attaching obligee or the provisionally attaching obligee, the third party obligor who has been enjoined from making a payment may not assert the set-off against the attaching obligee or the provisionally attaching obligor. 【3.1.3.32】(Appropriation of the set-off) (1) 【3.1.3.11】(partial, rules corresponding to the provisions of Article 488, Article 490 and Article 491 of the present Civil Code) relating to the appropriation of a payment shall apply mutatis mutandis to set-offs. (2) If either the person manifesting the intention of set-off or the other party does not designate the appropriation of the set-off, the obligation to be extinguished by the set-off shall be subject to the following. (3) Regardless of whether the due date of the payment of the obligation has arrived or the order of arrival of the due dates of payment, the extinguishment of the obligation which has more benefit for the person manifesting the intention of set-off shall be appropriated first. (4) If the benefits of the extinguishment of the obligations are equal for the person manifesting the intention of set-off, they shall be appropriated corresponding to the amount of each obligation. Division 3 Novation 【3.1.3.33】(Concept of novation) (1) With regard to cases where the parties conclude a contract which changes the object of the obligation, if an intention has been manifested to extinguish the obligation, such obligation shall be extinguished through novation. In such case, the obligor shall assume the obligation whose object was changed through the novation of the contract. (2) Even in cases where the parties conclude a contract which changes the nature of the obligation, such obligation shall be extinguished through the novation and the obligor shall assume the obligation whose nature was changed through the novation of the contract. (3) Parties who make a conditional obligation an unconditional obligation and then add conditions to the unconditional obligation or who manifest an intention to change the conditions of the obligation extinguishing the previous obligation shall be deemed to have made a novation. 【3.1.3.34】(Effect of a contract to the effect of substituting the obligor or the obligee) (1) In cases where a person, who is not the obligor, and the obligee conclude a contract to the effect that the person who is not the obligor shall be substituted for the obligor extinguishing the previous obligation, it shall be deemed that an agreement has been made on assumption of the obligation. (2) In cases where a contract is concluded to the effect of substituting a person who is not the obligee for the obligee extinguishing the previous obligation assumed by the obligor vis-à-vis the previous obligee, it shall be deemed that an agreement has been made to the effect of assigning the claim. 【3.1.3.35】(Non-existence of an obligation prior to novation or the non-accrual of an obligation after novation and the effect of the novation) (1) Novation takes effect only in cases where the obligation existed before the novation. (2) In cases where the obligee or the obligor novated the contract aware that there were grounds where the effect of the novation would not accrue, the obligation before the novation shall be extinguished; provided, however, that this shall not apply if the novation of the contract is contrary to public order. (3) In cases where there are grounds making the novation of a contract rescindable, if the obligee (excluding persons who are able to rescind the novation of the contract) novated the contract aware that such grounds existed, it shall be deemed that the obligee manifested an intention for an offer of release from the obligation before the novation; provided, however, this shall be limited to cases where the novation of the contract is rescinded. 【3.1.3.36】(Transfer of the security to the obligation after novation) (1) With regard to novation of the contract, the obligee may transfer the security furnished for the obligation to the obligation after the novation to the extent of the object of the obligation before novation; provided, however, that if a person who was not the obligor furnished the security, the consent of the person who furnished the security shall be acquired. (2) The guarantor of the obligation before novation shall not assume responsibility for performance of the obligation after novation; provided, however, that this shall not apply if the guarantor consents in writing to assume the responsibility. Division 4 Central Counterparty Settlement 【3.1.3.37】(Concept of central counterparty settlement) (1) An obligation to be assumed in the future by one of the parties vis-à-vis the other parties ((hereinafter referred to as the “obligation which is the subject of settlement” in 【3.1.3.37】and【3.1.3.39】) shall be extinguished through central counterparty settlement at the moment when the obligation which is the subject of settlement accrues, in cases where the obligor assumes a corresponding obligation vis-à-vis a party who is not the obligee of the obligation which is the subject of settlement (hereinafter referred to as “settlement provider” in【3.1.3.37】to【3.1.3.39】), and in addition, the person who is to be the obligee and the person who is to be the obligor shall stipulate in advance that the settlement provider shall assume the same obligation vis-à-vis the obligee of the obligation which is the subject of settlement, and the person who is to be the settlement provider so consents. In such case, the obligor of the obligation which is the subject of settlement shall assume an obligation corresponding to that obligation vis-à-vis the settlement provider, and the settlement provider shall assume the same obligation vis-à-vis the obligee of the obligation which is the subject of settlement. (2) The obligee of the obligation which is the subject of settlement and the settlement provider shall be juridical persons. (3) The contract in (1) shall take effect through registration. In such case, any disposal of the claim relating to the obligation which is the subject of settlement subsequent to the registration of the central counterparty settlement shall lose its effect through extinguishment of the obligation due to the central counterparty settlement. (4) Taking into consideration that the central counterparty settlement is proposed for the purpose that it be utilized in group concentrated settlements, if there are several central counterparty settlements to be conducted by the same settlement provider and a contract of central counterparty settlement is concluded between any one of the parties and all of the remaining parties, a basic policy shall be formed making it possible for a list of the parties to be made public, and separate consideration shall be given to detailed items of registration taking into consideration the basic policy. (5) With regard to the contract in (1), it may be stipulated that the obligor of the obligation which is the subject of settlement may not assert against the settlement provider the grounds that could have been asserted against the obligee. (6) In cases where one of the parties agreed with the obligee that the obligation actually assumed at the time of the registration of (3) would be incorporated into the settlement and the person who is to act as the settlement provider consents, the obligation which is the subject of the settlement shall be extinguished through the central counterparty settlement. In such case, the obligor of the obligation which is the subject of the settlement shall assume an obligation corresponding to the same obligation vis-à-vis the settlement provider, and the settlement provider shall assume the same obligation vis-à-vis the obligee of the obligation which is the subject of the settlement. * The Commission’s basic assumption is that in addition to【3.1.3.37】, the rules of 【3.1.3.38】to【3.1.3.39】shall be positioned in the Civil Code. However, there is also the possibility of placing them in existing laws other than the Civil Code or the possibility of legislating a single law for the purpose of establishing these rules. 【3.1.3.38】(Effect between the parties of the central counterparty settlement) Even if a claim acquired by the settlement provider through central counterparty settlement is not performed, the extinguishment of the claim through the central counterparty settlement shall not be affected. 【3.1.3.39】(Effect regarding the relationship with a third party to the central counterparty settlement) (1) Even if the obligation which is the subject of settlement is enjoined from being paid, extinguishment through central counterparty settlement shall not be precluded. (2) The attachment or provisional attachment of a claim relating to an obligation which is the subject of settlement shall be deemed to have been executed for the object of the claim relating to the obligation assumed by the settlement provider. In such case, with regard to the application of【3.1.3.30】to the set-off by the settlement provider, the settlement provider shall be deemed to be a third party obligor. (3) If the attachment or the provisional attachment of the claim takes effect with regard to a claim relating to an obligation assumed by the settlement provider, the executing court shall notify the settlement provider to such effect in accordance with the provisions of the Supreme Court Rules. Division 5 Release 【3.1.3.40】(Concept of release) (1) The obligee may release an obligation through an agreement with the obligor. (2) In cases where the obligor did not state an objection within a reasonable period of time with regard to the manifestation of intention made by the obligee to the effect of release from the obligation, it shall be deemed that the agreement in (1) was made. * One view was expressed that the release should be construed as a unilateral act of the obligee whereby the effect of release does not take effect if the obligor refuses the release. 【3.1.3.41】(Effect of release in a will) The obligee may manifest an intention of release in a will. In such case, the provisions of Articles 986 to 989 of the present Civil Code shall apply mutatis mutandis to a manifestation of intention by the obligor to the effect of either rejecting the release or acknowledgement. Division 6 Merger 【3.1.3.42】(Merger) If the claim and the obligation become vested in the same person, the claim shall be extinguished through merger; provided, however, that if the claim is the subject of the right of a third party, the claim shall not be extinguished. Division 7 Prescriptions of claims Section 1 Subjects of Prescriptions and Prescription Periods 【3.1.3.43】(Subjects of prescriptions) The subject of a claim prescription shall be a claim (excluding the right of lease of immovable property). 【3.1.3.44】(Principles on the commencement time of the prescription for a claim and the prescription period) (1) Unless otherwise provided in the Civil Code or other laws, the prescription period for a claim shall expire after [10 years] have elapsed since the time of being able to exercise the claim. (2) Even before the elapse of the period in (1), if the obligee (in cases where the obligee is a minor or an adult ward, the legal representative) comes to know of a cause for accrual of a claim and identifies the obligor, the prescription period for the claim shall expire through the elapse of [3 years/4 years/5 years] since the time of knowing of the fact or being able to exercise the claim, whichever comes later. 【In cases where the prescription period of (2) is three years】 (3) Notwithstanding (1), if the obligee (in cases where the obligee is a minor or an adult ward, the legal representative) comes to know of a cause for accrual of a claim and identifies the obligor within [10 years] of the time of being able to exercise the claim, the period of claim prescription shall not expire until [3 years] have passed since knowing of such fact. 【3.1.3.45】(Handling of the provisions on short-term extinctive prescriptions) (1) Articles 169 to 174 of the present Civil Code shall be abolished. (2) Article 724 of the present Civil Code shall be abolished. (3) With regard to other provisions of the present Civil Code stipulating provisions which differ from【3.1.3.44】, the Commission considers that it is preferable to abolish them in principle, but it reserves a room for further consideration on each provision. (4) With regard to provisions relating to extinctive prescription in the Commercial Code, the Commission considers that it is preferable to abolish Article 522 and other related provisions of the Commercial Code insofar as possible, but these revisions shall be left to later consideration for the reform of the Commercial Code. 【3.1.3.46】(Special provisions on calculation of commencement times in cases where the obligor is required to draft records on the claim or comply with inquiries) (1) If the obligor is required to draft records on the claim or comply with inquiries from the obligee in accordance with laws and regulations or fair business customs, the period in【3.1.3.44】(2) with regard to the claim shall commence running from the time of the obligor indicating the contents of the claim to the obligee and notifying to the effect that the claim prescription shall commence running. (2) The notification in (1) may not be made unless the period in【3.1.3.44】(2) has passed calculating from the due date of payment of the claim or where there is a compelling reason. 【3.1.3.47】(Exceptions to claims recognized through final and binding judgments and suchlike) (1) The prescription period for a claim which has been recognized through a final and binding judgment shall expire when [10 years] have passed since the judgment became final and binding. The same shall apply to a claim which has been recognized through a final and binding family affairs adjudication, a claim which has been recognized through a conciliation or a judicial settlement in accordance with the Domestic Relations Trial Act, conciliation in accordance with the Civil Conciliation Act, demand for payment, entry in a notice of a bankruptcy claim or a notice of a rehabilitation claim, an arbitration award or a claim which has been recognized through any other judgment which has an effect equivalent to a final and binding judgment. (2) (1) shall not apply with regard to a claim whose due date for payment has not yet arrived at the time when such judgment becomes final and binding. (3) In cases where a guarantor or some other person is to assume the obligation (referred to as “guarantee obligation”) of performing the obligation (referred to as “principal obligation”) of another person, if a claim relating to the principal obligation becomes final and binding in accordance with a final and binding judgment or a final and binding family affairs adjudication, is recognized through a conciliation or a judicial settlement in accordance with the Domestic Relations Trial Act, a conciliation in accordance with the Civil Conciliation Act, a demand for payment, an entry in a notice of a bankruptcy claim or a notice of a rehabilitation claim, an arbitration award or through any other judgment which has an effect equivalent to a final and binding judgment, the prescription period for the claim relating to the guarantee obligation for the benefit of the claim which has been recognized shall be the same as (1). 【3.1.3.48】(Prescription period for a claim of periodic payments) (1) The prescription period for a claim which accrues at each individual period based on a claim which requires a certain payment be made or alternative goods be delivered on a periodic basis (referred to as a “claim for periodic payment”) aside from expiring after the period provided for in【3.1.3.44】has passed, shall expire when [10 years] have passed since the time of the last payment of the claim for periodic payment which had already accrued. (2) The obligee of a claim for periodic payment may ask the obligor for acknowledgement at any time in order to acquire evidence of renewal of the prescription period for the claim. 【3.1.3.49】(Prescription period of a claim for damages owing to infringement of personal interests) The application of the provisions of【3.1.3.44】with regard to a claim for damages owing to infringement of the [life, body, reputation, and other personal interests] shall be as follows: (a) The period of【3.1.3.44】(1) shall be [30 years]. (b) The period of【3.1.3.44】(2) shall be [5 years/10 years]. (c) 【3.1.3.44】(3) shall not apply. 【3.1.3.50】(Setting a prescription period through agreement) (1) The obligee and the obligor may, through an agreement, change the commencement time of the prescription period or the length of the prescription period provided for in【3.1.3.44】(2) up until the time of accrual of the claim. (2) The commencement time stipulated through the agreement of (1) shall be from after the time the claim could be exercised. (3) The prescription period stipulated through the agreement of (1) shall be for more than [6 months/1 year] of the time of being able to exercise the claim but less than [10 years] (the same period as【3.1.3.44】(1)); provided, however, that this does not apply if otherwise provided for by law. (4) The agreement in (1) made between a business operator and consumer is void if it has contents which are more disadvantageous to the consumer than in cases according to the provisions of law. Section 2 Impediments to Prescriptions of Claims 【3.1.3.51】(Types and definitions of prescription impediments relating to prescription of claims) The impediments to prescriptions of claims shall be divided into the three types of renewal of the prescription period, suspension of the running of the prescription period and extension of the expiry of the prescription period. (a) The renewal of the prescription period means that the running of the previous prescription period terminates through the occurrence of certain grounds and the running of a new prescription period commences. (b) The suspension of the running of the prescription period means that the running of the prescription period is temporarily suspended through the occurrence of certain grounds and after the grounds have terminated, the running of the prescription period recommences and the prescription period expires through the passing of the remaining period. (c) The extension of the expiry of the prescription period means that, in cases of there being certain grounds, the expiry of the prescription period is extended from the time of the grounds terminating or being extinguished until a certain period has passed. 【3.1.3.52】(Renewal of the prescription period) (1) The prescription period shall be renewed according to the following grounds: (a) Civil execution; (b) Acknowledgement of the claim by the obligor. (2) The renewal of the prescription period due to the grounds of (1) vis-à-vis the principal obligor shall also take effect vis-à-vis the guarantor or any other person assuming the obligation of performance of any other principal obligation. 【3.1.3.53】(Renewal of the prescription period of a claim through civil execution) (1) The renewal of the prescription period of a claim through civil execution shall take effect at the time of conclusion of the execution procedures recognizing the claim. (2) If the civil execution is conducted vis-à-vis a guarantor, third party pledgor or some other person other than the obligor, the renewal of the prescription period of the claim shall not take effect until after the obligee or the person undergoing execution of such property has notified the obligor of such execution. 【3.1.3.54】(Renewal of the prescription period of the claim through acknowledgement of the claim by the obligor) (1) The renewal of the prescription period of the claim through acknowledgement of the claim by the obligor shall take effect at the time of the acknowledgement. (2) If the obligor performs part of the obligation, it shall be presumed that the obligor acknowledged the whole of the claim relating to such obligation. If the obligor performs the obligation of interest, the obligation of compensatory damages for delay or any other obligation which accrued incidentally to the claim, it shall be presumed that the obligor acknowledged such claim. (3) When making the acknowledgement giving rise to the renewal of the prescription period, the capacity or authority to act is not required to assume the obligation relating to such acknowledgement. 【3.1.3.55】(Prescription period of a claim after renewal) (1) The prescription period of a claim after renewal shall be [3 years/4 years/5 years]. (2) With regard to the claim stipulated in【3.1.3.47】or the claim stipulated in【3.1.3.49】, the prescription period of the claim of (1) after renewal shall not expire until the remaining period at the time of renewal of the period stipulated in【3.1.3.47】or the period stipulated in【3.1.3.49】(2) before the renewal, has passed. (3) With regard to cases stipulated in【3.1.3.46】, (1) shall not apply and【3.1.3.46】shall apply even with regard to the prescription period of the claim after renewal. (4) If the parties agree on the prescription period of a claim, (1) shall not apply and the prescription period of the claim after the renewal shall be the same as the agreed period. 【3.1.3.56】(Suspension of the running of the prescription period of a claim) (1) The prescription period of a claim shall be suspended through the following grounds: (a) Filing of an action or any other demand by litigation, motion for a demand for payment, motion for a settlement, motion for a conciliation through the Civil Conciliation Act or the Domestic Relations Trial Act, participation in bankruptcy proceedings, participation in rehabilitation procedures or cases coming under the “claim” of item 1 of Article 147 of the present Civil Code (excluding demand notice) or cases equivalent to “claim”; (b) A motion for civil execution; (c) A motion for civil preservation; (d) An agreement between the obligee and the obligor to the effect of holding discussions concerning the claim; (e) Use of alternative resolution dispute procedures. (2) The suspension of the running of the prescription period of the claim due to the grounds in (1) vis-à-vis the principal obligor shall also take effect vis-à-vis the guarantor and any other person assuming the obligation of performing any other principal obligation. 【3.1.3.57】(Suspension of the running of the prescription period of a claim due to the filing of an action) (1) If a demand or a motion falling under【3.1.3.56】(1) (a) is made, the prescription period of the claim shall suspend running from such time. (2) In cases of a demand or a motion falling under【3.1.3.56】(1) (a) being made with regard to part of a claim, if it is clear that a partial demand is being made, the effect of (1) shall accrue for the whole of the claim. (3) If the procedures have ended without the existence of the claim being recognized, the running of the prescription period of the claim shall recommence from such time. In such case, the prescription period shall not expire until [6 months/1 year] have passed since the time of conclusion of the procedures. A demand notice for performance made within the (6 months/1 year) shall not have the effect of extending the expiry of the prescription period. (4) In cases where a demand by litigation or motion is made with the guarantor, third party pledgor or a person other than the obligor as the other party, if the obligee or other party to the lawsuit has notified the obligor of the demand or motion, the running of the prescription period shall be suspended on the arrival of the notification. (5) In cases of (4), the running of the prescription period shall recommence at the time of conclusion of the procedures. In such case, the prescription period shall not expire until [6 months/1 year] has passed since the time of conclusion of the procedures. A demand notice for performance made within the [6 months/1 year] shall not have the effect of extending the expiry of the prescription period. 【3.1.3.58】(Suspension of the running of the prescription period of a claim due to a motion for civil execution) (1) If a motion for civil execution procedures is filed, the running of the prescription period of the claim shall be suspended from such time. (2) In cases where a motion for procedures is filed with regard to the property of a person other than the obligor, if the obligee or a person whose property is the subject of the proceedings notified the obligor of the fact of the motion, the running of the prescription period of the claim shall be suspended on the arrival of the notification. (3) If the motioned procedures have concluded, the running of the prescription period shall recommence from such time; provided, however, that this shall not apply if the prescription period was renewed. (4) In cases of the main text of (3), the prescription period shall not expire until [6 months/1 year] have passed since the time of conclusion of the procedures. A demand notice for performance made within the [6 months/1 year] shall not have the effect of extending the expiry of the prescription period. 【3.1.3.59】(Suspension of the running of the prescription period of a claim due to a motion for civil preservation) (1) If a motion for civil preservation procedures is filed, the running of the prescription period of the claim shall be suspended from such time. (2) In cases where a motion for procedures is filed with regard to the property of a person other than the obligor, if the obligee or a person whose property is the subject of the proceedings notified the obligor of the fact of the motion, the running of the prescription period shall be suspended on the arrival of the notification. (3) If the filed procedures have concluded, the running of the prescription period shall recommence from such time. In such case, the prescription period shall not expire until [6 months/1 year] have passed since the time of conclusion of the procedures. A notice for performance made within the [6 months/1 year] shall not have the effect of extending the expiry of the prescription period. 【3.1.3.60】(Suspension of the running of the prescription period of a claim due to an agreement on discussions) (1) If an agreement is reached between the obligee and the obligor to the effect of holding discussions relating to the claim, the running of the prescription period of the claim shall be suspended from such time. (2) If a notification reaches the obligee from the obligor to the effect of rejecting the continuation of the discussions or [3 months/6 months] have passed since the last discussion (excluding cases where an agreement has been reached on continuing the discussions), the running of the prescription period shall recommence from such point. (3) In cases of (2), the prescription period shall not expire until [6 months/1 year] have passed since the time of recommencement of the running. A demand notice for performance made within the [6 months/1 year] shall not have the effect of extending the expiry of the prescription period. 【3.1.3.61】 (Suspension of the running of the prescription period of a claim due to the use of alternative dispute resolution procedures) (1) In cases where arbitration, certified alternative dispute resolution or other alternative dispute resolution procedures are employed, the running of the prescription period shall be suspended in accordance with the Arbitration Act, the Act on Promotion of Use of Alternative Dispute Resolution and other laws. (The Commission considers it necessary that relevant provisions in the Arbitration Act, the Act on Use of Alternative Dispute Resolution and other individual laws are arranged as necessary.) (2) The following contents are to be established with regard to arbitration: (a) If arbitration procedures have commenced and a demand has been made in such procedures, the running of the prescription period for the claim pertaining to such demand shall be suspended from the time of commencement of the procedures. (b) If the arbitration procedures have concluded without an arbitral award being made, the running of the prescription period of the claim shall recommence from the time of conclusion of the procedures. In such case, the prescription period shall not expire until [6 months/1 year] have passed since conclusion of the procedures. A demand notice for performance made within the [6 months/1 year] shall not have the effect of extending the expiry of the prescription period. (c) If after the occurrence of the dispute, the obligee and the obligor agree to settle the dispute through arbitration, the agreement of【3.1.3.60】(1) is deemed to have been reached at such time. (d) 【3.1.3.60】(2) shall apply mutatis mutandis to the suspension of the running of the prescription period of the claim through (c), and in addition, if the suspension of the running of the prescription period through (a) takes effect, then it shall lose its effect at such time. (3) The following contents are to be established with regard to certified alternative dispute resolution. (a) If a demand pertaining to the claim is made in the recognized alternative dispute resolution procedures, the running of the prescription period for such claim shall be suspended from the time of commencement of the procedures. (b) If a settlement is reached through the procedures, the acknowledgment of 【3.1.3.52】(1) (b) is deemed to have been made at such time. (c) If the procedures end without a settlement being reached, the running of the prescription period shall recommence from such time. In such case, the prescription period shall not expire until [6 months/1 year] have passed since conclusion of the procedures. A demand notice for performance made within the [6 months/1 year] shall not have the effect of extending the expiry of the prescription period. (d) If after the occurrence of the dispute, the obligee and the obligor agree to request the dispute resolution provider for implementation of dispute resolution procedures, the agreement of 【3.1.3.60】(1) is deemed to have been reached at the time of such agreement. (e) 【3.1.3.60】(2) shall apply mutatis mutandis to the suspension of the running of the prescription period through (d), and in addition, if the suspension of the running of the prescription period of the claim through (a) takes effect, then it shall lose its effect at such time. 【3.1.3.62】 (Extension of the expiry of the prescription period of a claim) (1) The following grounds shall be the grounds for extension of the expiry of the prescription period of a claim: (a) A demand notice; (b) The grounds stipulated in Article 158 to Article 161 of the present Civil Code. (2) The extension of the expiry of the prescription period through the grounds of (1) (a) vis-à-vis the principal obligor shall also take effect vis-à-vis the guarantor and any other person assuming the obligation of performing principal obligation. 【3.1.3.63】 (Extension of the expiry of the prescription period of a claim due to a demand notice) (1) If the obligee notifies the obligor to the effect that the performance of the obligation should be made, even when the period stipulated in【3.1.3.44】(1) to (3) has passed, the prescription period of the claim relating to the demand notice shall not expire until [6 month/1 year] have passed since the time of the notice. (2) If a further demand notice is given during the extended expiry of the prescription through (1), the effect of (1) shall not accrue through such notice. 【3.1.3.64】(Minors or adult wards and extension of the expiry of the prescription period of a claim) (1) If a minor or an adult ward does not have a legal representative during the [6 months/1 year] preceding the expiry of the prescription period of the claim, the prescription period shall not expire with respect to the minor or adult ward until [6 months/1 year] have passed since the time the minor or the adult ward became a person with the capacity to act or a legal representative was appointed. (2) In cases where a minor or an adult ward has any claim vis-à-vis its father, mother, or guardian who manages its property, the prescription period with respect to such claim shall not expire until [6 months/1 year] have passed since the time the minor or the adult ward became a person with the capacity to act or a succeeding legal representative was appointed. 【3.1.3.65】 (Extension of the expiry of the prescription period of a claim between a husband and wife) With respect to any claim which either the husband or wife has vis-à-vis the other spouse, the prescription period of the claim shall not expire until [6 months/1 year] have passed since the time of dissolution of the marriage. 【3.1.3.66】 (Extension of the expiry of the prescription period of a claim related to inherited property) With regard to inherited property, the prescription period of the claim shall not expire until [6 months/1 year] have passed since the time an heir was determined, an administrator was appointed or the ruling of commencement of bankruptcy proceedings was made. 【3.1.3.67】 (Extension of the expiry of the prescription period of a claim due to a natural disaster) If at the time of expiry of the prescription period of a claim, the renewal of the prescription period of the claim, the suspension of the running or the extension of the expiry through a demand notice could not take place due to a natural disaster or any other compelling circumstances, the prescription period shall not expire until (2 weeks) have passed since the time of the impediment being extinguished. Section 3 Effect of the Expiry of the Prescription Period of Claims 【3.1.3.68】 (Effect of the expiry of the prescription period of a claim) [Proposal A] (1) If the prescription period pertaining to a claim expires, the obligor may invoke the claim prescription. (2) The invocation in (1) may be made either in or out of court. (3) If the invocation in (1) is made, it may not be revoked. (4) If the invocation in (1) is made, the claim shall be extinguished retroactively from the day of commencement of calculation. [Proposal B] (1) If the prescription period pertaining to a claim expires, the obligor may refuse the performance of the obligation relating to the claim and the performance of the obligation of interest, the obligation of compensatory damages for delay and any other obligation which accrues incidentally to the claim. (2) The refusal of performance in (1) may be made either in or out of court. (3) If the refusal of performance in (1) is made, it may not be revoked. (4) If the refusal of performance in (1) is made, a request may not be made for performance or any other method of actualizing the claim. Any guarantee claim, real-right security or any other right to secure the performance of the obligation which was refused shall be extinguished. 【3.1.3.69】 (Right of reservation of performance and prescription) Notwithstanding【3.1.3.68】, the right of defense of simultaneous performance or any other right reserving performance which is established based on the claim is not affected by the expiry of the prescription period of such claim. 【3.1.3.70】 (Effect vis-à-vis a person other than the obligor on the expiry of the prescription period of the claim) [Proposal A](Right of invocation of the claim prescription of a person with a legally justifiable interest) (1) If the prescription period for a claim expires, aside from the obligor the guarantor, third party pledgor or any other person with a legally justifiable interest has the right to invoke the claim prescription. (2) Even an invocation of a claim prescription by a person other than the obligor shall be the same as【3.1.3.68】[Proposal A] (2), (3). (3) If a person other than the obligor invokes the claim prescription, such claim shall be extinguished retroactively to the day of commencement of calculation only to the extent that it is necessary in protecting the interests of such person. [Proposal B] (Status of the guarantor, third party pledgor and other persons) (1) In cases where the guarantor or some other person assumes the obligation of performing the obligation of another person, if after the expiry of the prescription period for the claim pertaining to the obligation of the other person, the obligee makes a demand to the guarantor or some other person for performance of the obligation, the guarantor or other person who receives the demand may request the obligee to ask the principal obligor by a demand notice [within a reasonable period of time] as to whether or not it exercises the right of refusal of performance, and until the reply of the principal obligor is given concerning such notification, the performance of the obligation may be reserved. (2) In cases where the property of a third party pledgor or a person other than the obligor is furnished in order to secure payment of the claim, if after the expiry of the prescription period of the claim, a motion is filed for proceedings to enforce a security right, the person who possesses the property furnished as security may request the obligee to ask the obligor by a demand notice [within a reasonable period of time after receiving the notice of such motion] as to whether or not it exercises the right of refusal of performance. If this notification is made, the security right shall not to be enforced until the obligor’s reply to the notice has been given. (3) If the principal obligor does not waive the right of refusal of performance within [1 month] of the time of the demand notice in (1) or the obligor does not waive the right of refusal of performance within [1 month] of the time of the demand notice in (2), the refusal of performance of【3.1.3.68】[Proposal B] (1) shall be deemed to have been made with regard to the relationship with the person requesting the notice. 【3.1.3.71】 (Waiver of the right to invoke prescription or the right to refuse performance) [Proposal A](Waiver of the right to invoke prescription) In cases of【3.1.3.68】[Proposal A] and【3.1.3.70】[Proposal A], (1) The right to invoke the claim prescription may be waived through a manifestation of intention made to the obligee; provided, however, that this shall not apply if otherwise provided for by law. (2) If the obligor makes the waiver in (1), a new prescription period for the claim shall commence running from the time of the waiver. The prescription period in this case shall be [3 years/4 years/5 years]. (3) In cases where there are multiple persons with the right to invoke the claim prescription, the waiver of the right to invoke the claim prescription made by one of the persons does not affect the right to invoke prescription of the others. [Proposal B] (Waiver of the right to refuse performance) In cases of 【3.1.3.68】[Proposal B], (1) The obligor may waive the right to refuse performance which accrued from the expiry of the prescription period through a manifestation of intention made to the obligee; provided, however, that this shall not apply if otherwise provided for by law. (2) If the obligor makes the waiver of (1), a new prescription period for the claim shall commence running from the time of the waiver. The prescription period of the claim in this case shall be [3 years/4 years/5 years]. (3) In cases where there are multiple obligors with the right to refuse performance, the waiver of the right to refuse performance made by one of the persons does not affect the right to refuse performance of the others. 【3.1.3.72】 (Forfeiture of the right to invoke the claim prescription or the right to refuse performance) [Proposal A] (Forfeiture of the right to invoke prescription) In cases of【3.1.3.68】[Proposal A] and【3.1.3.70】[Proposal A], (1) If the person with the right to invoke the claim prescription manifests to the obligee after the expiry of the prescription period of the claim that it will comply with the exercising of the claim, even when it does not have the intention of waiving the right to invoke the claim prescription, it may not exercise the right to invoke the claim prescription through such expiry. (2) In cases of (1), a new prescription period for the claim shall commence running from the time of the manifestation to the effect that the obligation will be performed. The prescription period in this case shall be [3 years/4 years/5 years]. (3) In cases where there are multiple persons with the right to invoke the claim prescription, the forfeiture of the right to invoke the claim prescription in (1) of one person does not affect the right to invoke the claim prescription of the others. [Proposal B](Forfeiture of the right to refuse performance) In cases of【3.1.3.68】[Proposal B], (1) If the obligor manifests to the obligee after the expiry of the prescription period of the claim that it will perform an obligation, even when it does not have the intention of waiving the right to refuse performance, it may not exercise the right to refuse performance through such expiry. (2) In cases of (1), a new prescription period for the claim shall commence running from the time of the manifestation to the effect that the obligation will be performed. The prescription period in this case shall be [3 years/4 years/5 years]. (3) In cases where there are multiple obligors with the right to refuse performance, the forfeiture of the right to refuse performance in (1) of one person does not affect the right to refuse performance of the others.

	Chapter 4 Movement of the Parties 【3.1.4.A 】 (Perfection requirements of transfer of a contractual status) (1) A particular system for perfection requirements shall not be established for the transfer of a contractual status. (2) Provisions shall not be established on the application of provisions relating to the requirements for perfection of a claim assignment relating to the transfer of a claim accompanying the transfer of a contractual status. Division 1 Assignment of Claims 【3.1.4.01】(Assignability of a claim) A claim may be assigned; provided, however, that this does not apply if the nature of the claim does not so allow. 【3.1.4.02】 (Assignment of a future claim) (1) Even a claim which will accrue in the future (hereinafter referred to as a future claim) may be assigned, and provisions shall be established to the effect that the requirements for assertion may be satisfied in accordance with【3.1.4.04】. (2) In cases where a future claim is assigned, the effect of the assignment may also be asserted afterwards against a person who inherits the contractual status of the assigner which gives rise to the future claim. 【3.1.4.03】 (Effect of special provisions on the prohibition of claims assignment) (1) Even in cases where the obligee and the obligee stipulate through a special provision to the effect that the assignment of a claim shall not be allowed, the effect of an assignment performed contrary to such special provision shall not be precluded; provided, however, that the obligor may assert the special provision against the assignee. (2) Notwithstanding the proviso of (1), the obligor may not assert the special provision of (1) against the assignee in the following cases: (a) The obligor approved such assignment to the assignor or the assignee; (b) The assignee was without knowledge with regard to the special provision of (1) and was not grossly negligent; or (c) In cases where the perfection requirements of the claim assignment against a third party have been satisfied and a ruling on commencement of bankruptcy proceedings has been rendered with regard to the assignor. (3) If a claim which has the special agreement of (1) is attached, the obligor may not assert the special agreement of (1) against the attaching obligee. 【3.1.4.04】(Perfection requirements against a third party other than the obligor with regard to the assignment of a claim) (1) An assignment of a monetary claim may not be asserted against a third party other than the obligor unless the assignment of the claim is registered. (2) An assignment of a non-monetary claim may not be asserted against a third party other than the obligor unless a fixed date is acquired for the assignment contract. * The Commission concluded that, in cases where it is judged difficult to unify the perfection requirements for the assignment of a monetary claim in the registration because of the cost or barriers to the procedures, further consideration is required not to return to the present system but for a new system. 【3.1.4.05】 (Requirements for exercising rights vis-à-vis the obligor with regard to the assignment of a claim) (1) (a) If the assignor or the assignee of a monetary claim issues a certificate of registered matters for the registration of the claim assignment and notifies the obligor, the assignee may assert to the obligor that it is the obligee. (b) If the assignor of a non-monetary claim issues a copy of the assignment contract which has a fixed date and notifies the obligor, the assignee may assert to the obligor that it is the obligee. (2) Even in cases where the requirement prescribed in (1) has not been satisfied, if the assignor has notified the obligor, the assignee of the claim may assert to the obligor that it is the obligee; provided, however, that this does not apply if the notification in (1) has been made regarding an assignment to a person other than the assignee. 【3.1.4.06】 (Payment of an assigned claim) (1) In cases where neither the notification of (1) nor the notification of (2) in 【3.1.4.05】 was made with regard to the assignment of a claim, the obligor shall make a payment to the assignor as its obligee. (2) In cases where the notification of【3.1.4.05】(1) or (2) was made with regard to the assignment of a claim, the obligor shall make a payment to the assignee of the assignment; provided, however, that if there is a conflict in the notification, the rules in the following items shall be followed: (a) In cases where there is a conflict in the notification prescribed in【3.1.4.05】(1), the obligor shall make a payment according to the chronological order of the registration and the fixed date. (b) In cases where there is a conflict in the notification prescribed in【3.1.4.05】(1) and it is not possible to decide the chronological order of the registration and the fixed date, the obligor may make a payment to either of the assignees. In such case, the obligor may also be exempted from the obligation by depositing the part of the conflict in the assignment. (c) In cases where there is a conflict in the notification of【3.1.4.05】(1) and the notification of【3.1.4.05】(2), the obligor shall make a payment to the assignee of the assignment associated with the notification prescribed in (1) as the obligee. (d) In cases where there is a conflict in the notification prescribed in【3.1.4.05】(2), the obligor may also make a payment to either of the assignees. In such case, the obligor may also be exempted from the obligation by depositing the part of the conflict in the assignment. 【3.1.4.07】 (Registration of a claim assignment) (1) The claim assignment shall generally be registered based on the provisions of law relating to the special provisions of the Civil Code concerning perfection requirements of the assignment of movables and claims. But the Commission concluded that, aside from establishing measures to make registration of the assignment of a monetary claim with a natural person as the assignor possible, consideration shall be given to methods of alleviating the burden for procedures in the case of applying for multiple registrations and on methods of responding to other practical requests. (2) The attachment of a claim does not require a registration. 【3.1.4.08】 (Defense of the obligor with regard to assignment of a claim) (1) In cases where a claim is assigned, the obligor may assert against the assignee the grounds which accrued vis-à-vis the assignor up until the time the assignee has satisfied the requirements for exercise of rights vis-à-vis the obligor. (2) The obligor may not waive the defense of (1) unless it is done in writing. (3) Even in cases lacking the writing of (2), the obligor may waive the defense of (1) by making a payment vis-à-vis the assignee. (4) In cases where the obligor waives the defense of (1) and makes a payment vis-à-vis the assignee or some other act of extinguishing the obligation, if a payment was made to the assignor in order to extinguish the obligation, the obligor may recover the payment and if an obligation was assumed vis-à-vis the assignor, it may be deemed that this was not assumed. 【3.1.4.09】 (Increase in performance expenses due to assignment of a claim) The obligor may demand the assignor or assignee of a claim bear the increase in the performance expenses due to assignment of the claim. Division 2 Assumption of Obligations 【3.1.4.10】 (Method of assumption of an obligation) (1) The “assumption of an obligation” means an obligation assumed by the acceptor vis-à-vis the obligee with the same contents as the obligation assumed by the obligor vis-à-vis the obligee from the time of an agreement of the following paragraph. (2) The assumption of an obligation shall be made through one of the following methods: (a) An agreement between the obligor and the acceptor. (b) An agreement between the obligee and the acceptor. (3) The agreement of transferring an obligation through (2) (a) shall be subject to the rules on contracts concluded for the benefit of a third party for the purpose of acquiring a claim. 【3.1.4.11】 (Effect of the assumption of an obligation) (1) The assumer shall assume jointly and severally with the obligor vis-à-vis the obligee an obligation with the same contents as the obligation assumed by the obligor vis-à-vis the obligee from the time of the agreement of【3.1.4.10】(2) (a) or (b) being made. (2) The assumer may set up against the obligee, the defense which the obligor had with regard to the claim vis-à-vis the obligee from the time of the assumption of the obligation taking effect; provided, however, that this shall not apply with regard to a right based on being the party to the contract which was the cause of accrual of the claim. Further, the assumer may not assert a set-off of the counter-claim which the obligor has vis-à-vis the obligee. (3) If the object of the obligation assumed by the assumer through an agreement of obligation assumption is to guarantee an obligation assumed by the obligor, the provisions on guarantees shall apply mutatis mutandis. 【3.1.4.12】 (Release accompanying the assumption of an obligation) (1) With regard to the assumption of an obligation through【3.1.4.10】(2) (a), if the assumer consents to the obligor being released from the obligation, the obligor shall be released from the obligation at the time of the agreement on release between the obligor and the obligee. (2) If the obligee agreed with the obligor beforehand on release from the obligation accompanying the assumption of the obligation, the obligor shall be released from the obligation at the time of the obligor notifying the obligee of the agreement on the obligation assumption and the fact that the consent of (1) was given by the assumer. (3) With regard to the assumption of an obligation through【3.1.4.10】(2) (b), if the assumer consents to the obligor being released from the obligation, the obligee may make an agreement on release with the obligor. (4) 【3.1.6.11】(1) shall not apply to the release pursuant to the proposal of【3.1.4.12】. 【3.1.4.13】 (Transfer of the security accompanying the exemptory assumption of an obligation) If the release from obligation under【3.1.4.12】has been made, the parties to the obligation assumption may transfer the security furnished for the obligation to the obligation after the assumption; provided, however, that if a third party (excluding the obligor) furnished it, the consent of the third party shall be acquired. Division 3 Transfer of the Contractual Status 【3.1.4.14】 (Concept of transfer of the contractual status) If one of the parties to the contract (hereinafter referred to as the assignor) reaches an agreement with a third party (hereinafter referred to as the assignee) to the effect of assigning a contractual status and the other party to the contract has consented to the agreement, the assignee succeeds to the contractual status of the assignor; provided, however, that if according to the nature of the contract the consent of the other party is not required, the assignee shall succeed to the contractual status of the assignor through an agreement between the assignor and the assignee. 【3.1.4.15】 (Transfer of the security accompanying the transfer of the contractual status) The assignor and assignee of the contractual status, and other party may transfer the security furnished for the obligation assumed by the assignor vis-à-vis the other party to the obligation to be assumed by the assignee vis-à-vis the other party; provided, however, that if a third party furnished the security, the consent of the third party shall be acquired.

	Chapter 5 Negotiable Instruments 【3.1.5.A】 (Premise 1) The Commission proposes that provisions shall not be established with regard to so-called securities-like claims, but from the perspective of negotiable instruments, provisions shall be established relating to basic matters for negotiable instruments as general provisions to be applied in general to each kind of negotiable instruments. 【3.1.5.B】 (Premise 2) The Commission proposes that Civil Code Book III Obligations, Part 1 Contracts and Obligations in General, Chapter 5 Negotiable Instruments shall be established. 【3.1.5.C】 (Premise 3) The Commission proposes that provisions shall be established on negotiable instruments indicating a claim and provisions shall not be established on negotiable instruments indicating a real right, a company membership right or a contractual status. 【3.1.5.D】 (Premise 4) The Commission proposes that a provision for the definition of negotiable instruments shall not be established. Moreover, to what kind of claims indicated in the negotiable instruments the provisions of this chapter are to be applied shall be left to interpretative theory. 【3.1.5.E】 (Premise 5) The Commission proposes that provisions shall not be established on registered negotiable instruments, but the provisions relating to cases of forfeiture of negotiable instruments shall also apply to registered negotiable instruments and shall not simply be limited to negotiable instruments indicating the claim. 【3.1.5.01】 (Treatment of bearer certificates of claims) Paragraph 3 of Article 86 of the present Civil Code shall be deleted accompanying the addition in this chapter. * One view was expressed that the article should be maintained. Division 1 Negotiable Instruments Payable to Order 【3.1.5.02】 (Assignment of Instruments payable to order) Negotiable instruments indicating a claim and which are listed in the following items (hereinafter referred to in this division as “negotiable instruments payable to order” may be assigned through endorsement of the assignment and delivery of the instrument to the assignee. (a) Where there is an entry to the effect that the obligation shall be performed to the person indicated as the right holder or another person ordered thereby. (b) Where it is deemed that the entry stipulated in the preceding item exists through the provisions of laws and regulations. 【3.1.5.03】 (Method of endorsement) (1) The endorsement should be written on the negotiable instruments payable to order or on an attached slip (hereinafter referred to as “allonge”) and should be signed by the endorser. (2) The endorsement may be made without specifying the endorsee or simply through being signed by the endorser. (3) An endorsement to the effect that it is payable to the bearer of the negotiable instrument shall have the same effect as the endorsement of the preceding paragraph. (4) If the endorsement in (2) is made, the holder may assign the negotiable instrument payable to order in accordance with the provisions of the following items: (a) Assignment by delivering the instrument with the name of some other person supplemented as the endorsee, (b) Re-endorsement of the instrument specifying or not specifying the endorsee, (c) Assignment by delivering the instrument without supplementing an endorsee and without an endorsement. 【3.1.5.04】 (Simplicity of the endorsement and prohibition of partial endorsement) (1) The endorsement shall be simple. Any condition added to the endorsement is deemed not to be written. (2) A partial endorsement shall be void. 【3.1.5.05】 (Acquisition in good faith) (1) The possessor of a negotiable instrument payable to order with consecutive endorsements is presumed to legitimately have the right relating to the instrument. The same applies if the last endorsement is blank. An erased endorsement is deemed in relation to the consecutive endorsements not to have been written. If there is another endorsement following the blank endorsement, the person who made such endorsement is presumed to have acquired the instrument through the blank endorsement. (2) A person who has acquired from the person stipulated in the preceding paragraph the instrument payable to order through endorsement acquires the right relating to the instrument; provided, however, that this shall not apply if the person was with knowledge or was grossly negligent. 【3.1.5.06】 (Severance of defense) The obligor of the negotiable instrument payable to order may not assert against the holder the grounds which may be asserted based on the personal relations vis-à-vis the person who assigned the instrument, excluding the matters written on the instrument or the outcome emerging obviously from the nature of the instrument; provided, however, that this shall not apply if the holder acquired the instrument knowing that it would injure the obligor. 【3.1.5.07】 (Performance and surrender of negotiable instruments) The holder of the negotiable instrument payable to order may not make a demand for performance of an obligation unless it is in exchange for the instrument. 【3.1.5.08】 (Place of performance) The payment of the claim indicated in the negotiable instrument payable to order shall be made at the place of payment entered in the instrument and if there is no such entry, shall be made at the present place of business or office of the obligor (in cases where there is no place of business or office, at the address); provided, however, that this shall not apply if the place of performance is obviously decided through the nature of the claim. 【3.1.5.09】 (Delayed performance) Even if there is fixed time limit with regard to the performance of the obligation, the obligor of the claim indicated in the negotiable instrument payable to order shall assume responsibility for the delay from the time of the holder presenting the instrument and making a demand for performance after the arrival of the time limit. 【3.1.5.10】 (Exemption from payment) (1) The obligor of a negotiable instrument payable to order shall assume the duty of verifying the uninterrupted series of endorsements but shall not assume the duty of verifying the signature of the endorser. (2) If the obligor of the negotiable instrument payable to order, in exchange for the instrument, performs such obligation for the holder of the instrument which has an uninterrupted series of endorsements, it shall be exempted from such responsibility; provided, however, that this shall not apply if the obligor was with knowledge or was grossly negligent. Division 2 Negotiable Instruments Payable to the Bearer 【3.1.5.11】 (Assignment of negotiable instruments payable to the bearer) A negotiable instrument which indicates the claim and with an entry to the effect that payment shall be made to the bearer of the instrument or to the effect that payment shall be made either to the person specified as the right holder or the bearer of the instrument (hereinafter referred to in this division as “negotiable instrument payable to the bearer”) may be assigned through the delivery of the instrument to the assignee. 【3.1.5.12】 (Acquisition in good faith) (1) The possessor of a negotiable instrument payable to the bearer is presumed to legitimately have the right relating to the instrument. (2) A person who receives the delivery of a negotiable instrument payable to the bearer acquires the right relating to the instrument; provided, however, that this shall not apply if the person was with knowledge or was grossly negligent. 【3.1.5.13】 (Severance of defense) The obligor of the negotiable instrument payable to the bearer may not assert against the holder the grounds which may be asserted based on the personal relations vis-à-vis the person who assigned the instrument, excluding the matters written on the instrument or the outcome emerging obviously from the nature of the instrument; provided, however, that this shall not apply if the holder acquired the instrument knowing that it would injure the obligor. 【3.1.5.14】 (Performance and surrender of negotiable instruments) The holder of the negotiable instrument payable to the bearer may not make a demand for performance of the obligation unless it is in exchange for the instrument. 【3.1.5.15】 (Place of performance) The payment of the claim indicated in the negotiable instrument payable to the bearer shall be made at the place of payment entered in the instrument and if there is no such entry, shall be made at the present place of business or office of the obligor (in cases where there is no place of business or office, at the address); provided, however, that this shall not apply if the place of performance is obviously decided through the nature of the claim. 【3.1.5.16】 (Delayed performance) Even if there is a fixed time limit with regard to the performance of the obligation, the obligor of the claim indicated in the negotiable instrument payable to the bearer shall assume responsibility for the delay from the time of the holder presenting the instrument and making a demand for performance after the arrival of the time limit. 【3.1.5.17】 (Exemption from payment) If the obligor of the negotiable instrument payable to the bearer, in exchange for the instrument, performs such obligation for the holder of the instrument, it shall be exempted from such responsibility; provided, however, that this shall not apply if the obligor was with knowledge or was grossly negligent. Division 3 Methods of Exercising the Right in Cases of Forfeiture of the Negotiable instrument 【3.1.5.18】 (Forfeiture of a negotiable instrument) A negotiable instrument listed in the following items, which indicates the claim, may be made void through the procedure of public notification stipulated in Article 142 of the Act of Procedure in Non-Contentious Matters: (a) There is an entry in the instrument to the effect that payment shall be made either to the person specified as the right holder or another person ordered thereby or where it is deemed that there is an entry to such effect through the provisions of laws and regulations. (b) There is an entry in the instrument to the effect that payment shall be made to the bearer or an entry to the effect that payment shall be made either to the person specified as the right holder or the bearer of the instrument. (c) There is an entry in the instrument to the effect that payment shall be made to the person specified as the right holder. 【3.1.5.19】(Method of exercising the right in cases of forfeiture of the negotiable instrument) In cases where the holder of negotiable instruments stipulated in【3.1.5.18】lost the negotiable instrument and a motion is filed for the public notification stipulated in Article 156 of the Act of Procedure in Non-Contentious Matters, the obligor may be made to deposit the subject matter of the obligation or may be made to render performance in accordance with the purport of the instrument while providing reasonable security. 【3.1.5.20】(Application mutatis mutandis to negotiable instruments other than negotiable instruments indicating the claim) 【3.1.5.18】and【3.1.5.19】 shall apply mutatis mutandis to negotiable instruments other than the negotiable instruments stipulated in【3.1.5.18】.

	Chapter 6 Claim and Obligation Relations of Multiple Parties Division 1 Multiple Obligees 【3.1.6.01】 (Divisible claims/joint and several claims/indivisible claims) (1) If there are several obligees with regard to the same claim, in accordance with the following, it shall be a divisible claim, joint and several claim or an indivisible claim. (a) In cases where the claim owing to its nature is divisible and cannot be a joint and several claim, it shall be a divisible claim. (b) In cases where the claim owing to its nature is divisible and the obligee and obligor agree to making it a joint and several claim or legally the effect of 【3.1.6.03】 accrues, it shall be a joint and several claim. (c) If the claim is indivisible owing to its nature, it shall be an indivisible claim. (2) An indivisible claim shall be a divisible claim if the claim becomes divisible; provided, however, that if the obligee and obligor agreed otherwise in advance, it shall be a joint and several claim. 【3.1.6.02】 (Effect of a divisible claim) (1) The divisible obligees each have an independent claim with regard to the share of their right. (2) The shares of the right of (1) are presumed to be of equal proportions for each obligee. (3) Even if the shares of the right are not equal in proportion, this may not be asserted against an obligor who is without such knowledge. 【3.1.6.03】 (Demand for performance of a joint and several claim) If there are several joint and several obligees, each obligee may demand performance on behalf of all of the obligees and each obligor may perform to one obligee for the benefit of all of the obligees. 【3.1.6.04】 (Effect of the causes accruing with regard to one of the joint and several obligees) (1) In cases where one of the joint and several obligees conducts one of the following acts, the other joint and several obligees may demand the entire performance from the obligor: (a) Release from the obligation; (b) Novation; (c) Agreement on a substitute payment. (2) If there is merger between one of the joint and several obligees and the obligor, it shall be treated the same as (1). (3) In cases of (1) and (2), if the obligor has performed the obligation, the obligee who received the performance shall reimburse the obligor for the value of the benefit which would have been distributed had the joint and several obligee who lost the right not lost the right through the causes of (1) and (2). 【3.1.6.05】 (Indivisible claims) If several persons have an indivisible claim, the provisions on joint and several claims shall apply mutatis mutandis. Division 2 Multiple Obligors 【3.1.6.06】 (Divisible obligations/joint and several obligations/indivisible obligations) (1) If there are several obligors with regard to the same obligation, in accordance with the following, it shall be a divisible obligation, joint and several obligation or an indivisible obligation. (1) In cases where the obligation owing to its nature is divisible and cannot be a joint and several obligation, it shall be a divisible obligation. (2) In cases where the obligation owing to its nature is divisible and the obligee and obligor agreed to make it a joint and several obligation when the obligor jointly assumed the obligation, or there are provisions in law, it shall be a joint and several obligation. (3) If the obligation owing to its nature is indivisible, it shall be an indivisible obligation. (2) With regard to reimbursement of an indivisible benefit or the payment of value, if the obligation owing to its nature is divisible, it shall be a joint and several obligation; provided, however, that this shall not apply when agreed otherwise. (3) Even if multiple obligors are each liable for compensation of the same damage, it shall be the same as (2); provided, however, that (5) shall apply in cases of joint torts. (4) If an indivisible obligation becomes an obligation which is divisible, it shall be a divisible obligation; provided, however, that if the obligee and obligor agreed otherwise in advance, it shall be a joint and several obligation. (5) The present law shall be maintained with regard to torts for the time being and, if it becomes a joint and several obligation, the provisions on joint and several obligations of this proposal shall apply. 【3.1.6.07】 (Divisible obligations) (1) The divisible obligors shall each assume an independent obligation with regard to their own share of the burden. (2) The shares of the burden in (1) are presumed to be of equal proportions for each obligor. (3) Even if the shares of the burden are not equal in proportion, this may not be asserted against an obligee who is without such knowledge. (4) An obligor who makes a performance exceeding the part of its own burden through (3) may obtain reimbursement from an obligor who is to assume responsibility of performance of a duty less than its share of the burden through such performance. 【3.1.6.08】 (Demand for performance of a joint and several obligation) (1) If several persons are to assume a joint and several obligation, the obligee may make a demand for the whole or a part of the performance to one of the joint and several obligors or simultaneously or sequentially to all of the joint and several obligors. (2) Aside from a separate proposal being drafted in this proposal, if a cause accrues with regard to one of the joint and several obligors, it shall not take effect against the other joint and several obligors. 【3.1.6.09】 (Demand for performance vis-à-vis the joint and several obligors) (1) If a demand for performance is made to one of the joint and several obligors, it shall not take effect vis-à-vis the other joint and several obligors. (2) Notwithstanding (1), if there is a cooperative relationship between the joint and several obligors, a demand for performance made to one of the joint and several obligors shall take effect with regard to the other joint and several obligors. * One view was expressed that the principles of this proposal and exceptions may be reversed and the following revised proposal is possible. (1) If a demand for performance is made to one of the joint and several obligors, it shall take effect vis-à-vis the other joint and several obligors. (2) Notwithstanding (1), if there is no cooperative relationship between the joint and several obligors, a demand for performance made to one of the joint and several obligors shall not take effect with regard to the other joint and several obligors. 【3.1.6.10】 (Prescription with regard to one of the joint and several obligors) (1) Even if there is a renewal, suspension of the running or an extension of the expiry of a prescription period with regard to one of the joint and several obligors, this shall not take effect with regard to the other joint and several obligors; provided, however, that this shall not apply in cases of 【3.1.6.09】(2) being applied. (2) If the prescription period for the claim has elapsed for one of the joint and several obligors, such obligor may refuse performance vis-à-vis the obligee. (3) In cases of (2), the other joint and several obligors who have rendered a performance vis-à-vis the obligee shall not be precluded from exercising the right to obtain reimbursement vis-à-vis such obligor; provided, however, that this shall not apply if the joint and several obligor for whom the prescription period elapsed did not know of the existence of other obligors assuming the obligation jointly and severally with it. 【3.1.6.11】 (Release vis-à-vis one of the joint and several obligors) (1) A release from an obligation between the obligee and one of the joint and several obligors shall not take effect with regard to the other joint and several obligors. (2) Article 445 of the present Civil Code shall be abolished. 【3.1.6.12】 (Novation vis-à-vis one of the joint and several obligors) A novation between one of the joint and several obligors and the obligee shall not take effect vis-à-vis the other joint and several obligors; provided, however, that in cases of performance of an obligation after novation, the obligor who made the performance may obtain reimbursement from the other joint and several obligors proportionate to such share of the obligation to the extent of the amount spent. 【3.1.6.13】 (Merger with regard to one of the joint and several obligors) If there is a merger between one of the joint and several obligors and the obligee, the joint and several obligee is deemed to have made a payment. 【3.1.6.14】 (Invocation of the right of set-off by the other joint and several obligors) Article 436, paragraph 2 of the present Civil Code shall be abolished. 【3.1.6.15】 (Commencement of bankruptcy proceedings with regard to the joint and several obligors) Article 441 of the present Civil Code shall be abolished. 【3.1.6.16】 (Reimbursement between joint and several obligors) (1) If one of the joint and several obligors makes a payment or has acquired any common exemption with regard to the whole or part of an obligation using its own property, such joint and several obligor has the right to obtain reimbursement from the other joint and several obligors according to each respective share of the burden. (2) The right to obtain reimbursement in (1) accrues even in cases where the joint and several obligor who made the payment paid within the extent of its own share of the burden. (3) If one of the joint and several obligors makes a substitute payment to the obligee, the obligor may obtain reimbursement proportionate to such share of the obligation from the other joint and several obligors to the extent of the amount spent. (4) The reimbursement in (1) comprehensively includes compensation of the statutory interest which accrues on or after the day of the payment or any other exemption from obligation, any unavoidable expenses and other damages. 【3.1.6.17】 (Restrictions on the reimbursement) (1) If there is a person among the joint and several obligors who does not have the financial resources to make the reimbursement, the share which cannot be reimbursed shall be borne proportionally to each of the shares of the burden by the person demanding reimbursement and other persons who have financial resources. If all of the persons with shares in the burden are without financial resources, the persons with financial resources shall bear the burden equally with the person demanding reimbursement. (2) (1) does not apply to the share which could not acquire reimbursement due to necessary measures not being taken accordingly by the person demanding reimbursement. 【3.1.6.18】 (Restrictions on the reimbursement of the joint and several obligors who failed to give notice) (1) Article 443, paragraph 1 and Article 433 of the present Civil Code shall be abolished. (2) If one of the joint and several obligors (hereinafter referred to as “former payer”) renders a payment or has otherwise acquired any common exemption in exchange for its own property and has failed to give notice of such fact to the other joint and several obligors, and as a result of such failure, another joint and several obligor (hereinafter referred to as “latter payer”) makes a payment or otherwise acquires exemption in exchange for an act performed for consideration without knowledge, the latter payer may deem its own payment or any other act performed to acquire exemption to be valid; provided, however, that this shall not apply if the lack of notification by the former performer to the latter payer was based on not knowing of the existence of the latter performer or any other justifiable reason. (3) The main text of (2) shall not apply if the latter payer received a claim for reimbursement from the former payer before notifying the former payer of its own payment or any other act performed to acquire exemption; provided however, that this shall not apply if the lack of notification by the latter payer to the former payer was based on not knowing of the existence of the former payer or any other justifiable reason. 【3.1.6.19】 (Indivisible obligations) If several persons assume an indivisible obligation, the provisions on joint and several obligations shall apply mutatis mutandis.

	Chapter 7 Guarantees Division 1 General Guarantees 【3.1.7.01】 (Concept of guarantees) (1) In this chapter, a “guarantee” means assumption by the guarantor of the duty of performance (including compensation of damage) vis-à-vis the obligee with regard to the obligation assumed by the obligor. (2) The guarantee shall be made by either of the methods listed below: (a) The conclusion of a contract (hereinafter referred to as a “contract of guarantee”) between the obligee and the guarantor; or (b) The conclusion of a contract (hereinafter referred to as a “contract of acceptance of guarantee”) between the obligor and the guarantor. (3) With regard to the contract of acceptance of guarantee of (2) (b), the right of the obligee shall accrue from the time of the obligee manifesting an intention of assent to the guarantor; provided, however, that if there is a custom to the effect that the right shall accrue at the time of showing the existence of the contract of acceptance of guarantee to the obligee, this shall prevail. (4) Neither the obligor nor the guarantor may effect change or extinguishment after the accrual of the right of the obligee pursuant to (3). (5) The guarantor assuming an obligation through the contract of acceptance of guarantee pursuant to (2) (b) may assert against the obligee the defense which may be asserted vis-à-vis the obligor based on the contract with the obligor. 【3.1.7.02】 (Conclusion of a contract of guarantee) (1) The contract of 【3.1.7.02】 (2) (a) and (b) shall not take effect unless made in writing. (2) The obligee shall strive to obey the following provisions with regard to conclusion of the contract of guarantee. The same applies to the obligor concluding a contract of acceptance of guarantee. (a) The terms of the contract shall be expressed in clear and simple wording. (b) The guarantor shall be provided with information which is sufficient to form an accurate understanding of the contents of the responsibility. (c) An excessive responsibility shall not be imposed compared to the financial resources of the guarantor. (3) (2) shall also be the same for an obligor who concludes a contract of acceptance of guarantee. 【3.1.7.03】 (Contents of the guarantee obligation) (1) The guarantor shall assume responsibility for performance of the obligation of the principal obligor stipulated in the contract if the principal obligor does not perform the obligation. (2) The guarantee obligation is presumed to comprehensively include the interest, penalties, and damages relating to the principal obligation and anything else incidental to such obligation. (3) With regard to the guarantee, if the subject or the form of the burden on the guarantor is greater than the principal obligation, it shall be reduced to the level of the principal obligation. If the burden on the obligor is increased with regard to the subject or form of the principal obligation between the obligee and the obligor after the formation of the guarantee, the burden on the guarantor shall not be changed. (4) Notwithstanding (3), the guarantor may stipulate the amount of the penalty or damages with regard to only its own guarantee obligation. (5) Notwithstanding (3), if a person guarantees an obligation which is rescindable through a lack of mental capacity or limits on the capacity to act and it knew of the grounds for rescission at the time of the contract of guarantee or the contract of acceptance of guarantee, it shall be presumed that it assumed an independent obligation with the same contents with regard to cases of non-performance of the principal obligation or in cases of rescission of such obligation. 【3.1.7.04】 (Requirements for the guarantor requested by contract) In cases where the obligor assumes the duty of furnishing a guarantor, the guarantor shall be a person who satisfies the following requirements: (a) A person with the capacity to act; (b) A person with the financial resources to make a payment. (2) If the guarantor comes to lack the requirement given in (1) (b), the obligee may demand that a person who satisfies the requirements of (1) (a) and (b) replace the guarantor. (3) (1) and (2) do not apply where otherwise provided for or where the obligee has designated a guarantor. (4) If the obligor is unable to furnish a guarantor who satisfies the requirements of (1) (a) and (b), it may furnish other negotiable instrument in lieu. 【3.1.7.05】 (Defense of reference) (1) Article 452 of the present Civil Code shall be deleted. (2) In cases where the obligee makes a demand of performance of the obligation to the guarantor, if the guarantor has proven that the principal obligor has the financial resources to pay and, execution can easily be accomplished, the obligee shall first perform an execution with regard to the property of the principal obligor. * With regard to the defense of notice stipulated in Article 452 of the present Civil Code, one view was expressed that this should be maintained. 【3.1.7.06】 (Duty of timely execution) If the obligee could not acquire all of the payment from the principal obligor because of a failure to make a timely execution with regard to the property of the principal obligor, the guarantor shall be exempted from the duty to the extent of the payment which could have been acquired had the obligee made a timely execution. The same applies if the principal obligor becomes subject to a ruling of bankruptcy proceedings, and the obligee does not participate in the distribution of the bankrupt estate; provided, however, that this shall not apply if there are provisions otherwise. 【3.1.7.07】 (Effect of causes accruing with regard to the principal obligor) (1) The guarantor may assert against the obligee the defense possessed by the principal obligor vis-à-vis the obligee. (2) If the principal obligor has the right of set-off vis-à-vis the obligee, the guarantor may refuse performance toward the obligee within such limit. (3) If the principal obligor has the right of rescission or the right of cancellation or some other right with regard to the contract which is the cause for accrual of the obligation, the guarantor may refuse performance vis-à-vis the obligee within such limit. 【3.1.7.08】 (In cases where there are several guarantors) (1) If there are several guarantors, each guarantor shall guarantee jointly and severally. (2) In cases where there are several guarantors guaranteeing a part of the same obligation, the obligee may demand performance of the guarantee obligation up until the limit of each guaranteed amount from each guarantor. (3) The internal shares of the obligation of the several guarantors shall be presumed to be equal. 【3.1.7.09】 (Right to obtain reimbursement by an entrusted guarantor) (1) With regard to cases where the guarantor concludes a contract of acceptance of guarantee or in cases where a guarantor makes a guarantee by concluding a contract of guarantee entrusted by the principal obligor (hereinafter in this proposal 【3.1.7.09】 referred to as the “entrusted guarantor”), if the entrusted guarantor makes a partial or whole payment in lieu of the principal obligor or uses its own property to perform an act which should partially or wholly extinguish the obligation of another person, such guarantor shall have the right to obtain reimbursement from the principal obligor with regard to the amount spent; provided, however, that a different stipulation shall not be precluded through an agreement between the obligor and the guarantor. (2) Notwithstanding (1), if the entrusted guarantor makes the payment or performs some other act stipulated in the main text of (1) before the arrival of the due date of the payment of the obligation of the principal obligor, 【3.1.7.10】 (1) shall apply. In such case, the principal obligor is not required to make the reimbursement until the time of arrival of the due date of payment of such obligation. (3) The reimbursement of (1) comprehensively includes the statutory interest which accrues on or after the day of the payment or any other exemption from obligation, any necessary expenses and compensation of any other damages. (4) This proposal 【3.1.7.09】shall not preclude providing separately for the right of the entrusted guarantor to demand remuneration from the obligor. (5) In cases where the entrusted guarantor failed to notify the principal obligor that it had acquired partial or whole exemption from the obligation through having made a partial or whole payment or using its own property, if the principal obligor made a payment or otherwise acquired exemption through an act performed for consideration in good faith, the principal obligor may deem its own payment and any other act performed to acquire exemption to be valid. (6) (5) shall not apply if the principal obligor received a claim for reimbursement from the entrusted guarantor before notifying the entrusted guarantor of its own payment or some other act performed to acquire exemption. (7) In cases where the principal obligor failed to notify the entrusted guarantor that it had made a payment or had acquired release using its own property, if the entrusted guarantor made a partial or whole payment or otherwise acquired partial or whole release through an act performed for consideration without knowledge, the entrusted guarantor may deem its own payment and any other act performed to acquire exemption to be valid. 【3.1.7.10】 (Right to obtain reimbursement by a non-entrusted guarantor) (1) If a person who made a guarantee without being entrusted by the principal obligor, has made a whole or partial payment or using its own property has otherwise acquired partial or whole exemption from the obligation of the principal obligor, the principal obligor shall reimburse the guarantor to the extent of the benefit received at the time of such performance. In such case, if the principal obligor asserts that it had the grounds for a set-off prior to the exempted act of the guarantor, the guarantor may make a demand to the obligee for performance of the obligation which would have been extinguished through the set-off. (2) A person who has made a guarantee against the will of the principal obligor shall have the right to obtain reimbursement only to the extent that the principal obligor was actually enriched. In such case, if the principal obligor asserts that it had, prior to the day of reimbursement, grounds for a set-off, the guarantor may make a demand to the obligee for performance of the obligation which would have been extinguished through the set-off. (3) In cases where a person who made a guarantee without being entrusted by the principal obligor failed to notify the principal obligor that it had made a partial or whole payment or had otherwise used its own property to acquire the partial or whole exemption of the obligation of the principal obligor, if the principal obligor made a payment or otherwise acquired exemption through an act performed for consideration in good faith, the principal obligor may deem its own payment and any other act performed to acquire exemption to be valid. 【3.1.7.11】 (Right of the guarantor to obtain reimbursement in advance) Article 460 of the present Civil Code shall be deleted. 【3.1.7.12】 (Right of the guarantor of a joint and several obligation to obtain reimbursement) If a person makes a guarantee for one of joint and several obligors or indivisible obligors, it shall have the right to obtain reimbursement from the other obligors only with regard to such share of the obligation. Division 2 Joint and Several Guarantees 【3.1.7.13】 (Special provisions in cases of joint and several guarantees) (1) The guarantor may assume an obligation jointly and severally with the principal obligor. (2) If a business operator has made a guarantee within the scope of its economic operation, it shall assume an obligation jointly and severally with the principal obligor. (3) If the guarantor assumes an obligation jointly and severally with the principal obligor,【3.1.7.05】and【3.1.7.06】shall not apply. (4) If the prescription period for the claim elapses with regard to the obligation of the principal obligor,【3.1.6.10】shall not apply. (5) 【3.1.6.09】(1) shall apply mutatis mutandis only when related to the obligation of the guarantor who has jointly and severally assumed the obligation of the principal obligor. (6) If the guarantor assumes an obligation jointly and severally with the principal obligor, 【3.1.6.11】(1) shall not apply. If the principal obligation is exempted the guarantee obligation shall be extinguished but the exemption of the guarantee obligation shall not affect the principal obligation. (7) If the guarantor assumes an obligation jointly and severally with the principal obligor, 【3.1.6.12】shall apply mutatis mutandis. (8) If the guarantor assumes an obligation jointly and severally with the principal obligor, 【3.1.6.13】shall apply mutatis mutandis only to the obligation of the principal obligor. Division 3 Revolving Guarantees 【3.1.7.14】 (Liability of the guarantor of a contract for revolving guarantees) (1) The guarantor of a contract of guarantee or a contract of acceptance of guarantee whose principal obligation is one or more unidentified obligations within a certain specified scope (excluding contracts where the guarantor is a juridical person; hereinafter referred to as a “contract for a revolving guarantee”) shall assume liability for performance of the original amount of the principal obligation, interest, penalties and damages relating to such principal obligation, and all other amounts incidental to the obligation, as well as the amount of any penalties and damages which are agreed on with regard to such guarantee obligation, within the limit of the maximum amount of the aggregate. (2) The contract for a revolving guarantee shall not take effect unless the maximum amount of (1) is stipulated. (3) 【3.1.7.02】(1) and (2) shall apply mutatis mutandis to the provision of the maximum amount of (1) with regard to the contract for a revolving guarantee. 【3.1.7.15】 (Determination date for the original amount in a contract for a revolving guarantee) (1) In cases where a contract for a revolving guarantee stipulates the date on which the original amount of the principal obligation should be determined (hereinafter referred to as the “determination date of the original amount’), if it is stipulated that the determination date of the original amount shall fall on a day on or after the day on which five years have elapsed since the day of conclusion of the contract for the revolving guarantee, such stipulation of the determination date of the original amount shall not take effect. (2) In cases where a contract for a revolving guarantee does not stipulate a determination date for the original amount (including cases where the stipulation on the determination date of the original amount does not take effect pursuant to (1)), the determination date thereof shall fall on a day on which three years have elapsed from the day of conclusion of the contract for a revolving guarantee. (3) The obligee and the guarantor may change the determination date of the original amount for the contract for a revolving guarantee. In such case, if the determination date of the original amount after the change falls on a day on or after the day on which five years have elapsed since the day of the change, the change of the determination date of the original amount shall not take effect; provided, however, that this shall not apply to cases where the determination date is changed within the two months immediately preceding the determination date of the original amount, and the changed determination date falls on a day within five years of the original determination date. (4) 【3.1.7.02】(1) and (2) shall apply mutatis mutandis to the stipulation of the determination date of the original amount with regard to a contract for a revolving guarantee and any change thereof (excluding any stipulation which provides to the effect that the determination date of the original amount shall fall on a day within three years from the day of conclusion of such contract for revolving guarantee, and any change which is intended to make the determination date after the change a day preceding the original determination date). 【3.1.7.16】 (Grounds for determination of the original amount in a contract for a revolving guarantee) The original amount of the principal obligation of a contract for a revolving guarantee shall be determined in the following cases: (a) The obligee has filed a motion for execution or enforcement of a security right for a claim whose object is the payment of money with regard to any property of the principal obligor or the guarantor; provided, however, that this shall apply only in cases where the proceedings for execution or enforcement of the security right have commenced; (b) The principal obligor or guarantor has become subject to a ruling of commencement of bankruptcy proceedings; (c) The principal obligor or guarantor has died. 【3.1.7.17】 (Right to obtain reimbursement in a contract for a revolving guarantee in cases where the guarantor is a juridical person) With regard to a contract for a revolving guarantee where the guarantor is a juridical person, if the maximum amount of【3.1.7.14】(2) is not provided, the determination date of the original amount is not stipulated, or if the stipulation on the determination date of the original amount or any change thereof would not take effect should【3.1.7.15】(1) or (3) be applied, the contract of guarantee (excluding cases where the guarantor is a juridical person) with respect to the right to obtain reimbursement vis-à-vis the principal obligor of the guarantor of the contract for a revolving guarantee shall not take effect.

	Part Two. Specific Contracts Chapter 1 Sale 【3.2.1.A】 (Cases of a buyer with knowledge) With regard to a contract for sale whose object is the right of another person, the Commission proposes that even in cases where the buyer was with knowledge, the general effect due to non-performance of the duty of transfer of the right shall accrue, and provisions corresponding to the latter part of Article 561 of the present Civil Code shall not be established. 【3.2.1.B】 (Transfer of the right due to violation of the duty of the buyer) In cases where it is impossible to transfer the right due to violation of a duty by the buyer, the Commission proposes that particular provisions shall not be established with regard to whether or not the buyer is able to exercise the right of cancellation. 【3.2.1.C】 (Cancellation right of the seller) The Commission proposes that whether or not the seller is able to cancel the contract shall be left to the general provisions and Article 562 of the present Civil Code shall be deleted. 【3.2.1.D】 (Limitation periods) The Commission proposes that the provision on the short-term limitation periods of Article 564 of the present Civil Code shall be deleted and shall be left to the general provisions. 【3.2.1.E】 (Limitation periods) The Commission proposes that the provision on the short-term limitation periods of paragraph 3 of Article 566 of the present Civil Code shall be abolished and shall be left to the general provisions. 【3.2.1.F】 (Cases of fundamental partial loss of a subject matter) The Commission proposes that Article 565 of the present Civil Code relating to the fundamental partial loss of a thing shall be deleted and the loss shall be treated as an issue of the responsibility of the seller relating to a defect in a thing. 【3.2.1.G】 (Special provisions with regard to consumer sales) With regard to a contract for sale which is a consumer contract, the Commission proposes that special provisions shall be established on the effect of terms which restrict the right of the consumer buyer or which increase the responsibility of the consumer seller. 【3.2.1.H】 (Special provisions in cases of excess quantity) The Commission proposes that special provisions shall not be established with regard to cases where the seller has delivered a quantity in excess of the amount of subject matters to be furnished in accordance with the agreement of the parties or the intent of the contract. * One view was expressed that provisions should be established allowing certain remedies to the seller in cases where the seller has delivered a quantity in excess of the amount of subject matters to be furnished in accordance with the agreement of the parties or the intent of the contract. In such case, the following proposal is possible. [Proposal A] (1) In cases where the subject matter which should be delivered by the seller is in excess of the amount which should be furnished in accordance with the agreement of the parties to the contract or the intent of the contract, the seller who becomes aware of such may set a reasonable period and request the buyer to give an answer as to whether the buyer is to make a payment of value corresponding to the excess amount; provided, however, that this shall not apply if the excess amount is minimal. (2) The buyer may manifest an intention to cancel the contract with regard to the request of (1). (3) If the buyer does not give an answer within the requested period in (1), the contract shall be deemed to have been cancelled. [Proposal B] (1) In cases where the subject matter which should be delivered by the seller is in excess of the amount to be furnished in accordance with the agreement of the parties or the intent of the contract, the seller may rescind the contract for sale in accordance with【1.5.13】. (2) Notwithstanding the provision of (1), the buyer may preclude the right of rescission being exercised by the seller through providing value corresponding to the excess amount. 【3.2.1.I】 (Passing of risk through delay in receipt) If despite the seller furnishing the buyer with the subject matter, the buyer does not take delivery of it and in cases of the loss or damage of the subject matter accruing afterwards, the Commission proposes that this shall be in accordance with the general provisions stipulated in【3.1.1.87】. 【3.2.1.J】 (Special agreement for redemption which does not have a secured object) If an agreement such as a special agreement on redemption or a pre-contract for re-sale (special agreement on re-acquiring the subject matter) is made at the same time as the contract for sale, in cases where the seller has the right to recover the subject matter which was sold to the buyer in the future, the Commission proposes that a distinction between special agreements without a security purpose and with a security purpose shall be made, and for the former, certain rules shall be stipulated in the provisions on “sales” and to the latter, the provisions of this division shall not apply. 【3.2.1.K】 (Provisions on presumption relating to special agreements on redemption) The Commission proposes that restrictions relating to the extent of the duty of return of the seller with regard to special agreements on redemption shall be established as presumptive provisions. 【3.2.1.L】 (Application of the provisions on special agreements on redemption) The Commission proposes that the general provisions shall be established that the provisions relating to special agreements on redemption shall apply to special agreements on re-acquiring a subject matter in another form without a secured object. Division 1 Concept and Formation of Sale 【3.2.1.01】 (Definition of sale) A sale means a contract where one party (the seller) assumes the duty of transferring a property right to the other party (buyer) and the buyer assumes the duty of paying the purchase price to the seller. 【3.2.1.02】 (Pre-contract for sale) (1) A pre-contract for sale is an agreement reached between parties to enter into a contract for sale, through a manifestation of intention to complete the pre-contract, whose contents are stipulated in advance. (2) A contract for sale takes effect from the time of the party with the right of completion of the pre-contract or, if both parties have the right of completion of the pre-contract, either one of the parties, manifesting an intention to complete the pre-contract; provided, however, that if a particular formality is required for the formation of the contract for sale, the pre-contract for sale shall be subject to such formality. (3) If a time limit has been specified for the right of completion of the pre-contract, the pre-contract shall lose its effect if the right of completion is not exercised within such time limit. (4) If a time limit for the right of completion of the pre-contract has not been specified, the person offering the pre-contract may set a reasonable time limit and request the other party to give an answer as to whether the pre-contract is to be completed. In such case, if the other party does not manifest an intention to complete the pre-contract within such time limit, the pre-contract shall lose its effect. 【3.2.1.03】(Earnest of a sale) (1) If the buyer delivers an earnest to the seller, the buyer may cancel the contract by waiving its earnest and the seller may cancel the contract by furnishing twice the amount up until the time of the other party to the contract commencing the performance of the contract. (2) 【3.1.1.82】(3) shall not apply in cases of (1). 【3.2.1.04】 (Costs relating to contracts of sale) The costs relating to a contract for sale shall be borne equally by both parties. 【3.2.1.05】 (Application mutatis mutandis to onerous contracts) The provisions in this division shall apply mutatis mutandis with regard to onerous contracts other than contracts for sale; provided, however, that this shall not apply if the nature of the onerous contract does not so allow. Division 2 Duty of the Seller 【3.2.1.06】 (Duty of ensuring satisfaction of the requirements for perfection) If it is required that the requirements for perfection be satisfied in order for the buyer to conclusively acquire a property right or if it is required that certain requirements be satisfied in order for a property right to be exercised, the seller shall assume the duty of ensuring that the requirements are satisfied. 【3.2.1.07】 (Validity of sale of the right of another person) Even if the object of a contract for sale is the right of another person, the seller shall assume the duty of acquiring such right and transferring it to the buyer. 【3.2.1.08】 (Sale of another person’s right and succession) (1) If the seller dies after concluding a contract for sale whose object is the right of another person and the right-holder succeeds the status of the seller, the right-holder may refuse to transfer such right. If the right-holder refuses to transfer the right, the right-holder shall assume the liability for damages which should have been assumed by the deceased seller. (2) If after the seller has concluded a contract for sale whose object is the right of another person, the right-holder dies and the seller acquires the right which is the object of the contract for sale through succession, the seller may not refuse to transfer such right. 【3.2.1.09】 (Cancellation due to non-performance of the duty of transfer of the right of another person) In cases where the right of another person is the object of a contract for sale, if the seller is unable to transfer the right or a performance is not made after the arrival of the due date of performance even though a demand notice has been given for performance, the buyer may cancel the contract for sale. 【3.2.1.10】 (Cancellation and damages) If the buyer cancels the contract in accordance with【3.2.1.09】, the buyer may demand compensation of damages in accordance with【3.1.1.82】(2). 【3.2.1.11】 (Partial non-performance of the duty of transfer of the right) In cases where part of the right which is the object of the contract for sale belongs to another person, if the seller is unable to transfer such part or a performance is not made after the arrival of the due date of performance even though the performance has been requested, the buyer is allowed to take the following remedies: (a) A demand for reduction in the purchase price; (b) Cancellation of the contract; and/or (c) A claim for damages. 【3.2.1.12】 (Requirements of remedies and their correlation) The requirements allowing the remedies stipulated in【3.2.1.11】and their correlation are as follows: (a) 【3.2.1.11】(a) shall be allowed even in cases where there are grounds for exemption on the part of the seller or in cases where it is not possible to exercise the right to demand performance. (b) 【3.2.1.11】(b) shall have as a requirement that not being able to transfer part of the right or not transferring part of a right despite a request being made comes under a serious non-performance of the contract. (c) In cases where the seller proves the grounds for exemption, the remedy of 【3.2.1.11】(c) shall not be allowed. (d) 【3.2.1.11】 (b) and (c) may be asserted simultaneously. (e) In cases where the right of【3.2.1.11】(a) is exercised, the remedy of【3.2.1.11】(b) shall not be allowed and the remedy of【3.2.1.11】(c) which is incompatible with the right of【3.2.1.11】(a) shall not be allowed. 【3.2.1.13】 (Existence of a right precluding use) (1) In cases where the seller is required to transfer a right without encumbrances due to the right of another person, if the subject matter of the contract for sale is the object of a superficies, right of lease fulfilling perfection, emphyteusis, servitude, right of retention or a pledge, the buyer is allowed the following remedies: (a) A demand for reduction in the purchase price; (b) Cancellation of the contract; and/or (c) A claim for damages. (2) In cases where a leasehold or servitude which was deemed to exist for the immovable property which is the object of the contract for sale does not exist, the buyer of the immovable property is allowed the following remedies: (a) A demand for reduction in the purchase price; (b) Cancellation of the contract; and/or (c) A claim for damages. 【3.2.1.14】 (Requirements of remedies and their correlation) The requirements for the remedies allowed in【3.2.1.13】(1) and (2) and their correlation are as follows: (a) With regard to【3.2.1.13】(1) and (2), the demand for a reduction in the purchase price of (a) shall be allowed even in cases where there are grounds for exemption on the part of the seller or where the buyer is unable to exercise the right to demand performance. (b) With regard to【3.2.1.13】(1) and (2), the cancellation of the contract of (b) has as a requirement that the existence of a right restricting the right of the buyer with regard to【3.2.1.13】(1) or the non-existence of a right which should exist for the benefit of the buyer with regard to【3.2.1.13】(2) comes under a serious non-performance of the contract of the seller. (c) In cases where the seller proves the grounds for exemption, the claim for damages stipulated in【3.2.1.13】(1) or (2) (c) shall not be allowed. (d) With regard to【3.2.1.13】(1) and (2), (b) and (c) may be asserted simultaneously. (e) With regard to【3.2.1.13】(1) and (2), in cases of exercising the right of (a) the remedy of (b) shall not be allowed. Further, the remedy of (c) which is incompatible with the right of (a) shall not be allowed. 【3.2.1.15】 (Sale of a right for which a secured real right exists) (1) With regard to a contract for sale for immovable property, movable property or any other right for which a secured real right has been created, in cases where a sale price is decided without taking into consideration the existence of the secured real right, if the buyer loses such ownership or other right due to the secured real right being exercised or if it has become impossible to seek the transfer of the ownership or any other right, the buyer may cancel the contract. (2) In cases of (1), if the buyer preserves the ownership or other right or preserves a right seeking the transfer of the ownership or other right by paying costs, the buyer may demand reimbursement of such costs from the seller. 【3.2.1.16】 (Remedies of the buyer vis-à-vis defects in the subject matter) (1) In cases where there is a defect in the subject matter delivered to the buyer, the buyer is allowed the following remedies: (a) A demand for performance of a thing which does not have a defect (demand of subsequent completion through such means as a demand for a substitute thing or a demand for repair); (b) A demand for reduction in the purchase price; (c) Cancellation of the contract; or (d) A claim for damages. (2) With regard to the assessment of whether or not there is a defect, the base point in time shall be the time of transfer of a risk in accordance with【3.2.1.27】. 【3.2.1.17】 (Requirements of remedies and their correlation) The requirements allowing each of the remedies stipulated in【3.2.1.16】(1) and their correlation shall be as follows: (a) The demand for a substitute thing in【3.2.1.16】(1) (a) shall not be allowed in cases contrary to the nature of the contract or the subject matter. (b) The demand for repair in【3.2.1.16】(1) (a) shall not be allowed in cases requiring excessive costs for repair. (c) With regard to【3.2.1.16】(1) (a), in cases where both a demand for a substitute thing or a demand for repair are possible, the buyer in accordance with its will may choose which right to exercise. In such case, with regard to the demand for repair of the buyer, the seller may be exempted from repair through delivering a substitute thing. Further, with regard to the demand for a substitute thing of the buyer, in cases where the extent of the defect is small, the defect is easily repairable and repair is possible within a reasonable period of time, the seller may be exempted from delivering a substitute thing through making the repair within this period. (d) 【3.2.1.16】(1) (b) shall be allowed even in cases where the seller has grounds for exemption or where the buyer is unable to exercise the right to demand performance; provided, however, that in cases where the buyer is allowed the remedy in (a), this shall be limited to cases where the buyer has requested the performance of (a) but the seller has not complied. (e) 【3.2.1.16】(1) (c) has as a requirement that the delivery of a thing with a defect or where a thing without a defect is not delivered despite a request being made to come under a serious non-performance of the contract. (f) In cases where the seller proves the grounds for exemption, the remedy of 【3.2.1.16】(1) (d) shall not be allowed. (g) In cases where the subsequent completion of【3.2.1.16】(1) (a) is possible, the remedy of【3.2.1.16】(1) (d) may be exercised if the buyer has stipulated a reasonable period and has demanded the subsequent completion of (a) and such period has elapsed; provided, however, that if the period has elapsed, with regard to the obligation for compensation of damages, it is deemed that the seller has lapsed into delay from the time of the demand for subsequent completion. (h) In cases of the buyer exercising the right of【3.2.1.16】(1) (b), the remedy of 【3.2.1.16】(1) (c) shall not be allowed. Further, the remedy of【3.2.1.16】(1) (d) which is incompatible with the right of【3.2.1.16】(1) (b) shall not be allowed. 【3.2.1.18】 (Duty of notification of a defect) (1) The buyer shall notify the seller, at the time of receipt of the subject matter or at the time of knowing of a defect after receipt, of the existence of a defect within a reasonable period of time in accordance with the nature of the contract; provided, however, that this shall not apply if the seller was with knowledge of the defect in the subject matter. (2) If the buyer did not make the notification of (1), the buyer may not exercise a remedy by reason of there being a defect in the thing; provided, however, that this shall not apply if the buyer did not make the notification based on a compelling reason. 【3.2.1.19】 (Duty of inspection/notification of a buyer who is a business operator) (1) If a buyer who is a business operator receives a subject matter based on a contract for sale conducted within the scope of its business, it shall inspect whether or not there are any defects within an appropriate period of time; provided, however, that this shall not apply if the seller was with knowledge of the defect in the thing. (2) The buyer who is a business operator shall notify the seller of the existence of a defect without delay at the time of discovering the defect in the subject matter or at the time when the defect should have been discovered. (3) If the buyer who is a business operator did not make the notification of (2), the buyer may not exercise a remedy by reason of there being a defect in the thing; provided, however, that this shall not apply if the buyer did not make the notification based on a compelling reason. 【3.2.1.20】 (Remedies of the purchaser in a compulsory auction) With regard to the right of a purchaser in a “compulsory auction”, no distinction shall be made between cases of non-performance relating to the duty of transfer of a right and cases of non-performance due to a defect in the thing and unified remedies shall be established. The remedies to be allowed to the purchaser may be as proposed below. [Proposal A] (1) A purchaser in a “compulsory auction” may cancel the contract or demand a reduction in the purchase price vis-à-vis the obligor in cases of not acquiring a right which should have been acquired or in cases where there is a defect in the subject matter which was bought through the bid. (2) With regard to the cancellation of the contract through (1), the requirements of 【3.1.1.77】must be met. (3) With regard to cases of (1), if the obligor is without financial resources, the purchaser may demand the whole or partial return of the proceeds from an obligee who has received distribution of the proceeds. (4) With regard to cases of (1) and (3), if the obligor did not so apprise while knowing of the absence of the thing or the right or if the obligee file a petition for auction while knowing of such, the purchaser may demand compensation of damages from such persons. [Proposal B] Of Proposal A, (4) shall be amended as follows. (4) In cases of (1) and (3), if the obligor did not so apprise while knowing of a defect in the thing or the whole or partial absence of a right or of restrictions due to the right of another person, or (if the obligee filed a petition for an auction while knowing of such/the obligee who filed a petition for an auction did not so apprise while knowing of such at the time of the decision permitting the sale), the purchaser may demand compensation of damages from such persons. 【3.2.1.21】 (Special provisions relating to the seller of a newly built residence) (1) The seller of a newly built residence which has durability, in cases where there is a defect existing with regard to part of the foundational structure relating to the durability of the building, shall assume responsibility in accordance with【3.2.1.16】for a period of 10 years from the time of delivery the building to the buyer. (2) Special provisions contrary to the stipulation of (1) which are disadvantageous for the buyer shall be void. 【3.2.1.22】 (Responsibility of the seller of a claim) (1) If the seller of a claim has assumed responsibility for the financial resources of the obligor, the seller is presumed to have assumed responsibility for the financial resources at the time of the contract. (2) If the seller of a claim whose due date of payment has not yet arrived assumes responsibility for the future financial resources of the obligor, the seller is presumed to have assumed responsibility for the financial resources from the due date of payment. 【3.2.1.23】 (Special provisions relating to the responsibility for non-performance of an obligation of the seller) Even if the seller forms a special agreement to the effect that the duty of the seller provided for in this division shall not be assumed, if the seller knew of the whole or partial absence of the right or knew of the restrictions of the right of another person or the existence of a defect in the thing, the seller may not be exempted from such responsibility. 【3.2.1.24】(Application mutatis mutandis of the provisions on simultaneous performance) The defense of simultaneous performance stipulated in【3.1.1.54】shall apply mutatis mutandis to cases of【3.2.1.10】, 【3.2.1.11】, 【3.2.1.13】and【3.2.1.16】. 【3.2.1.25】 (Duty of transfer of the seller) The seller of a thing shall assume the duty of transferring the thing to the buyer. 【3.2.1.26】 (Periodic sales between business operators) (1) With regard to a contract for sale between business operators, in cases where the object of the contract cannot be achieved unless a performance is made by a specified date or within a certain period due to the nature of the sale or the manifestation of intention of the parties, the party for whom the period has elapsed without making a performance may set a reasonable period and request the other party who has the right of cancellation to give an answer within this period as to whether a demand for performance or cancellation is to be made; provided, however, that this shall not apply if the other party has made clear the intention of exercising either of the rights before the request. (2) If the answer is not given within the requested period of (1), the contract is deemed to have been cancelled. Division 3 Duty of the Buyer 【3.2.1.27】 (Duty of payment of the purchase price and transfer of risk) In cases where the subject matter to be delivered by the seller is lost or damaged and the seller is allowed grounds for exemption with regard to such loss or damage, whether the buyer is to assume the duty of paying the purchase price or whether the contract is to be cancelled and the buyer is to be exempted from the duty of payment of the purchase price shall be in accordance with the following provisions; provided, however, that this shall not apply if the parties have stipulated otherwise. (1) If the subject matter was lost or damaged before the seller delivered the subject matter to the buyer, the buyer may be exempted from the duty of payment of the purchase price through cancelling the contract in accordance with【3.1.1.77】. (2) If the subject matter was lost or damaged after the seller delivered the subject matter to the buyer, even in cases where the performance of the obligation of the seller has become impossible through the loss or damage of the subject matter, the buyer may not cancel the contract. (3) In cases where the subject matter of the sale is immovable property, even if the subject matter was lost or damaged before the delivery, if a registration was made for transfer to the buyer, the buyer may not cancel the contract. (4) Notwithstanding the provisions of (2) and (3), in cases where the loss or damage of the subject matter occurred due to a defect in the subject matter, the buyer may cancel the contract. 【3.2.1.28】 (Special provisions in cases of a subject matter with a defect being lost) (1) If there is a defect in the subject matter delivered by the seller to the buyer and such subject matter is lost after the delivery, the buyer may make a demand to the seller to deliver a subject matter which does not have a defect; provided, however, that this shall not apply if the buyer is unable to make a demand for delivery of another subject matter owing to the nature of the contract or the subject matter. (2) In cases where the buyer demands the delivery of a subject matter without a defect in accordance with the main text of (1), the buyer assumes the duty of return of the value of the subject matter with a defect; provided, however, that this shall not apply in cases where the loss of the subject matter is based on the defect. (3) In cases where the buyer assumes the duty of return of the value of a subject matter with a defect, the buyer may be exempted from the duty of payment of the purchase price through waiving the right to demand performance. 【3.2.1.29】 (Presumption relating to the due date of payment of the purchase price) (1) If with regard to the delivery of the subject matter of a contract for sale a due date of performance is stipulated, it shall be presumed that the same performance due date has been attached to the payment of the purchase price. (2) Notwithstanding (1), if the due date of registration transfer is stipulated in cases where the subject matter of the contract for sale is immovable property, it shall be presumed that the same performance due date is attached to the payment of the purchase price. 【3.2.1.30】 (Presumption relating to the place of payment of the purchase price) (1) If the payment of the purchase price should be made at the same time as the delivery of the subject matter of the contract for sale, it shall be presumed that the place of payment of the purchase price is the same as the place of delivery. (2) Notwithstanding the provision of (1), if the subject matter is delivered before the payment of the purchase price, the place of payment shall be in accordance with 【3.1.3.08】. 【3.2.1.31】 (Payment interest and the right to collect fruits) [Proposal A] (1) The right to collect the fruits of the subject matter of the contract for sale shall be transferred to the buyer at the time when the delivery is to be made by the seller to the buyer. (2) The buyer has the duty to pay interest from the time of the due date of payment of the purchase price. [Proposal B] (1) If the subject matter of a contract for sale which has not been delivered accrues fruits, the fruits shall belong to the seller. (2) The buyer assumes the duty of paying interest on the purchase price from the day of the delivery; provided, however, that if there is a due date with regard to the payment of the purchase price, the interest need not be paid until the arrival of the due date. 【3.2.1.32】 (Right to refuse payment of the purchase price – assertion of a right by a third party) If with regard to the object of a contract for sale, an assertion is made which is incompatible with the acquisition of the right by the buyer, in cases where there is reasonable cause to doubt the acquisition of the right by the buyer, the buyer may refuse to pay the whole or part of the payment of the purchase price corresponding to the degree of risk; provided, however, that this shall not apply if the seller provided reasonable security to the buyer. 【3.2.1.33】 (Right to refuse payment of the purchase price – in cases of the existence of a mortgage registration) (1) If there is a registration of a mortgage with regard to immovable property which has been purchased and the purchase price was decided without taking into consideration the existence of the mortgage with regard to the contract for sale, the buyer may refuse to pay the purchase price until the procedures to demand extinction of the mortgage have been completed. (2) (1) shall apply mutatis mutandis to cases where there is a registration of a statutory lien or a pledge with regard to immovable property which has been purchased. 【3.2.1.34】 (Right to demand deposit of the purchase price) With regard to cases of【3.2.1.32】and【3.2.1.33】, the seller may demand the buyer deposit the purchase price. 【3.2.1.35】 (Duty of taking delivery of the subject matter) The buyer of the thing assumes the duty of taking delivery of the subject matter. 【3.2.1.36】 (Right of deposit/right of auction/right of private sale of the seller for sales between business operators) (1) With regard to a contract for sale between business operators, if the seller is able to make a deposit through the general provisions of the Civil Code, the seller may deposit the subject matter of the contract for sale or, establishing a reasonable period, may put it up for auction after a demand notice has been given. In such case, if the seller deposits the thing or puts it up for auction, the seller shall send a notification to the buyer to such effect without delay. (2) Things which are at risk of depreciation of the value through damage or other causes may be put up for auction without the notice in (1) being given. (3) In cases of (1) and (2), if there is a market price for the subject matter in the stock exchange or a market value in other markets, a private sale may be made in lieu of the auction. (4) If a subject matter of a contract for sale is put up for auction in accordance with (1) or (2), or if the subject matter of the contract is sold privately in accordance with (3), the seller shall deposit the proceeds; provided, however, that this shall not preclude the whole or part of the proceeds being appropriated for the purchase price. Division 4 Special Sale 【3.2.1.37】 (Special agreements on redemption) If the parties to a contract for sale of immovable property have made a special agreement on redemption at the same time as the contract for sale, the seller may refund the purchase price and the costs of the contract paid by the buyer and cancel the contract for sale; provided, however, that this shall not apply if there are provisions otherwise. 【3.2.1.38】 (Time limit of special agreements on redemption) (1) The time limit for redemption may not exceed 10 years. If a longer period than this is stipulated through a special agreement, the time limit shall be 10 years. (2) If a time limit is stipulated for redemption, this may not be extended afterwards. (3) If a time limit is not stipulated for redemption, the redemption shall take place within 5 years. 【3.2.1.39】 (Perfection of the special agreement on redemption) (1) If a special agreement on redemption is registered at the same time as the contract for sale, the seller may even assert the redemption against a third party. (2) The rights of a lessee who has effected a registration may be asserted against the seller only within the remainder of the lease not exceeding a period of one year; provided, however, that this shall not apply if the lease was entered into for the purpose of injuring the seller. 【3.2.1.40】 (Exercising subrogation of the right of redemption) If an obligee of the seller attempts to effect redemption substituting for the seller through【3.1.2.01】, the buyer may have the right of redemption extinguished by depositing the amount of the remaining balance after deducting the amount the seller is to return from the current value of the immovable property in accordance with the evaluation of an appraiser appointed by the court. 【3.2.1.41】 (Implementation of redemption) (1) If the seller does not provide the purchase price and the costs of the contract within the period stipulated in【3.2.1.38】, the seller may not effect redemption. (2) If the buyer or a subsequent acquirer has incurred expenses with regard to immovable property, the seller shall reimburse the expenses in accordance with Article 196 of the present Civil Code; provided, however, that with regard to beneficial expenses, the court may, at the seller’s request, grant a reasonable period for such reimbursement. 【3.2.1.42】 (Sale of a co-ownership share with a special agreement on redemption) If one of the co-owners of immovable property sells its share, which has a special agreement on redemption attached, and the immovable property is then divided or is put up for auction, the seller may redeem the share or purchase sum which the buyer received or should have received; provided, however, that any division or auction effected without notification being given to the seller may not be asserted against the seller. 【3.2.1.43】(Purchaser of a co-ownership share with a special agreement on redemption) (1) In cases of【3.2.1.42】if a buyer becomes a purchaser with regard to an auction of immovable property, the seller may effect redemption by paying the auction price and the expenses stipulated in【3.2.1.42】. In such case, the seller acquires the whole ownership of the immovable property. (2) If the buyer became a purchaser with regard to an auction through another co-owner making a demand for division, the seller may not effect redemption with regard to only such share. 【3.2.1.44】(Tryout sale) (1) If the parties who intend to conclude a contract for sale, agree that the subject matter may be tried out by the buyer before conclusion of the contract, the contract for sale shall be formed when the buyer manifests an intention of acceptance after trying out the subject matter. (2) In cases where the person who has tried out the subject matter does not accept a contract for sale, the owner who agreed to the subject matter being tried out may not demand compensation of damage incurred though the subject matter being tried out from the person trying the subject matter out; provided, however, that this shall not apply if the person trying out the subject matter was intentionally or grossly negligent. (3) If the parties did not stipulate a time limit after the tryout within which notification should be given as to whether or not the contract for sale is to be accepted, the acceptance shall be deemed to have been refused though the passing of a reasonable period of time.

	Chapter 2 Exchange 【3.2.2.01】 (Definition of exchange) (1) An exchange means a contract where the parties mutually assume the duty of transferring a property right other than ownership of a sum of money. (2) In cases where one of the parties promises to transfer the ownership of a sum of money together with another right, the provisions relating to the purchase price for sale shall apply mutatis mutandis to such sum.

	Chapter 3 Gifts Division 1 Concept and Formation of Gifts 【3.2.3.01】 (Definition of a gift) A gift means a contract where one party assumes the duty of transferring a property right to another party gratuitously. 【3.2.3.02】 (Pre-contract for a gift) (1) A pre-contract for a gift is an agreement reached to form a gift contract, through the donee manifesting the intention of concluding the pre-contract, whose contents have been decided in advance by the parties. (2) A gift becomes effective from the time of the donee manifesting an intention to complete the pre-contract for the gift; provided, however, that if a particular formality is required for formation of the gift, the pre-contract for the gift shall be subject to such formality. (3) If a pre-contract has been made in writing, with regard to a gift which has become effective through (2), the donor may not cancel the gift by reason of the gift not having been made in writing. (4) If a time limit has been stipulated for the right to complete the pre-contract, the pre-contract shall lose its effect unless the right to complete the pre-contract is exercised within the time limit. (5) If a time limit has not been stipulated for the right to complete the pre-contract, the person offering the pre-contract may set a reasonable period of time and request that the other party give an answer as to whether the pre-contract is to be completed. In such case, if the other party does not manifest an intention to complete the pre-contract within such time, the pre-contract shall lose its effect. 【3.2.3.03】 (Cancellation of a gift not made in writing) (1) If a contract for a gift was not made in writing (excluding electronic records; hereinafter the same shall apply to the writing in this chapter), either of the parties may cancel the gift; provided, however, that this shall not apply to any part of a performance which has already been completed. (2) With regard to cases where a contract for an encumbered gift was not made in writing, if the donee has already performed the encumbrance, neither party may cancel the gift even with regard to the part of the performance which has not yet been completed. 【3.2.3.04】 (Application mutatis mutandis to gratuitous contracts) [Proposal A] The provisions of this chapter shall not comprehensively apply mutatis mutandis to gratuitous contracts and the provisions on each type of gratuitous contract shall individually apply mutatis mutandis where necessary. [Proposal B] A provision stating that “The provisions in this chapter shall apply mutatis mutandis to gratuitous contracts provided that they are not contrary to the nature of the contract” shall be established. Division 2 Effect of Gifts 【3.2.3.05】(Cancellation by reason of a false act) (1) The donor may cancel a gift in the following cases: (a) The donee has abused, seriously defamed the donor or has performed some other act of grave misconduct. (b) The donee has precluded the cancellation of the gift not made in writing through fraud or duress. (c) The donee who has legally assumed the duty of support of the donor in accordance with paragraph 1 of Article 877 of the present Civil Code has received a request of support from the donor who is financially distressed but has refused to perform the duty of support. (2) In cases of the death of the donor, the successor of the donor may effect the cancellation of (1). (3) If the gift is cancelled through (1) or (2), the donee shall assume the duty of return to the extent of the benefit which had been received at the time of emergence of the cause for cancellation. * With regard to (2), in cases of the right of cancellation based on (1) (c) accruing, one view was expressed that the successor of the donor may not effect cancellation. 【3.2.3.06】(Period of exercising the right to cancellation by reason of a false act) (1) The cancellation based on【3.2.3.05】(1) and (2) shall be made within 1 year of the time of the donor or its successor being able to exercise the right of cancellation. (2) The cancellation through (1) may not be made with regard to the part for which performance has been completed after 10 years have elapsed since performance of the gift. 【3.2.3.07】(Gift of fungible things) If the subject matter of a gift is specified simply as a type, the donor may specify the thing which is to be delivered. 【3.2.3.08】(Duty of preservation of the donor) The donor shall assume the duty of preservation of the subject matter with the same duty of care as it has for its own property. 【3.2.3.09】(Damages caused by non-performance of the obligation of a gift) If the non-performance of an obligation occurs through grounds which the donor had not accepted with regard to the contract for the gift, it shall not assume liability for the damages of【3.1.1.62】. 【3.2.3.10】(Gift of another person’s right) (1) With regard to a gift whose object is another person’s property right, the donor assumes the duty of transfer to the donee only when the donor has acquired such property right itself; provided, however, that this shall not apply if an agreement was reached that the donor was to acquire such property right. (2) In cases of the main text of (1), the donee may cancel the gift after the gift has become effective up until the donor has acquired the property which is the object of the gift. 【3.2.3.11】(Responsibility of the donor with regard to a defect in the subject matter) (1) In cases of there being a defect in the subject matter, the donee may make a demand to the donor for the performance of a thing without a defect (a demand for subsequent completion through such means as a demand for a substitute thing or a demand for repair); provided, however, that this shall not apply if it is unreasonable to expect the donor to make a performance of a thing without a defect in light of the intent of the gift. (2) 【3.2.1.17】(a) to (c) shall apply mutatis mutandis to cases of the main text of (1). 【3.2.3.12】(Cancellation and duty of return of the donee) If a gift has been cancelled, the donee assumes the duty of return to the extent of the benefit which had been received at the time of the cancellation. Division 3 Special Gifts 【3.2.3.13】(Termination due to the death of the parties of periodic gifts) A gift which has as its object periodic payments shall lose its effect on the death of the donor or the donee. 【3.2.3.14】(Encumbered gifts) (1) With regard to an encumbered gift, if through there being a defect in the subject matter which was delivered, the amount of the encumbrance of the donee exceeds the value of the benefit received through the gift, the donee may make a demand to the donor that the encumbrance be reduced to the amount of the benefit received through the gift. (2) The provision of (1) shall not preclude the donee exercising other remedies. 【3.2.3.15】(Abolishment of mutatis mutandis application of the provisions relating to bilateral contracts to encumbered gifts) Article 533 of the present Civil Code shall be abolished. 【3.2.3.16】(Formation requirements of a gift through the donor’s death) (1) A gift which takes effect through the death of the donor shall be made through a notarized document or a document written by the donor itself. (2) If a gift to be given through the donor’s death is made through a document written by the donor itself, the donor itself shall write the whole text of the contents of the contract, the date and its name affixing its seal and the donee shall sign and seal it. (3) Paragraph 2 of Article 968 of the present Civil Code shall apply mutatis mutandis to the cases of (2). 【3.2.3.17】(Capacity of the donor to give a gift through its death) Article 961 of the present Civil Code relating to the capacity to make a will shall not apply mutatis mutandis to gifts through the donor’s death. 【3.2.3.18】(Death of the donee of a gift to be given through the donor’s death) Article 994 of the present Civil Code shall apply mutatis mutandis to gifts through a donor’s death; provided, however, that in cases where the parties have manifested an intention otherwise, this intention shall prevail. 【3.2.3.19】(Revocation of a gift through the donor’s death) Provisions on wills relating to the revocation or rescission of a will shall not apply mutatis mutandis to gifts through the donor’s death. If the donee performs an act coming under【3.2.3.05】against the donor of the gift through a donor’s death, 【3.2.3.06】(1) shall apply mutatis mutandis. * With regard to gifts through the donor’s death, one view was expressed that revocation should be allowed as with wills. 【3.2.3.20】(Duty of obligated persons with regard to gifts through the donor’s death) Articles 996 to 998 and Article 1000 of the present Civil Code shall not apply mutatis mutandis to gifts through the donor’s death.

	Chapter 4 Leases Division 1 Concept and Formation of Leases 【3.2.4.A】(Right to demand registration of the right of lease) The Commission proposes that: (1) Provisions shall not be established with regard to the right to demand registration by the lessee to the lessor; and (2) Special provisions shall not be established on requirements for perfection of a lease right for movable property. 【3.2.4.B】(Succession of lease rights) The Commission proposes that special provisions shall not be established for succession of lease rights. 【3.2.4.01】Definition of a lease A lease means a contract where one party (lessor) assumes the duty of making a certain thing available for the using and taking the profits from it by the other party and the other party (lessee) assumes the duty of paying rent for the same and of returning the subject matter after termination of the contract. 【3.2.4.02】(Short-term leases) (1) In cases where a person without the authority of disposition grants a lease, the leases listed in the following items shall not exceed the terms stipulated respectively in each of the items. (a) Lease of a forest for the purpose of planting or felling trees: 10 years. (b) Lease of land other than the lease listed in (a): 5 years. (c) Lease of a building: 3 years. (d) Lease of movable property: 6 months. (2) Notwithstanding the provision of Article 3 of the Act on Land and Building Lease, the validity of the short-term leases provided for in (1) shall be clearly expressed (shall be established in the Act on Land and Building Lease). (3) In cases where a person who does not have the authority of disposition concludes a lease contract which exceeds the period of a short-term lease, the part which exceeds the term of each of the items in (1) shall be void (partially void). (4) Special provisions shall not be established on the relations between leases without a set term and short-term leases. 【3.2.4.03】(Renewal of short-term leases) The term stipulated in【3.2.4.02】may be renewed; provided, however, that the renewal shall be effected within 1 year in the case of land, within 3 months in the case of a building and within 1 month in the case of movable property prior to the expiry of the term. 【3.2.4.04】(Duration of the lease) [Proposal A] Article 604 of the present Civil Code relating to the duration of a lease shall be maintained and the following contents are to be established. (1) The duration of a lease may not exceed 20 years. Even if the contract stipulates a term longer than this, the term shall be 20 years. (2) The duration of a lease may be renewed; provided, however, that such term may not exceed 20 years from the time of the renewal. [Proposal B] Article 604 of the present Civil Code shall be deleted and the limitation periods on the duration of the lease shall be abolished. Division 2 Relations between the Lease and a Third Party 【3.2.4.05】(Perfection of lease rights) If the lease right of immovable property is registered or if the requirements for perfection stipulated through the provisions of other special laws are satisfied, these may be asserted against a person who has later acquired a real right with regard to the immovable property or some other third party. 【3.2.4.06】(Transfer of ownership of the subject matter and lease contracts) (1) In cases where the ownership of immovable property which is the subject of the lease is transferred, if the lease right of the immovable property may be asserted pursuant to 【3.2.4.05】, the new owner succeeds to the status of the lessor of the previous lease. Any agreement between the former owner of the immovable property and the new owner to the effect of reserving the status of the lessor to the assignor shall be void. (2) With respect to the transfer of the status of the lessor in (1), the consent of the lessee is not required. (3) In cases of (1), the new owner may assert the transfer of the status of the lessor against the lessee from the time of the requirements for perfection of the transfer of ownership being met. (4) In cases of (3), if the lessee paid the rent to the previous lessor before knowing about the transfer of the ownership of the subject matter, the lessee may assert such payment of rent against the new owner. (5) In cases of (3) where there is lease contract, if there is a monetary sum which has been received as a security deposit, the new owner shall assume the obligation of refund excluding the amount already appropriated to the rent by the former owner of the immovable property which is the subject of the lease. In such case, the former owner shall assume a duty of security with regard to performance of such refund obligation. (6) If the ownership of the subject matter of a lease has been transferred, the above provisions shall apply mutatis mutandis to cases where an agreement has been reached on succession of the status of the lessor. * With regard to the assumption of the duty of the former owner to secure performance in proposal (5), there was some debate on the right and wrong of such a proposal, and one view was expressed that restrictions are required for cases allowing such. 【3.2.4.07】(Right to demand exclusion of impediments based on lease rights) (1)[Proposal A] The lessee of immovable property with perfection may demand suspension of an impediment based on the lease right if the use of or the profit-making from the subject matter has been impeded. [Proposal B] The lessee of immovable property may demand suspension of an impediment based on the lease if the use of and the profit from the subject matter has been impeded; provided, however, that this shall not apply in cases where the lessor or the original lessor with regard to a sublease does not have ownership of the subject matter. (2) The provision of (1) does not preclude the lessee from exercising subrogation based on【3.1.2.01】of the claim on real rights or other right possessed by the lessor for the purpose of preserving the claim vis-à-vis the lessor. Division 3 Duties of the Lessor 【3.2.4.08】(Responsibility of the lessor with regard to a defect in the subject matter) The following points shall be made clear with regard to the responsibility of the lessor for a defect in the subject matter. (a) The provisions including and following【3.2.1.16】relating to sales shall apply mutatis mutandis to defects in the subject matter. (b) 【3.2.1.18】which limits the warranty of the seller based on the duty of notification relating to the defect shall not apply to leases. 【3.2.4.09】(Repair of the subject matter) (1) The lessor assumes the duty of necessary repair for use or profit-making of the leased thing. (2) If the lessor is to perform an act necessary for preservation of the leased thing, the lessee may not refuse such act. (3) The lessee shall notify the lessor if it becomes aware that the leased thing requires repair; provided, however, that this shall not apply if the lessor was already aware of such. (4) In cases where the notification by the lessee in (3) is not made without delay, this shall be taken into consideration when deciding the amount of damages caused by non-performance of the duty of repair of the lessor and if damage was incurred by the lessor due to a delay in notification, the lessee shall assume liability for compensation. 【3.2.4.10】(Act of preservation contrary to the will of the lessee) Article 607 of the present Civil Code relating to the right of cancellation by the lessee due to act of preservation contrary to the will of the lessee shall be deleted and special provisions shall not be established for this. 【3.2.4.11】(Repair by the lessee and demand for reimbursement of expenses by the lessee) (1) In cases where the lessor does not perform the duty of repair, the lessee may repair the subject matter at its own expense. (2) If the lessee has incurred necessary expenses which should be borne by the lessor with regard to the leased thing, the lessee may demand reimbursement immediately from the lessor. (3) If the lessee has incurred beneficial expenses with regard to the leased thing, the lessor shall reimburse the expenses in accordance with paragraph 2 of Article 196 of the present Civil Code at the time of the termination of the lease; provided, however, that the court may, at the lessor’s request, grant a reasonable time limit for the reimbursement. * With regard to a claim for reimbursement of beneficial expenses, one view was expressed that if the borrower does not notify the lender within a reasonable amount of time in accordance with the nature of the contract that expenses were incurred, the right to demand reimbursement of expenses shall be lost. Division 4 Duties of the Lessee 【3.2.4.12】(Payment date of rent) The rent shall be paid at the end of each month with regard to movable property, a building or residential land or at the end of each year with regard to other types of land. 【3.2.4.13】(Right to demand an increase or reduction in the rent through changes in circumstances) (1) Provisions shall be established to the effect that the parties to a lease contract may demand an increase or reduction in rent in cases where there is a change in circumstances which form the basis of the calculation of the rent. (2) Provisions shall be established to the effect that the provisions relating to the right to demand an increase or reduction in the rent in (1) are default rules and that it is possible to exclude them through a special agreement. (3) With regard to legal relations in cases of exercising the right to demand an increase or reduction in the rent, the following points shall be established: (a) The determination procedures to be followed in cases where the right to demand an increase or reduction in the rent has been exercised but an appropriate increased or reduced amount has not been decided. (b) The rent amount which the lessor may demand and the rent amount that the lessee should pay up until the determination of (a). (c) Treatment when the increased or reduced amount determined through (a) and the amount paid in (b) differs. (4) The provisions of Article 609 and Article 610 of the present Civil Code which provide for a demand for reduction in the rent/cancellation through a decrease in profits shall be deleted. 【3.2.4.14】(Reduction in the rent due to part of the subject matter not being available for use) (1) In cases where part of the subject matter cannot be used, the rent claim corresponding to the proportion that cannot be used shall not accrue. (2) The provision of (1) shall not preclude a claim for damages due to violation of the duty of the lessor. (3) With regard to cases where part of the subject matter cannot be used, the lessee may cancel the contract when falling under one of the following: (a) Cases where the object of the contract cannot be achieved due to part of the subject matter not being available for use. (b) Cases where the object of the contract cannot be achieved due to the lessor not performing the duty of repair in response to a demand for repair by the lessee owing to part of the subject matter not being available for use. 【3.2.4.15】(Reduction in the rent due to the subject matter temporarily being unavailable for use) (1) In cases where the subject matter is temporarily unavailable for use, the rent claim shall not accrue with regard to the period of time during which the subject matter could not be used. (2) The provision of (1) shall not preclude a claim for damages due to violation of the duty of the lessor. (3) With regard to cases where the subject matter temporarily could not be used, the lessee may cancel the contract when falling under one of the following: (a) Cases where the object of the contract cannot be achieved due to the subject matter being temporarily unavailable for use. (b) Cases where the object of the contract cannot be achieved due to the lessor not performing the duty of repair in response to a demand for repair by the lessee owing to the subject matter not being available for use. 【3.2.4.16】(Use and profit-making from the subject matter in accordance with its method of use) The lessee shall use the thing and make profits in accordance with the method of use prescribed through the nature of the contract or the subject matter. 【3.2.4.17】(Notification duty of the lessee) If there is a person who contends a right with regard to a leased thing, the lessee shall notify the lessor to such effect without delay; provided, however, that this shall not apply if the lessor was already aware of such fact. 【3.2.4.18】(Restrictions on assignment and subleases of a lease right) (1) The lessee may not assign a lease right or sublease a leased thing without acquiring the consent of the lessor. (2) If the lessee in violation of the provision of (1) allows a third party to use or to make profits from the use of the leased thing, the lessor may cancel the contract; provided, however, that this shall not apply in cases where such unauthorized sublease did not result in destroying the trust relations between the parties. (3) With regard to (2), in cases where the cancellation by the lessor is not allowed, the lawful sublease of (1) is deemed to have been made. 【3.2.4.19】(Legal relations between the lessor and the sub-lessee – right of direct demand) (1) If the lessee lawfully subleases the leased thing, the sub-lessee may assert the right of use or profit-making based on the sublease against the lessor within the scope of the authority to use or make profits granted by the original lessor to the lessee. (2) In cases where a lawful sublease is effected, the lessor may demand payment from the sub-lessee to the extent to which the respective duties of performance based on the rent claim which the lessor has against the lessee and the rent claim which the lessee has against the sub-lessee overlap. (3) If the lessor makes the demand in (2) to the sub-lessee in writing, even if the sub-lessee pays rent to the lessee after such demand, the sub-lessee may not assert such payment against the lessor with regard to the extent of the demanded amount of (2). (4) If the lessor makes the demand stipulated in (2) to the sub-lessee, the sub-lessee may not assert a payment made to the lessee before the due date of rent against the lessor. 【3.2.4.20】(Cancellation of contracts of lease and contracts of sublease) (1) Even with regard to cases where a cancellation agreement of a contract of lease is made between the lessor and lessee, the effect of the cancellation shall not accrue with regard to the relations with the sub-lessee. (2) [Proposal A] Special provisions shall not be established in cases of a contract of lease being cancelled due to non-performance of the obligation of the lessee. [Proposal B] In cases where a lawful contract of sublease is effected, if the lessee does not perform the obligation of paying rent, the lessor may cancel the contract of lease due to non-performance of the obligation by informing the sub-lessee of the non-performance and by confirming that the sub-lessee shall not pay the rent obligation of the lessee. Such cancellation may be asserted against the sub-lessee. (3) In cases where land is being leased, if the lessee of the land is leasing the building which it owns, (1) and (2) shall also apply mutatis mutandis. * With regard to the proposal of (1), one view was expressed proposing a solution whereby if the agreed cancellation is allowed, the original lessor shall succeeds the status of the sub-lessor and the contract of lease shall be transferred to between the original lessor and the sub-lessee. Division 5 Termination of Leases 【3.2.4.21】(Requests to terminate a lease without a set term) (1) If the parties have not specified a term for the lease, either party may request its termination at any time. In such case, the leases listed in the following items shall terminate after the period stipulated in each respective item has elapsed from the day of the request for termination. (a) Leases of land: 1 year. (b) Leases of buildings: 3 months. (c) Leases of movable property and seating hire facilities: 1 day. (2) The provision of paragraph 2 of Article 617 of the present Civil Code relating to agricultural land shall be deleted and shall be established in the Agricultural Land Act. 【3.2.4.22】(Reservation of the right to terminate a lease with a set term) (1) Even if the parties specify the term of a lease, if one of the parties or both parties reserve the right of termination within such term, 【3.2.4.21】shall apply mutatis mutandis. (2) (With regard to cases where Proposal B is adopted for 【3.2.4.04】), in cases where the lease term is in excess of 20 years, the right of termination shall be presumed to be reserved during the time in excess of 20 years. (3) The provision of (2) shall not apply to leases to which Act on Land and Building Lease may be applied. * One view was expressed that adopting Proposal B of【3.2.4.04】which would entail abolishing the maximum limit on the lease term would be inconsistent with the provision on reservation of the right of termination with regard to the period in excess of 20 years and therefore (2) should be deleted. 【3.2.4.23】(Presumption of renewal of the lease) (1) In cases where the lessee continues to use or to make profits from the leased thing after the expiry of the term of the lease, if the lessor knew of such and raised no objection, it shall be presumed that a further lease was entered into under the same conditions as those of the previous lease; provided, however, that there shall be no stipulations on the term. (2) With regard to the previous lease, if the parties provided security, such security shall be extinguished through the expiry of the term; provided, however, that this shall not apply to security deposits. 【3.2.4.24】(Effect of cancellation of the lease) In cases where the lease is cancelled, such cancellation shall take effect only with regard to the future. In such case, if there is a violation of duty on the part of one of the parties, a claim for damages shall not be precluded vis-à-vis such person. 【3.2.4.25】(Termination of the lease due to loss of the subject matter) (1) In cases where the obligation of the lessor has become impossible to perform because of the loss of the subject matter, the contract for the lease shall terminate. (2) If the owner of the subject matter makes a demand to the lessee such as for return of the subject matter, in cases where it is definite that the use of the subject matter is impossible because of a cause other than loss of the subject matter, it shall be treated the same as (1). * With regard to the proposal of (2), one view was expressed that the lease should not terminate through the operation of law but that it is appropriate for it to be handled through cancellation. 【3.2.4.26】(Right of removal and the duty of recovery to the original state at the time of expiry of the lease) (1) The lessee may at its own expense remove the things which are adjoined to the subject matter. (2) The lessee shall recover the subject matter to its original state at the time of expiry of the lease; provided, however, that this shall not apply with regard to changes incurred in the subject matter through natural wear and tear. With regard to a lease where the lessee is a consumer and the lessor is a business operator, any special agreement which is contrary to this proviso shall be void. (3) In cases where the lessee incurs excessive costs for separation of adjoined things, regardless of (2), the lessee may seek reimbursement from the lessor in accordance with【3.2.4.11】. 【3.2.4.27】(Limitations on the period with regard to the claim for damages) [Proposal A] (1) In cases of damage incurred on the subject matter through use or profit-making in violation of the method of use stipulated in the contract or through the nature of the subject matter, which still remains at the time of return of the subject matter, with regard to the claim for damages relating to such, the prescription period shall not expire until (1 year) has passed since the time of return of the subject matter. (2) In cases where the lessor becomes aware of damage incurred on the subject matter after its return, with regard to the claim for damages, the period of 【3.1.3.44】(1) shall be calculated commencing from the time of the return of the subject matter and the period of【3.1.3.44】(2) shall be calculated commencing from the time of knowing of the damage of the subject matter. [Proposal B] With regard to the limitation period of the claim for damages, in addition to the rules on the prescription period for the claim stipulated through [Proposal A], the following provisions shall be established. (3) At the time of the lessor receiving the return of the subject matter or at the time of becoming aware that the subject matter was damaged after its return, the lessor shall notify the lessee of the existence of damage within a period of time judged to be reasonable in accordance with the nature of the contract. (4) In cases of (3), where the lessor is a business operator, the lessor shall notify the lessee of the existence of damage within a period of time judged to be reasonable in accordance with the nature of contract from the time the lessor knew or could have known that the subject matter was damaged. (5) If the lessor did not make the notification in (3) or (4), it may not exercise any remedies by reason of such damage; provided, however, that this shall not apply if the notification stipulated in (3) and (4) was not made because of a compelling reason on the part of the lessor. (6) If the lessee knew of the damage of the subject matter, the provisions of (3), (4) and (5) shall not apply. * One view was expressed that [Proposal B](4), (5) and (6) should be retained only in cases where the lender is a business operator and the subject matter was leased within the scope of business. 【3.2.4.28】(Limitations on the period with regard to the claim for reimbursement of costs) Provisions shall not be established on particular limitations on the period with regard to the reimbursement of costs incurred on the borrower and the limitation period relating to the claim for reimbursement of costs of Article 621 of the present Civil Code shall be abolished.

	Chapter 5 Loans for Use 【3.2.5.A】(Pre-contracts of loans for use) The Commission proposes that special provisions shall not be established for pre-contracts of loans for use. 【3.2.5.B】(Right to demand exclusion of an impediment based on a loan for use) The Commission proposes that: (1) Special provisions on relations with persons who have acquired ownership with regard to the subject matter shall not be established; and (2) Special provisions on relations with persons with a usufructuary real right with regard to the subject matter or persons who have received the creation of a lease right shall not be established. (3) Special provisions shall not be established with regard to the right to demand exclusion of an impediment based on a loan for use. Division 1 Concept and Formation of Loans for Use 【3.2.5.01】(Definition of a loan for use) A loan for use means a contract where one party (lender) assumes the duty of delivering a certain thing (subject matter) to the other party to the contract (borrower) in order for the borrower to gratuitously use it or profit from its use, and the borrower assumes the duty, through the expiry of the loan for use, of returning the subject matter which was delivered. 【3.2.5.02】(Right of cancellation of the loan for use prior to the handover) Either party may cancel the loan for use up until the lender delivers the subject matter to be loaned for use to the borrower; provided, however, that this shall not apply if an agreement was made in writing (excluding electronic records) to exclude the right of cancellation of the lease up to the delivery. * One view was expressed on mutatis mutandis application of【3.2.3.03】stipulating the right of cancellation of a gift not made in writing. Division 2 Effect of Loans for Use 【3.2.5.03】(Duty of the borrower relating to use of the subject matter) (1) Paragraph 1 of Article 594 of the present Civil Code shall be deleted and【3.2.4.16】relating to leases shall apply mutatis mutandis. (2) Paragraphs 2 and 3 of Article 594 of the present Civil Code shall be retained and the following provisions shall be established: (a) The borrower may not have a third party use or make profits from the subject matter unless the consent of the lender has been acquired; and (b) If the borrower has a third party use or make profits in violation of the provision of (a) the lender may cancel the contract. 【3.2.5.04】(Assumption of expenses relating to the subject matter) (1) The borrower shall assume the usual necessary expenses incurred after the delivery with regard to the subject matter. (2) Special provisions shall not be established on beneficial expenses of the subject matter. 【3.2.5.05】(Responsibility of the lender with regard to the subject matter) [Proposal A] (1) Even if the subject matter of the loan for use which was delivered is unsuited to usual use or profit-making, the lender shall not assume responsibility for such. (2) Notwithstanding (1), in cases where there is a defect [stated in【3.1.1.05】] in the subject matter, the borrower may make a demand to the lender for performance of a thing without a defect (a demand for subsequent completion such as through a demand for a substitute thing or a demand for repair); provided, however, that this shall not apply if it is not reasonable to expect the lender to make a performance of a thing without a defect in light of the contract for the loan for use. (3) 【3.2.1.17】(a) to (c) shall apply mutatis mutandis to cases of the main text of (2). [Proposal B] Even if the subject matter of the loan for use which was delivered is unsuited to usual use and profits, the lender shall not assume responsibility for such; provided, however, that if it is interpreted that the lender assumes an obligation, through the agreement of the parties or the intent of the loan for use, to deliver a subject matter which has a certain quality or function, the borrower may demand performance of a thing without a defect (a demand for subsequent completion such as through a demand for a substitute thing or a demand for repair). 【3.2. 5.06】(Responsibility of the lender with regard to an encumbered loan for use) [Proposal A] (1) With regard to an encumbered loan for use, if through there being a defect in the subject matter which was delivered, the amount of the encumbrance of the borrower exceeds the amount of the benefit received by the borrower through use of the subject matter, the borrower may make a demand to the lender that the encumbrance be reduced to the amount of the benefit received through use of the subject matter. (2) The provision of (1) shall not preclude the borrower from exercising other remedies. [Proposal B] With regard to an encumbered loan for use, the lender shall assume the duty of having the borrower use or make profits for use from the subject matter to the extent of the encumbrance. In such case, the provisions on leases shall apply mutatis mutandis to the extent of the encumbrance. 【3.2.5.07】(Application mutatis mutandis of the provisions on leases) The following provisions relating to leases shall apply mutatis mutandis. (a) 【3.2.4.16】(Use and profits from use of the subject matter in accordance with its method of use) (b) 【3.2.4.09】(2) and (3) of (Repair of the subject matter) (c) 【3.2.4.11】(3) of (Repair by the lessee and demand for reimbursement of expenses by the lessee) (d) 【3.2.4.17】(Notification duty of the lessee) (e) 【3.2.4.24】(Effect of cancellation of the lease) (f) 【3.2.4.26】(Right of removal at the time of expiry of the lease and the duty of recovery to the original state) Division 3 Expiry of Loans for Use 【3.2.5.08】(Expiry of a loan for use) (1) In cases where the term of the loan for use is stipulated, the loan for use shall expire through the lapse of such term. (2) If the parties did not stipulate a date for return, the loan for use shall expire at the time of the borrower concluding the use or profit-making in accordance with the object stipulated in the contract; provided, however, that even prior to conclusion of the use or profit-making, if a sufficient period for use or profit-making has elapsed, the lender may cancel the loan for use immediately. (3) If the parties did not stipulate a term for the loan for use or the object of the use or profit-making, the lender may cancel at any time [stipulating a reasonable period of time]. 【3.2.5.09】(Expiry of the loan for use due to the death of the borrower) The loan for use shall terminate through the death of the borrower. 【3.2.5.10】(Cancellation of the loan for use due to particular circumstances) Notwithstanding【3.2.5.08】and【3.2.5.09】, the lender may cancel the loan for use in the following cases: (a) If a need for the subject matter occurs which the lender could not have anticipated and the need is recognized as justifying the termination of the loan for use in light of the previous circumstances of use relating to the subject matter. (b) If the relationship of trust between the parties which is the foundation for the loan for use is lost through an act of the borrower and it is extremely difficult to continue the loan for use. (c) If【3.2.3.05】so stipulates. 【3.2.5.11】(Limitations on the period with regard to the claim for damages) (1) In cases of damage incurred on the subject matter through use or profit-making in violation of the method of use stipulated in the contract or through the nature of the subject matter, which still remains at the time of return of the subject matter, with regard to the lender’s claim for damages, the prescription period for the claim shall not expire until 1 year has passed since the time of return of the subject matter. (2) In cases where the lender becomes aware of the damage incurred on the subject matter after its return, with regard to the claim for damages, the period of 【3.1.3.44】(1) shall be calculated commencing from the time of return of the subject matter and the period of【3.1.3.44】(2) shall be calculated commencing from the time of knowing of the damage of the subject matter. 【3.2.5.12】(Limitations on the period with regard to the claim for reimbursement of expenses) Article 600 of the present Civil Code shall be deleted and provisions shall not be established with regard to period limitations on the claim for reimbursement of expenses.

	Chapter 6 Loans for Consumption 【3.2.6.A】(Rules concerning the interest rate) The Commission proposes that provisions concerning the interest rate shall not be established. 【3.2.6.B】(Commitment-line contracts) (1) Special provisions shall not be established on commitment-line contracts per se. (2) Necessary revisions shall be carried out with regard to laws concerning special commitment-line contracts in response to allowing consensual loans for consumption. 【3.2.6.C】(Non-performance of an obligation relating to financing) The Commission proposes that special provisions shall not be established with regard to legal relations in cases of non-performance of an obligation related to financing. 【3.2.6.D】(Basic policy relating to the linking of defense) With regard to the linking of defense for a contract of third-party-type credit, the Commission proposes as follows. [Proposal A] Provisions shall be established in the loans for consumption. [Proposal B] Provisions shall not be established. Division 1 Concept and Formation of Loans for Consumption 【3.2.6.01】(Definition of a loan for consumption) A loan for consumption means a contract where one party (lender) assumes the duty of delivering money or some other thing to the other party (borrower) and the borrower assumes the duty of returning a thing equivalent in terms of type, quality and quantity to the delivered thing. 【3.2.6.02】(Agreement concerning interest) (1) In cases where there is an agreement that interest should be paid, the borrower shall pay interest with regard to the principal that was delivered. (2) With regard to a loan for consumption between business operators, in cases where a monetary loan for consumption was effected within the scope of business operation of the lender, interest shall be paid as long as there is no agreement otherwise. (3) With regard to (1) and (2), in cases where there is no agreement on the interest rate, the interest shall be paid based on the statutory interest rate at the time of forming the loan for consumption. 【3.2.6.03】(Right of cancellation prior to delivery of a loan for consumption [without interest]) [Proposal A] With regard to a loan for consumption without interest, either party may cancel the loan for consumption up until the lender has delivered the subject matter of the loan for consumption to the borrower; provided, however, that this shall not apply in cases where the loan for consumption was formed in writing (excluding electronic records). [Proposal B] (1) With regard to a loan for consumption without interest, either party may cancel the loan for consumption up until the lender has delivered the subject matter of the loan for consumption to the borrower; provided, however, that this shall not apply in cases where the loan for consumption was formed in writing (excluding electronic records). (2) In cases where the lender is a business operator and the borrower is a consumer, regardless of whether there is the duty of paying interest or not, even in cases where the formation of the loan for consumption is in writing, the borrower may cancel the loan for consumption up until the lender has delivered the subject matter of the loan for consumption to the borrower. Any special agreement excluding the right of cancellation by the borrower prior to delivery shall be void. 【3.2.6.04】(Pre-contracts for loans for consumption) [Proposal A] Special provisions shall not be established with regard to pre-contracts for loans for consumption. [Proposal B] If a pre-contract for a loan for consumption without interest is made in writing (excluding electronic records), a loan for consumption formed through exercising the right to complete a pre-contract may not be cancelled by reason of not having been made in writing. 【3.2.6.05】(Quasi-loans for consumption) In cases where a person assumes a duty to provide money or any other thing through any arrangement which is not a loan for consumption, if the parties agree that such thing shall be the subject of a loan for consumption, a loan for consumption shall be deemed to have been formed through such. 【3.2.6.06】 (Commencement of bankruptcy proceedings with regard to one of the parties prior to the implementation of financing) (1) If one of the parties becomes subject to a ruling for commencement of bankruptcy proceedings before the subject matter is delivered by the lender to the borrower, the loan for consumption shall lose its effect. (2) The pre-contract for a loan for consumption shall lose its effect if one of the parties later becomes subject to a ruling for the commencement of bankruptcy proceedings. Division 2 Effect of Loans for Consumption 【3.2.6.07】(Responsibility of the lender in cases where there is a defect in the subject matter with regard to a loan for consumption with interest) (1) With regard to a loan for consumption with interest, if there is a defect in the thing which was delivered (including a defect in a right), the borrower is allowed the following remedies on the premise that the borrower satisfies each of the requirements: (a) A demand for performance of a thing without a defect; (b) Reduction of the interest with regard to the part of the right vis-à-vis the principal not transferred or reduction of the interest in reasonable proportion to the defect; (c) Cancellation of the contract; and (d) A claim for damages. (2) With regard to the correlation of the abovementioned (a) to (c),【3.2.1.12】, 【3.2.1.14】and【3.2.1.17】shall apply mutatis mutandis. (3) With regard to (1) (a) and (d), 【3.2.1.18】shall apply mutatis mutandis. With regard to (1) (b), in cases where notification was given after the elapse of a reasonable period of time, the right to demand reduction in the interest up until such notification shall be lost, and with regard to after the notification, the right to demand reduction of further interest exists. 【3.2.6.08】(Responsibility of the lender in cases of there being a defect in the subject matter with regard to a loan for consumption without interest) (1) With regard to a loan for consumption without interest, in cases where the condition of the subject matter does not conform to the one that should exist in light of the agreement of the parties to the contract or the intent of the contract for the loan for consumption, such as the subject matter not furnishing the function, quality or quantity that should be furnished, the borrower may demand performance of a thing without a defect (a demand for subsequent completion such as a demand for a substitute thing or a demand for repair) from the lender; provided, however, that this shall not apply if the lender cannot be reasonably expected in light of the contract for the loan for consumption to perform a thing without a defect. (2) 【3.2.6.07】shall apply mutatis mutandis to cases of the main text of (1). 【3.2.6.09】(Duty of return in cases of there being a defect in the subject matter) Regardless of whether or not there is the duty of paying interest, if there is a defect in the thing which was delivered, the borrower may return the value of the thing with a defect; provided, however, that this shall not apply in cases where a performance was subsequently completed through the borrower exercising the right stipulated in 【3.2.6.07】or【3.2.6.08】or in cases where the borrower demanded compensation of damages in lieu of the performance. Division 3 Linking of Defense 【3.2.6.10】(Requirements for linking of defense) In cases where the consumer concludes a contract to purchase goods or a right or a contract to receive the provision of onerous services (hereinafter referred to as a “supply contract”) with a business operator (hereinafter referred to as “supplier”) and concludes a contract for a loan for consumption with a third party which is a business operator different from the supplier (lender), if the supply contract and the contract for the loan for consumption are［financially］effectuated as a unity and, if such an agreement existed beforehand between the supplier and the lender as the one where the supply contract and the contract for the loan for consumption would be effectuated as a unity, the purchaser and other such persons may assert the grounds which accrue vis-à-vis the supplier against the lender. Division 4 Termination of Loans for Consumption 【3.2.6.11】(Termination of a loan for consumption) [Proposal A] (1) If the parties do not stipulate a due date for return, the lender may set a reasonable period of time and request return. (2) The borrower may make the return at any time; provided, however, that with regard to a loan for consumption with interest for which a due date for return is stipulated, if the return is to be made before the arrival of the due date, the borrower shall compensate for damage incurred on the lender. [Proposal B] The following provision shall be added to (1) and (2) of Proposal A. (3) The proviso of (2) shall not apply in cases where the lender is a business operator and the borrower is a consumer. 【3.2.6.12】(Return of the subject matter) If the borrower is unable to return a thing which is equivalent to the type, quality and quantity of the thing which was received, it shall reimburse the value of the thing at such time; provided, however, that this shall not apply in cases provided for in [paragraph 2 of Article 402 of the present Civil Code].

	Chapter 7 Finance Leases 【3.2.7.A】(Application of the Interest Rate Restriction Act) The Commission proposes that provisions shall not be established with regard to relations with the Interest Rate Restriction Act. 【3.2.7.B】(Perfection of the right to use leases) The Commission proposes that special provisions shall not be established with regard to perfection of the right to use a lease. 【3.2.7.C】(Other legal relations at the time of termination of the finance lease) The Commission proposes as follows. (1) Special provisions shall not be established with regard to re-leasing. (2) Special provisions shall not be established with regard to transfer of ownership at the termination of the finance lease. Division 1 Concept and Formation of Finance Leases 【3.2.7.01】(Definition of a finance lease) A finance lease means a contract where the lease provider assumes the duty of acquiring the ownership of a certain thing (hereinafter referred to as “subject matter”) from a third party (hereinafter referred to as “supplier”), delivering the subject matter to a user, and allowing the user to use such thing for a certain period (hereinafter referred to as “lease term”) and the user assumes the duty of paying a specified amount calculated based on the costs for procurement (hereinafter referred to as “lease fee”) through divided payments during the lease term (hereinafter referred to as “periodic lease payments”). Division 2 Effect of Finance Leases 【3.2.7.02】(Commencement of the lease term) (1) The user shall inspect the subject matter immediately after receiving the subject matter from the supplier or the lease provider and, after confirming that the thing does not have a defect, shall notify the lease provider of the same. (2) The lease term shall commence from the time of the notification of (1) being made. (3) Even in cases where a defect in the subject matter becomes clear after the notification, the effect of (2) shall not be precluded. 【3.2.7.03】(Duty of the user relating to use of the subject matter) The user shall follow the method of use stipulated in the contract or through the nature of the subject matter with respect to the use or profit-making of the subject matter. 【3.2.7.04】(Maintenance management of the subject matter) The lease provider shall not assume the duty of repair and maintenance management of the subject matter. 【3.2.7.05】(Prohibition on having a third party use or make profits from use without authorization) The user may not have a third party use or make profits from use of the subject matter without acquiring the consent of the lease provider. 【3.2.7.06】(Damage or loss of the subject matter) (1) If after the commencement of the lease term, the use of the subject matter has become temporarily impossible through the subject matter being damaged or in cases where use has become restricted, if the damage is not through a violation of duty of the lease provider, the user shall not be exempted from the obligation of the periodic lease payments of the lease term. (2) With regard to cases where the subject matter is lost, if the loss is not through a violation of duty of the lease provider, the user shall not be exempted from the obligation of paying the lease fee for the remainder of the lease term. In cases where the subject matter was lost through a violation of duty of the user, the user shall lose the time benefit. 【3.2.7.07】(Responsibility with regard to a defect in the subject matter) (1) In cases where there is a defect in the subject matter for which the lease term has commenced through【3.2.7.02】, the lease provider shall not assume responsibility for such vis-à-vis the user. (2) The rights (excluding the right of cancellation) possessed by the lease provider vis-à-vis the supplier relating to the defect in a subject matter stipulated in (1) shall be transferred to the user on a demand from the user. (3) With regard to a right vis-à-vis the supplier of the lease provider pertaining to the provision of (2), in cases where a decision on the subject matter has been reached between the user and the supplier, it shall be deemed that there is a contract for sale between the user replacing the lease provider and the supplier, and the provisions of 【3.2.1.18】and【3.2.1.19】shall apply. (4) In cases where the user is a consumer, if the lease provider has concluded a special agreement with the supplier that the responsibility of the supplier shall be reduced or exempted, the lease provider shall assume responsibility vis-à-vis the user to the extent that the exemption clause becomes void, if the lease provider were a consumer, through the provisions of [Article 8 and Article 10 of the Act on Consumer Contracts]. (5) In cases where the user is a consumer, special agreements violating the provisions of (2), (3) and (4) which are disadvantageous to the user shall be void. 【3.2.7.08】(Notification duty of the user) If a person asserts a right with regard to a subject matter, the user shall notify the lease provider without delay to such effect; provided, however, that this shall not apply if the lease provider was already aware of such. Division 3 Termination of Finance Leases 【3.2.7.09】(Prohibition of midterm cancellation) A finance lease may not be cancelled during the lease term excluding cases where there is an agreement otherwise. 【3.2.7.10】(Cancellation due to non-performance of an obligation of the user) (1) If the lease provider cancelled the finance lease due to a failure by the user to pay the periodic lease payments, the user shall not be exempted from the obligation of paying the lease fee for the remainder of the lease term. In such case, the user shall lose the time benefit with regard to the periodic lease payments. (2) The lease provider shall liquidate the benefit acquired through return of the subject matter. 【3.2.7.11】(Return of the subject matter) If the finance lease has terminated, the user shall return the subject matter and the lease provider shall take it back.

	Chapter 8 Rendering of Services Division 1 Concept and Formation of Services 【3.2.8.01】(Definition of service) A service means a contract where one party (service provider) receives remuneration from the other party (service receiver) or, without remuneration, assumes the duty of providing service. 【3.2.8.02】(Contents of the basic duties of the service provider) (1) In cases where the parties agree to actualizing an object or a result stipulated in the contract, the service provider assumes the duty of actualizing such. (2) In cases where the agreement of (1) is not recognized, the service provider shall assume the duty of rendering the service with the care that can usually be expected of a prudent service provider for [the actualization] of the object or result stipulated in the contract; provided, however, that in cases where the service provider renders a service without receiving remuneration, excluding cases where a business operator renders a service within the scope of its business, the service provider shall assume the duty of rendering the service with care reduced to an appropriate degree [the same care as it would have if performing the service for itself] taking into consideration the fact that the service is gratuitous. 【3.2.8.03】(General provisions of service contracts) The provisions of Chapter 8 shall apply to contracts for work, mandates, deposits, employment and all other types of service contracts except for cases otherwise provided for by this Act or other laws and regulations. Division 2 Services and Claims for Remuneration 【3.2.8.04】(Claim for remuneration of the business operator) If a business operator agrees to render a service for the other party within the scope of its economic operation, the other party is presumed to have agreed to pay reasonable remuneration for the service. 【3.2.8.05】(Method of remuneration payment with regard to an onerous service contract) (1) Method of remuneration payment for completed results If an agreement has been reached to pay remuneration for the results achieved through the rendering of a service, the service provider may not claim remuneration unless the results have been completed (2) Method of remuneration payment for proportionate performance If the agreement of (1) does not exist, the service provider may claim remuneration corresponding to the proportion of such rendered service. 【3.2.8.06】(Relationship between the service and the claim for specific remuneration) (1) The service provider may not claim remuneration for the service unless the service is rendered. (2) In cases where the service receiver pays remuneration in advance, if the service provider is unable to render the whole or part of the service [where it is definite that the service will not be rendered], it shall refund the amount of remuneration for the service which has not been rendered to the service receiver. 【3.2.8.07】(Due date of payment of remuneration) (1) With regard to a service contract paying remuneration for completed results, the service provider may not claim remuneration until after the results through such service have been completed. (2) With regard to a service contract paying remuneration for proportionate performance, the service provider may not claim remuneration until after the service has been rendered; provided, however, that if a set term has been fixed for the remuneration, the service provider may demand remuneration after the set term has passed. 【3.2.8.08】(Claim for definite remuneration for parts already performed in cases of termination during performance) (1) With regard to a service contract paying remuneration for completed results, even in cases where it has become impossible to complete the results through such service, if the results of the service already rendered are divisible and the service receiver possesses a benefit with regard to the parts already performed, the service receiver may not cancel the contract with regard to the parts already performed. In such case, the service provider may claim remuneration for the parts already performed. (2) With regard to a service contract paying remuneration for proportionate performance, if the service contract is terminated during performance, the service provider may claim remuneration proportionate to the service already rendered. 【3.2.8.09】(Claim for definite remuneration in cases where the service has become impossible to render) (1) If it has become impossible for the service provider to render the service due to a cause attributable to the service receiver, the service provider may claim remuneration proportionate to the service already rendered and the expenses not included in the remuneration. (2) If it has become impossible for the service provider to render the service due to a violation of duty of the service receiver, the service provider may claim the amount left after deducting the benefit gained from being exempted from its obligation from the agreed remuneration. The agreed remuneration in such case shall be calculated by taking into consideration the amount which could be claimed by the service provider as compensation for damage incurred through cancellation pursuant to【3.2.8.10】(2) in cases where the service receiver is able to cancel the contract pursuant to【3.2.8.10】(1). Division 3 Termination of Services 【3.2.8.10】(Right of discretionary cancellation of the service receiver) (1) The service receiver may cancel the contract at any time while the service provider has not yet completed the rendering of the service. (2) In cases of (1), the service provider may claim the following amounts as compensation for damage incurred through the cancellation. (a) With regard to a service contract for completion of results, the amount left after deducting the expenses exempted from payment due to the cancellation (the benefit gained from being exempted from its obligation) from the agreed remuneration. (b) With regard to a service contract for proportionate performance, the remuneration proportionate to the service already rendered and expenses not included in the remuneration. * With regard to the above (2) (b), one view was expressed that in cases where not only the benefit of the service receiver but the benefit of the service provider is to be had, if there is no justifiable reason for the service receiver to cancel, compensation of damage exceeding the amount stipulated in (2) (b) should be allowed. 【3.2.8.11】(Right of discretionary cancellation of the service provider) (1) The right of discretionary cancellation with regard to onerous service contracts [Proposal A] Provisions on the right of discretionary cancellation of the service provider shall not be established with regard to onerous service contracts. [Proposal B] Even in cases where the service provider receives remuneration, the service provider may immediately cancel the contract if there is a compelling reason to do so. (2) The right of discretionary cancellation with regard to gratuitous service contracts The service provider may cancel the contract at any time; provided, however, that if the cancellation is made at a time which is disadvantageous for the service receiver and such cancellation is recognized as violating the good faith between the parties, the service provider shall compensate for any damage incurred on the service receiver through the contract being cancelled. 【3.2.8.12】(Cancellation due to commencement of bankruptcy proceedings with regard to the service receiver) (1) With regard to an onerous service contract, if the service receiver has become subject to a ruling of commencement of bankruptcy proceedings, the service provider or the trustee in bankruptcy may cancel the contract. In such case, the service provider may participate in the distribution of the bankrupt estate with regard to remuneration proportionate to the service already rendered and the expenses not included in such. (2) In cases of (1), the claim for the compensation of damage incurred through the cancellation of the contract in【3.2.8.10】may only be made with regard to service providers in cases where the trustee in bankruptcy exercised the right to cancel the contract. In such case, the service provider may participate in the distribution of the bankruptcy estate with regard to the damages.

	Chapter 9 Contracts for Work Division 1 Concept and Formation of Contracts for Work 【3.2.9.01】(Definition of a contract for work) (1) A contract for work means a contract where one party assumes the duty of completing work and delivering such subject matter and the other party assumes the duty of paying remuneration for the outcome of such work. (2) The provisions in this Chapter shall also apply mutatis mutandis to cases where the outcome of the work produced by the contractor is an intangible object requiring delivery to the customer. Division 2 Effect of Contracts for Work 【3.2.9.02】(Completion of work and acceptance of the subject matter) (1) If the contractor has completed the work, the customer shall take delivery of the subject matter of the work. In such case, the customer shall be given a reasonable opportunity to check whether the subject matter of the work conforms to the contents stipulated in the contract when taking delivery of the subject matter of the contract. (2) In cases where the customer is a business operator, the customer shall conduct a necessary inspection to check within a reasonable period of time whether the subject matter of the work conforms to the contents stipulated in the contract when taking delivery of the subject matter of the contract. (3) In cases where the work is divided into several parts and the subject matter of the work should be delivered for each part before total completion of the work, (1) and (2) shall apply to each part of the subject matter of the work. 【3.2.9.03】(Due date of payment of the remuneration) The remuneration shall be paid at the same time as taking delivery of the subject matter of the work. 【3.2.9.04】(Remedy contents for a warranty against defects) (1) If there is a defect in the subject matter of the work, the customer may demand from the contractor one of the measures listed in the following items pursuant to 【3.1.1.57】,【3.1.1.58】,【3.1.1.77】and【3.1.1.78】: (a) A demand for repair of the defect stipulating a reasonable period of time; provided, however, that this shall not apply when, in light of the degree or form of the defect, excessive costs are required for such repair. (b) A claim for damages in lieu of or as well as repair of the defect. In such case, the customer may refuse to pay the remuneration until the contractor has provided performance of the obligation of compensation for damage. (c) Cancellation of the contract if there is a defect in the subject matter of the work and, owing to such, the object for which the contract was concluded cannot be achieved. (d) [Proposal A] A demand for reduction of the remuneration; provided, however, that in cases where (a) is allowed, this shall be limited to where the contractor has not complied even though the customer has made the demand in (a). Moreover, in cases where the customer has made the demand of (d), the cancellation of (c) shall not be allowed and the right of (b) which is incompatible with the demand of (d) shall not be allowed. [Proposal B] Provisions shall not be established with regard to a demand for reduction of the remuneration. (2) (1) shall not apply if the defect in the subject matter of the work occurred due to the nature of the material provided by the customer or instructions given by the customer; provided, however, that this shall not apply if the contractor was aware that the material or instructions were unsuitable but did not warn the customer. 【3.2.9.05】(Duty of notification of a defect) (1) If the customer becomes aware of a defect in the subject matter of the work at the time of taking delivery of the subject matter of the work or after its receipt, it shall notify the contractor of such defect within a period judged to be reasonable in accordance with the nature of the contract; provided, however, that this shall not apply if the contractor was aware of such defect. (2) In cases where the customer is a business operator, the customer shall notify the contractor, within a period judged to be reasonable in accordance with the nature of the contract, of the existence of a defect it came to know of or could have known of at the time of taking delivery of the subject matter of the work or after such receipt. (3) If the customer did not make the notification of (1) or (2), it may not exercise any rights based on the defect; provided, however, that this shall not apply if the customer did not make the notification because of a compelling reason. 【3.2.9.06】(Term of warranty against defects) (1) With regard to construction work of a building or some other structure on land, the contractor shall assume responsibility for a warranty with regard to structural defects which have become apparent within two years from the day of taking delivery of such by the customer; provided, however, that with regard to contracts to produce construction work to newly construct a building which possesses durability, the term shall be 10 years with regard to the foundational structural parts [and ground] relating to the building’s durability. (2) The period of (1) may be extended [limited to a period within 20 years] or reduced through the contract; provided, however, that the term of (1) may not be reduced if the defect occurred through the intentional act or serious violation of duty of the contractor. (3) (1) shall not preclude the application of【3.2.9.04】and【3.2.9.05】. 【3.2.9.07】(Effect of a special agreement on exemption from responsibility for a warranty against defects) Even if the contractor has made a special agreement to the effect that it shall not assume responsibility for the warranty pursuant to【3.2.9.04】, if the contractor knew of the defect at the time of delivering the subject matter of the work or if the defect occurred through the intentional act or serious violation of duty of the contractor, it shall not be exempted from responsibility for the defect. Division 3 Termination of Contracts for Work 【3.2.9.08】(Right to discretionary cancellation of the customer) The customer may cancel the contract at any time while the contractor has not completed the work. In such case, the contractor may demand compensation of damage corresponding to the amount left after deducting the costs which were exempted from payment through the cancellation [the benefit gained through being exempted from its obligation] from the agreed equivalent amount of remuneration. 【3.2.9.09】(Cancellation due to commencement of bankruptcy proceedings with regard to the customer) (1) If the customer has become subject to a ruling of commencement of bankruptcy proceedings, the contractor or the trustee in bankruptcy may cancel the contract. In such case, the contractor may participate in the distribution of the bankruptcy estate with regard to the remuneration of the work already performed and the expenses not included in such. (2) In cases of (1), a demand may be made for the compensation of damage incurred through the cancellation of the contract only with regard to contractors in cases where the trustee in bankruptcy was the one to cancel the contract. In such case, the contractor shall participate in the distribution of the bankruptcy estate with regard to the compensation of damage. Division 4 Subcontracts 　　【3.2.9.10】(Legal relationship between the customer and a subcontractor – direct claim) (1) In cases where a subcontract is lawful, the subcontractor may demand payment from the customer to the extent to which the respective duties of performance based on the remuneration claim which the subcontractor has against the original contractor and the remuneration claim which the original contractor has against the customer overlap. (2) If the subcontractor makes the claim stipulated in (1) to the customer in writing, the customer may not assert a payment of remuneration made to the original contractor afterwards against the subcontractor with regard to the extent of the claimed amount,. (3) If the subcontractor makes the claim stipulated in (1) in writing to the customer, it shall notify the original contractor to such effect without delay. (4) With regard to the subject matter of the contract for work, the subcontractor may not assert a right to the customer which exceeds the right possessed by the original contractor based on the original contract for work vis-à-vis the customer. Moreover, the customer may not assert a right against the subcontractor which exceeds the right it possesses vis-à-vis the original contractor based on the original contract for work.

	Chapter 10 Mandates 【3.2. 10.A】(Brokerage contracts) The Commission proposes that provisions shall not be established with regard to brokered contracts. Division 1 Concept and Formation of Mandates 【3.2.10.01】(Definition of a mandate) A mandate means a contract where one party (mandator) mandates the other person (mandatary) to perform a juridical act and the other party assumes the duty of performing such act. 【3.2.10.02】(Definition of a quasi-mandate) The provisions of this Chapter shall apply mutatis mutandis to cases where one party (mandator) mandates the other party (mandatary) to conduct affairs which are not a juridical act with a third party. Division 2 Duty of the Mandatary 【3.2.10.03】(Duty of care of the mandatary) (1) [Proposal A] The mandatary shall assume the duty of handling the mandated affairs with the due care of a prudent manager in accordance with the purpose of the mandate. [Proposal B] The mandatary shall assume the duty of handling the mandated affairs with the due care of a prudent manager in accordance with the intent of the mandate contract. (2) The mandatary shall handle the mandated affairs in accordance with the instructions given by the mandator; provided, however, that this shall not apply in cases where it is recognized that obeying the instructions of the mandator is not in the interests of the mandator and it is difficult to seek a change in the instructions from the mandator. 【3.2.10.04】(Duty of loyalty of the mandatary) The mandatary shall handle the mandated affairs faithfully for the mandator. 【3.2.10.05】(Duty of self-execution of the mandatary) (1) The mandatary may not mandate a third party to handle the mandated affairs; provided, however, that this shall not apply if the permission of the mandator has been acquired or it is not reasonable to expect the mandatary to handle the mandated affairs itself. (2) With regard to mandates where the mandatary does not receive remuneration, if the mandatary appoints a sub-mandatary pursuant to (1), it shall be exempted from the duty of handling the mandated affairs itself and shall only assume the duty of appointment and supervision of the sub-mandatary. (3) If the mandatary appoints a sub-mandatary in accordance with a designation by the mandator, it shall not assume responsibility for either the appointment or supervision of the sub-mandatary; provided, however, that this shall not apply if the mandatary, knowing that the sub-mandatary was unsuitable or untrustworthy, failed to notify the mandator to such effect or to cancel the sub-mandated contract. 【3.2.10.06】(Legal relationship between the mandator and the sub-mandatary – direct claim) (1) With regard to the sub-mandate accompanying the granting of the authority of agency, the sub-mandatary shall assume vis-à-vis the mandator, within the scope stipulated with regard to the sub-mandate, a duty with the same contents as the duty assumed by the mandatary vis-à-vis the mandator through the (original) mandate. (2) With regard to the sub-mandate accompanying the granting of the authority of agency, the sub-mandatary may demand payment of the remuneration, costs or compensation for damage relating to the handling of the mandated affairs from the mandator to the extent to which the respective duties of performance based on the claim which the sub-mandatary possesses vis-à-vis the mandatary and the claim which the mandatary possesses vis-à-vis the mandator overlap. (3) In cases where the sub-mandatary makes the claim stipulated in (2) in writing to the mandator, even if the mandator pays the remuneration, costs or compensation for damage relating to the handling of the mandated affairs to the mandatary after the claim has been made, it may not assert such payment against the sub-mandatary with regard to the extent of the demanded amount of (2). 【3.2.10.07】(Duty to report of the mandatary) (1) If a request is made by the mandator or if it is necessary to ask for instructions from the mandator with regard to the handling of the mandated affairs, the mandatary shall report on the state of the handing of the mandated affairs at any time. (2) The mandatary shall report to the mandator on the progress or results without delay after the termination of the mandate. 【3.2.10.08】(Duty of the mandatary to deliver a received thing) (1) The mandatary shall deliver to the mandator money or any other thing received in the process of handling the mandated affairs. The same applies to fruits which have been collected. (2) The mandatary shall transfer to the mandator any right that it has acquired in its own name for the benefit of the mandator. 【3.2.10.09】(Duty of retention of the mandatary with regard to the property of the mandator) In cases where the mandatary retains the property of the mandator, the provisions on onerous deposits shall apply mutatis mutandis. 【3.2.10.10】(Responsibility of the mandatary for consumption of monies) Article 647 of the present Civil Code shall be deleted. Division 3 Duties of the Mandator 【3.2.10.11】(Remuneration of the mandatary) In cases where an agreement has been reached that the mandator should pay remuneration, the mandator shall pay remuneration to the mandatary. 【3.2.10.12】(Demand for advance payment of expenses by the mandatary) If expenses are required with regard to the handling of mandated affairs, the mandator shall pay them in advance on the request of the mandatary. 【3.2.10.13】(Claim for reimbursement of expenses by the mandatary) (1) If the mandatary has incurred expenses which are recognized as being necessary to handle the mandated affairs, it may claim reimbursement of the expenses and the interest accumulating after the payment day from the mandator. (2) [Proposal A] If the mandatary assumes an obligation recognized as being necessary in order to handle the mandated affairs, it may claim payment of funds for the performance from the mandator. In such case, if the obligation is not yet at its due date of payment, the mandatary may have the mandator furnish reasonable security. [Proposal B] If the mandatary assumes an obligation recognized as being necessary in order to handle the mandated affairs, it may demand that the mandator make the payment in lieu of itself. In such case, if the obligation is not yet at its due date of payment, the mandatary may have the mandator furnish reasonable security. 【3.2.10.14】(Claim for compensation of damage by the mandatary) (1) If the mandatary has incurred damage without negligence on its part in the handling of the mandated affairs, it may claim compensation for damage from the mandator. (2) In cases where the mandatary should receive remuneration, if the amount of remuneration has been stipulated taking into consideration the risk and the degree of damage with regard to the handling of the mandated affairs by the mandatary, the liability for the compensation in (1) and its amount shall be stipulated by accounting for such. Division 4 Termination of Mandates 【3.2.10.15】(Right of discretionary cancellation of the mandate) (1) Either party may cancel the mandate at any time. (2) If one of the parties cancels the mandate at a time which is disadvantageous for the other party, such party shall compensate for any damage incurred by the other party owing to such cancellation; provided, however, that this shall not apply if there is a compelling reason for the cancellation. (3) In cases where the mandate is entirely for the benefit of the mandatary or a third party, the mandator may not cancel the contract; provided, however, that this shall not apply if there is a compelling reason for the cancellation. (4) In cases where the mandate is not simply for the benefit of the mandator but is also for the benefit of the mandatary, if the mandator cancels the mandate, it shall compensate for any damage incurred by the other party through such cancellation; provided, however, that this shall not apply if there was a justifiable reason for the mandator to make the cancellation. 【3.2.10.16】(Grounds for termination of the mandate) The mandate shall terminate due to the following grounds: (a) [Proposal A] The death of the mandator or the mandatary; provided, however, that this shall not apply in cases where the mandate was the object of specific affairs and an agreement was made to the effect that the mandate would not terminate even through the death of the mandator. [Proposal B] The death of the mandator or the mandatary. (b) The mandator or the mandatary becoming subject to a ruling of commencement of bankruptcy proceedings. (c) The mandatary becoming subject to an order for commencement of guardianship 【3.2.10.17】(Duty of the mandatary for appropriate handling) In cases where the mandate has terminated, if there are pressing circumstances, the mandatary or its heir or a legal representative shall effect necessary dispositions until the mandator, its heir or legal representative is able to handle the mandated affairs. 【3.2.10.18】(Notification of termination of the mandate) The termination of the mandate may not be asserted to the other party unless the other party was notified of the fact of grounds occurring for termination of the mandate; provided, however, that this shall not apply if the other party knew of such fact. Division 5 Particular Mandates 【3.2.10.19】(Definition of a mediated contract and its contents) (1) A mediated contract means an onerous quasi-mandate where one party (assignor) mandates another party (mediator) to strive for formation of a juridical act between the assignor and a third party. (2) The mediator assumes the duty of collecting necessary information and conducting investigation into the suitability of the other party of the juridical act to the object of the mandate, and on the contents and conditions of the juridical act, and of providing such information to the assignor. (3) The assignor assumes the duty of paying remuneration to the mediator if the juridical act is formed between the assignor and the third party; provided, however, that this shall not apply if the parties reached a different agreement with regard to the remuneration. 【3.2.10.20】(Definition of an intermediary contract) An intermediary contract means a mandate where the assignor mandates the other party (intermediary) to perform a juridical act (on the assignor’s account) in its own name for the benefit of the assignor. 【3.2.10.21】(Effect of transfer of a right with regard to an intermediary contract relating to acquisition of a property right) With regard to the intermediation of a contract whose object is the acquisition of a property right, if the intermediary acquires such property right from the other party, the effect of the transfer of the property right shall accrue vis-à-vis the assignor of the intermediary (without requiring a particular act from the intermediary). 【3.2.10.22】(Performance guarantee contract of the intermediary) If the intermediary has agreed vis-à-vis the assignor to guarantee that the contractual obligation assumed by the other party vis-à-vis the intermediary shall be performed, the intermediary shall assume an obligation with the same contents as such obligation vis-à-vis the assignor. 【3.2.10.23】(Performance guarantee contract of a person who has formed a contract in the name of another person) If a person, who has performed a juridical act with the other party in the name of another person without being granted the authority of agency by the other person, has guaranteed to the other party that the effect of the juridical act shall accrue vis-à-vis the other person, such person shall assume the duty of acquiring ratification from the other person with regard to such act.

	Chapter 11 Deposits Division 1 Concept and Formation of Deposits 【3.2.11.01】(Definition of a deposit) A deposit means a contract where one party (depositary) assumes the duty of receiving a thing from the other party (depositor), retaining such thing for the other party and returning it. 【3.2.11.02】(Right of discretionary cancellation of the parties before receipt of the deposited thing) (1) The depositor may cancel the deposit before the receipt of the deposited thing by the depositary. (2) The depositary may cancel the deposit before receipt of the deposited thing with regard to gratuitous deposits; provided, however, that this shall not apply in cases where the formation of the deposit was made in writing (excluding electronic records). Division 2 Retention of the Deposited Thing 【3.2.11.03】(Authority of the depositary for use relating to the deposited thing) The depositary may not use the deposited thing without acquiring the consent of the depositor. 【3.2.11. 04】(Duty of care of the depositary relating to retention) (1) The depositary shall assume the duty of retaining the deposited thing with the due care of a prudent manager. (2) If a person has received a deposit gratuitously, it shall assume the duty of retention of the deposited thing with the same care as it would have towards its own property; provided, however, that this shall not apply if a business operator received the deposit within the scope of its economic operation. 【3.2.11.05】(Re-deposits) (1) The depositary may not have a third party retain the deposited thing unless it has acquired authorization from the depositor or if it is not reasonable to expect the depositary to retain the deposited thing. (2) If the depositary has appointed a sub-depositary in accordance with a designation by the depositor, it shall not assume responsibility for the appointment or supervision of the sub-depositary; provided, however, that this shall not apply if the depositary, knowing that the sub-depositary was unsuitable or untrustworthy, failed to notify the depositor to such effect or to cancel the contract of re-deposit. 【3.2.11. 06】(Liability for damages of the depositor) The depositor shall compensate for any damage incurred on the depositary due to the nature or state of the deposited thing; provided, however, that this shall not apply if the depositary was aware of its nature or state, or in cases where the depositary is a business operator and moreover, the depositor is a consumer, and the depositor was without negligence in not knowing about such nature or state. Division 3 Return of Deposited Things 【3.2.11.07】(Demand for return of a deposited thing by the depositor) Even if the parties have set a due date for return of the deposited thing, the depositor may demand return at any time. 【3.2.11.08】(Demand for taking back of the deposited thing by the depositary) (1) If the parties have not set a due date for return of the deposited thing, the depositary may demand the taking back of the deposited thing at any time. (2) If there is a due date for return, the depositary may not demand that the deposited thing be taken back before the due date unless there is a compelling reason for such demand. 【3.2.11.09】(Place of return of the deposited thing) The return of the deposited thing shall take place at the place of retention; provided, however, that if the depositary changed the place of retention of the thing through a justifiable cause, the return may take place at its present location. 【3.2.11.10】(Duty of notification of the depositor with regard to cases of damage or partial loss of the deposited thing) (1) If the depositor becomes aware of the damage or partial loss of the deposited thing which was returned, it shall notify the depositary of the damage or partial loss within a period judged to be reasonable, in accordance with the nature of the contract, from the time of knowing of such; provided, however, that this shall not apply if the depositary was already aware of such. (2) In cases where the depositor is a business operator, the depositor shall notify the depositary of the damage or partial loss within a period judged to be reasonable, in accordance with the nature of the contract, from the time the depositor knew or could have known of the damage or partial loss of the deposited thing which had been returned; provided, however, that this shall not apply if the depositary was already aware of such. (3) If the depositor did not make the notification of (1) or (2), it may not pursue the responsibility of the depositary with regard to such damage or partial loss; provided, however, that this shall not apply if the lack of notification by the depositor is based on a compelling reason. 【3.2.11.11】(Application mutatis mutandis of the provisions on mandates) 【3.2.10.08】, 【3.2.10.11】, 【3.2.10.12】and【3.2.10.13】shall apply mutatis mutandis to deposits. Division 4 Rights of Third Parties Relating to Deposited Things 【3.2.11.12】(Assertion from a third party about its rights relating to the deposited thing and the duties and rights of the depositary) (1) The depositary shall not deliver a deposited thing at its own discretion to a third party who asserts a right with regard to the deposited thing unless so ordered by the depositor. (2) The depositary may invoke the right which the depositor is able to assert against a third party which is contending a right with regard to the deposited thing. 【3.2.11.13】(Assertion of the right of a third party relating to the deposited thing and the duty of notification of the depositary) If a third party who asserts a right with regard to a deposited thing files a lawsuit against the depositary or takes a measure of seizure, provisional seizure or provisional disposition, the depositary shall notify the depositor of such fact without delay; provided, however, that this shall not apply if the depositor was already aware of such fact. 【3.2.11.14】(Assignment of the status of the depositor and transfer of indirect possession based on a deposit) (1) The assignment of the status of the depositor shall take effect if the depositor has notified the depositary that the status of the depositor has been assigned to a third party and the depositary has acknowledged such. (2) [Proposal A] Particular provisions shall not be established. [Proposal B] If the depositor is to transfer possession of a deposited thing to a third party to be undertaken by the depositary, this shall not take effect unless undertaken at the same time as transfer of the status of the depositor. Division 5 Particular Deposits 【3.2.11.15】(Commingled deposits) (1) The depositary may not retain deposited things of the same type and quality from multiple depositors by commingling them without the consent of the depositors. (2) If the depositary has retained deposited goods (excluding monies) of the same type and quality from multiple depositors by commingling them, each individual depositor acquires a co-ownership interest in the deposited thing in commingled retention in proportion to the quantity of the thing which was deposited. (3) In cases of (2), if one of the depositors demands the return of a thing which it deposited, the depositary shall separate a thing of a quantity (the same quantity as that deposited) proportionate to the co-ownership interest of such depositor from the deposited things in commingled retention and return it; provided, however, that this shall not apply in cases where it is impossible to separate a certain quantity due to the nature of the deposited thing. (4) In cases of (2), if one of the depositors assigns the co-ownership interest of a deposited thing which was kept in commingled retention, it may assert this against a third party through the method of transfer of possession through the instruction [stipulated in【3.2.11.14】]. 【3.2.11.16】(Deposits for consumption) (1) In cases where the depositary is able to consume the deposited thing pursuant to a contract, the depositary shall return a thing of the same type and quality as the thing deposited in the same amount which was deposited. (2) With regard to the deposit for consumption of (1), the provisions on “deposits” shall apply mutatis mutandis to the legal relationship before the depositary receives the deposited thing, and the provisions of Chapter 6 on “loans for consumption” (excluding【3.2.6.11】termination of the loan for consumption) shall apply mutatis mutandis to the legal relationship after the depositary has received the deposited thing; provided, however, that this does not preclude the application of the provisions on deposits to the extent not contrary to the intent of the mutatis mutandis application provisions. (3) With regard to a demand for return of a deposited thing, the provisions on deposits shall apply; provided, however, that in cases where the parties have stipulated a due date for the demand of return, if this is for the benefit of the depositary, the depositor may demand return at the time of arrival of the due date. 【3.2.11.17】(Deposit for consumption through a liquid deposit account) (1) In cases where an agreement is reached on a deposit for consumption by receiving money in a liquid deposit account, if a deposit is made by the account holder who is the depositor or if a payment transfer is made by a third party, a deposit claim shall be formed for the sum total of such money and the pre-existing amount of the outstanding balance through the depositary making a credit entry [credit record] for such deposit account. (2) If an obligor assuming a monetary obligation makes a transfer of money of the obligation amount into the deposit account of the obligee, the payment of the monetary obligation shall take effect at the time of forming the deposit claim of (1). (3) In cases where the claim of the outstanding balance existing in the deposit account is attached, the effect of the seizure shall accrue only with regard to the claim of the outstanding balance existing at the time of the seizure. The continuing validity of the agreement on the deposit account stipulated in (1) shall not be precluded through such seizure. 【3.2.11.18】(Deposit contracts controlling liquid deposit accounts) The provisions on mandates shall apply to the acceptance of a payment transfer made by a third party pertaining to the deposit account, payment orders to the depositary of the account holder for transfer to a third party, and the contractual relationship between the account holder and the depositary relating to the use or control of a liquid deposit account. * One view was expressed that it is better not to establish the provisions of【3.2.11.18】. 【3.2.11.19】(Liability of the accommodation service provider relating to deposits accompanying contracts for accommodation) (1) Liability for things which have been deposited. (a) If a person [accommodation service provider/accommodation business operator] accepts a guest into a facility within the scope of its business for the purpose of accommodation [or stay] and it accepts retention of a thing which has been brought into the facility by the guest, it shall compensate for the damage incurred by the guest through the loss, destruction or damage of the thing; provided, however, that this shall not apply if this occurred as a result of the nature or state of the thing or through force majeure [natural disasters or other circumstances which could not have been foreseen or avoided]. (b) With regard to money, negotiable instruments, valuables and other valuable items, in cases where the accommodation service provider asked for clear notification of the type and value of the thing and the guest did not make such clear notification, the liability of (a) shall be assumed to the extent of an amount corresponding to [x] times the cost of accommodation for one day. (c) Even in cases where the accommodation service provider refused to accept retention of the thing without a justifiable reason, it shall assume the same liability as (a). (2) Liability for personal effects which are not deposited. [Proposal A] (a) With regard to a thing carried into the facility by the guest, even in cases where the accommodation service provider did not accept retention of the thing, if the thing is lost, destroyed or damaged, it shall assume the same liability as (1) (a). (b) The liability of (a) shall be limited to the amount corresponding to [x] times the cost of accommodation for one day; provided, however, that this shall not apply if this occurred through the accommodation service provider failing in care as a prudent manager. (c) With regard to money, negotiable instruments, valuables and other valuable items which were not accepted for retention by the accommodation service provider, the service provider shall assume the liability of (a) to the extent of an amount corresponding to [x] times the cost of accommodation for one day; provided, however, that this shall not apply if this occurred through the intentional act or serious violation of duty of the accommodation service provider. [Proposal B] (a) With regard to things carried into the facility by the guest, and where the accommodation service provider did not accept retention of the thing, if the thing is lost, destroyed or damaged due to the provider failing in care as a prudent manager of the accommodation facility, it shall compensate for the damage incurred on the guest through such lack of care. (b) The liability of (a) shall be limited to the amount corresponding to [x] times the cost of accommodation for one day with regard to money, negotiable instruments, valuables and other valuable items which were not accepted for retention by the accommodation service provider; provided, however, that this shall not apply if this occurred through the intentional act or serious violation of duty of the accommodation service provider. (3) Effect of the general conditions for exemption An agreement or notice which exempts or limits the liability of the accommodation service provider based on (1) or (2) in advance shall not take effect. (4) Limitation periods. The provisions of【3.2.11.10】shall apply mutatis mutandis to the liability of (1) and (2). * Coordination with the Commercial Code is required with regard to establishing the rules of【3.2.11.19】in the Civil Code.

	Chapter 12 Employment 【3.2.12.A】(Basic policy of revision of the employment regulations) The Commission proposes that the provisions relating to “employment” shall, in the future, be integrated into the “Labour Contract Act” and in the meantime, coordination shall be carried out maintaining the present provisions within the scope necessary as basic supplementary regulations of “labor contracts”. * One view was expressed that in the case of the provisions on “employment” being separated from the corpus of the Civil Code and integrated into the “Labour Contract Act” in the future, it is appropriate to leave only the definition provision of “employment” in the corpus of the Civil Code. 【3.2.12.01】(Definition of employment) Employment means a contract where one party (employee) assumes the duty of engaging in work for the other party (employer), and the other party assumes the duty of paying remuneration for the work. 【3.2.12.02】(Rules relating to remuneration) Article 624 of the present Civil Code shall be deleted. 【3.2.12.03】(Assignability of the claim for labour services and self-execution of the duty of labour) (1) The employer may not assign its right to a third party without acquiring the consent of the employee. (2) The employee may not have a third party engage in the work in lieu of itself without acquiring the consent of the employer. (3) If the employee has a third party engage in the work in violation of the provision of (2), the employer may cancel the contract. 【3.2.12.04】(Cancellation of employment which has a set term) Article 626 of the present Civil Code shall be deleted. 【3.2.12.05】(Exclusion from application of the right to discretionary cancellation of the service receiver) The employer may not cancel a contract pursuant to【3.2.8.10】. 【3.2.12.06】(Notice of termination of employment without a set term) (1) If the parties have not stipulated an employment term, either party may give notice of termination at any time. In such case, the employment shall terminate after 2 weeks have elapsed since the day of the notice for termination. (2) In cases where remuneration is stipulated for a term, the notice of termination may be made from the next term; provided, however that the notice for termination shall be made in the first half of the current term. (3) In cases where remuneration is stipulated for a term of over 6 months, the notice of termination of (2) shall be made 3 months in advance. 【3.2.12.07】 (Cancellation due to compelling reasons) Even in cases where the parties stipulated a term for the employment, either party may cancel the contract immediately if there is a compelling reason. In such case, if such reason emerges due to a violation of duty of one of the parties, it shall assume liability for damages vis-à-vis the other party. 【3.2.1.2.08】(Presumption of renewal of employment) After the expiry of a term of employment, in cases where the employee is continuing to engage in the work, if the employer was aware of such and did not raise an objection, it shall be presumed that the employment was renewed with the same conditions (excluding the term) as the previous employment. 【3.2.12.09】(The effect of notice of termination of employment and the effect of cancellation due to a compelling reason) The notice of termination of【3.2.12.06】and the cancellation of【3.2.12.07】shall take effect only with regard to the future. 【3.2.12.10】(Notice of termination due to commencement of bankruptcy proceedings with regard to the employer) In cases where the employer has become subject to a ruling for commencement of bankruptcy proceedings, even if a term of employment has been stipulated, the employee or the trustee in bankruptcy may make the notice of termination through 【3.2.12.06】. In such case, neither of the parties may make a claim to the other party for damages incurred through the termination.

	Chapter 13 Partnerships Division 1 Concept and Formation of Partnership Contracts 【3.2.13.01】(Definition of a partnership contract) (1) A partnership contract means a contract where each of the parties (hereinafter referred to as “partners”) agrees to make a contribution and operate a joint business. (2) The object of the contribution may be labour. 【3.2.13.02】(Non-performance of the obligation of contribution of one of the partners) (1) Even in cases where one of the partners does not render the performance of the obligation of contribution, this shall not affect the obligation to contribute of the other partners; provided, however, that in cases where there is no operating officer as stipulated in【3.2.13.10】, if a partner demanding contribution has not performed the obligation to contribute, it shall be in accordance with the provisions of【3.1.1.54】and 【3.1.1.55】. (2) In cases of (1), the other partners may not cancel the partnership contract by reason of non-performance of the obligation. (3) In cases of (1), a partner who does not perform the obligation to contribute shall compensate for damage. 【3.13.03】(Voidance or rescission of a partnership contract) (1) Even in cases where there is a cause for voidance or rescission of a manifestation of intention to conclude a partnership contract with regard to one or several partners, if there are two or more other partners, the effect of the partnership contract shall not be precluded; provided, however, that this shall not apply if this is prior to the partnership commencing business with a third party. (2) In cases where a person has concluded a partnership contract through a manifestation of intention that is void or rescindable, if the person incurs damage through not being able to assert the invalidity or rescission against a third party who has done business with the partnership, it shall have the right to obtain reimbursement vis-à-vis the partnership and may exercise such right through【3.2.13.07】. (3) In cases where a partnership contract has become void or has been rescinded, the invalidity or rescission shall take effect only with regard to the future; provided, however, that this shall not apply if the partnership contract is made void through 【1.5.02】or is prior to the partnership commencing business with a third party. Division 2 Property Relationship of Partnerships and Partners 【3.2.13.04】(Joint ownership of partnership property) (1) The contribution of each partner and other partnership property shall be owned jointly by all of the partners. (2) If a partner disposes of its share with respect to (property belonging to) the partnership property, it may not assert such disposition against the partnership and a third party who has done business with the partnership. (3) A partner may not ask for division of partnership property prior to liquidation. 【3.2.13.05】(Claim belonging to partnership property) (1) A claim belonging to partnership property may only be exercised jointly by all of the partners. (2) The obligor of a partnership may not set off such obligation against a claim vis-à-vis a partner. * One view was expressed on having the title as (Prohibition of set-off by an obligor of the partnership) and establishing only the provision of (2) above. 【3.2.13.06】(Exercise of a right vis-à-vis partnership property by an obligee of a partner) The obligee of a partner may not exercise a right vis-à-vis the partnership property. 【3.2.13.07】(Partnership obligations) (1) The obligee of a partnership may exercise a right vis-à-vis the partnership property. (2) The obligee of a partnership may exercise a right in equal proportions vis-à-vis each of the partners; provided, however, that if the obligee of a partnership knew of the proportion of the losses to be borne by the partners at the time of accrual of the claim, it may exercise its right only with regard to such proportion. (3) Notwithstanding (2), if the object of the business of the partnership is economic operation and the partnership is one where all of the partners of the partnership are business operators, the partners shall each assume an obligation jointly and severally vis-à-vis the obligees of the partnership. 【3.2.13.08】(Proportion of distribution of profits and losses of the partners) (1) If the partners have not stipulated the proportion of the distribution of profits and losses, such proportion shall be set corresponding to the value of the contribution of each of the partners. (2) If a proportion has been stipulated only for the profits or only for the losses, such proportion shall be presumed to be common to both the profits and the losses. Division 3 Business Management of the Partnership and Partnership Representation Section 1 Business Management of the Partnership 【3.2.13.09】(Business management of the partners) (1) Each partner shall manage the business of the partnership based on a resolution passed by the majority of votes of the partners. (2) Notwithstanding (1), each of the partners may individually conduct the usual business affairs of the partnership; provided, however, that this shall not apply if other partners state an objection prior to completion of such business affairs. (3) (1) and (2) shall not apply in cases where operating officers are stipulated through 【3.2.13.10】. (4) Regardless of whether an operating officer has been stipulated, this shall not preclude the business being managed by all of the partners. 【3.2.13.10】(Operating officer) (1) The management of business of the partnership may be mandated to one or several partners or a third party through the stipulations of the partnership contract. (2) A person who has been mandated to manage the business (hereinafter referred to as “operating officer”) through (1) shall manage the business of the partnership. In cases where there are two or more operating officers, each operating officer shall manage the business of the partnership based on a resolution passed by the majority of votes of the operating officers. (3) Notwithstanding the latter part of (2), each operating officer may individually conduct the usual business affairs of the partnership; provided, however, that this shall not apply if other operating officers state an objection prior to completion of the business affairs. 【3.2.13.11】(Inspection of the business of the partners of the partnership and of the state of property) Even if a partner does not have the right to manage the business of the partnership, it may inspect such business and the state of the partnership property. 【3.2.13.12】(Application mutatis mutandis of the provisions on mandates) 【3.2.10.03】, 【3.2.10.04】, 【3.2.10.05】(1), 【3.2.10.06】to【3.2.10.09】and【3.2.10.11】to【3.2.10.14】shall apply mutatis mutandis to the partners managing the business of the partnership. 【3.2.13.13】(Resignation and dismissal of partners who are operating officers) (1) If a partnership contract mandates the management of business to one or several partners, such partner may not resign without a justifiable reason. (2) The partner of (1) may be dismissed by the unanimous agreement of other partners only when there is a justifiable reason. Section 2 Representation of the Partnership 【3.2.13.14】(Authority of representation of the partners) (1) Each partner has the authority, based on a resolution passed by the majority of votes of the partners, to perform acts relating to the business of the partnership representing the other partners. (2) Notwithstanding (1), each partner has the authority by the operation of law to perform an act representing the other partners with regard to acts relating to the usual business affairs of the partnership. (3) (1) and (2) shall not preclude conditions such as requiring that several partners jointly represent the other partners or other requirements being attached pursuant to the partnership contract. (4) (1), (2) and (3) shall not apply to cases where operating officers are stipulated. (5) The effect of the acts of representation of the partners listed in the following items shall not be precluded against a third party without knowledge and free from negligence: (a) An act not belonging to usual business affairs performed without being based on a resolution passed by the majority of votes of (1); (b) An act contrary to the conditions of (3); and (c) An act performed despite an operating officer being stipulated. 【3.2.13.15】(Authority of representation of the operating officers) (1) An operating officer shall have the authority to perform acts relating to the business of the partnership representing each of the partners. In cases where there are two or more operating officers, each operating officer has the authority to perform acts relating to the business of the partnership representing each of the partners, based on a resolution passed by the majority of votes of the operating officers. (2) Notwithstanding the latter part of (1), each operating officer shall have the authority to perform acts representing each of the partners by operation of law with regard to the acts relating to the usual business affairs of the partnership. (3) (1) and (2) shall not preclude conditions such as requiring that several operating officers jointly represent each of the partners or other requirements being attached pursuant to the partnership contract. (4) The effect of the acts of representation of the operating officers listed in the following items shall not be precluded against a third party without knowledge (and free from negligence): (a) In cases of the latter part of (1), an act not belonging to usual business affairs performed without being based on a resolution passed by the majority of votes of (1); (b) An act contrary to the conditions of (3); and (c) An act performed despite a representing operating officer being stipulated through (5). (5) A representing operating officer may be stipulated from among the operating officers through stipulations in the partnership contract. In such case, (1) to (4) shall apply by reading the operating officer referred in (1) to (4) as the representing operating officer (excluding (4) (c)). Division 4 Changes in the Partners Section 1 Participation 【3.2.13.16】(Participation of partners) A partner may have a third party newly join the partnership through the stipulations of the partnership contract. This shall be the same in cases where all of the partners agree. 【3.2.13.17】(Responsibility of newly joining partners) A partner who has joined after the formation of the partnership shall not assume the responsibility of【3.2.13.07】(2) with regard to obligations of the partnership which accrued before the participation of the new partner. Section 2 Withdrawal 【3.2.13.18】(Withdrawal of partners) In addition to the voluntary withdrawal of【3.2.13.19】, a partner may withdraw through the following causes: (a) Death; (b) Becoming subject to a ruling of commencement of bankruptcy proceedings; (c) Becoming subject to an order of commencement of guardianship; and (d) Expulsion. 【3.2.13.19】(Voluntary withdrawal) (1) If a definite period of existence for the partnership has not been stipulated in the partnership contract or if it has been stipulated that the partnership shall continue to exist for the lifetime of a certain partner, any of the partners may withdraw at any time; provided, however, that a partner may not withdraw at a time which is disadvantageous for the partnership except where there is a compelling reason to do so. (2) Even in cases where a definite period of existence for the partnership has been set, any partner may withdraw if there is a compelling reason to do so. (3) The provision of a partnership contract which stipulates that a partner may not withdraw even if there is a compelling reason to do so shall not take effect. 【3.2.13.20】(Expulsion of a partner) A partner may be expelled through the accord of the other partners only in cases where there is a justifiable reason; provided, however, that this may not be asserted against the expelled partner unless notification to such effect has been given to such partner. 【3.2.13.21】(Return of the share of a withdrawing partner) (1) The settlement between a withdrawing partner and the other partners shall be subject to the state of the partnership property at the time of the withdrawal. (2) The share of a partner who has withdrawn may be paid in money regardless of the type of contribution made. (3) Matters which had not yet been completed at the time of the withdrawal shall be settled after the completion. (4) A partner who has withdrawn shall assume the responsibility stipulated in 【3.2.13.07】(2) and (3) with regard to obligations of the partnership which accrued prior to the withdrawal. In such case, the partner who has withdrawn may request the other partners that it be able to acquire exemption from such obligation or to furnish reasonable security. Division 5 Dissolution of Partnerships and Liquidation Section 1 Dissolution 【3.2.13.22】(Grounds for dissolution) The partnership shall be dissolved through the grounds listed below: (a) Expiry of the definite period of existence stipulated in the partnership contract; (b) Emergence of a ground for dissolution stipulated in the partnership contract; (c) Achievement of the business which is the object of the partnership or impossibility of achievement; (d) Agreement of all of the partners; (e) (Number of partners becoming one/ Lack of partners); and (f) A demand for dissolution through【3.2.13.2】. 【3.2.13.23】(Demand for dissolution of the partnership) Any partner may demand dissolution of the partnership if there is a compelling reason. 【3.2.13.24】(Effect of dissolution of the partnership) In cases where the partnership is dissolved, such dissolution shall take effect only with regard to the future. In such case, if a certain partner has violated a duty, a claim for damages vis-à-vis such partner shall not be precluded. Section 2 Liquidation 【3.2.13.25】(Causes for commencement of liquidation of the partnership and appointment of a liquidator) (1) The partnership shall be liquidated through the provisions of this section in the following cases: (a) Cases of dissolution; or (b) Cases of a final and binding judgment recognizing voidance or rescission of the partnership contract. (2) The liquidation shall be performed by all of the partners or by a liquidator who has been appointed. (3) The appointment of the liquidator shall be determined through the majority vote of all of the partners. 【3.2.13.26】(Method of executing business of the liquidator) The provisions of【3.2.13.10】(2) and (3) shall apply mutatis mutandis to cases where there are several liquidators. 【3.2.13.27】(Resignation or dismissal of a liquidator who is a partner) 【3.2.13.13】shall apply mutatis mutandis to cases where a liquidator is appointed from among the partners through the partnership contract. 【3.2.13.28】(Duties/authority of the liquidator and method of division of the remaining property) (1) The duties of the liquidator shall be as follows: (a) Conclusion of the current business; (b) Collection of claims and payment of obligations; and (c) Delivery of the remaining property. (2) The liquidator has the authority to represent the other partners. (3) The liquidator may perform any and all acts necessary in carrying out the duties listed in each of the items of (1). (4) The remaining property shall be divided corresponding to the value of the contribution of each partner. Division 6 Internal Partnerships 【3.2.13.29】(Internal partnerships) The provisions of this Chapter shall apply mutatis mutandis to a partnership where each of the partners, making a contribution, jointly operates the business but the partnership property is vested in one of them, and moreover, such partner is allow to exclusively conduct business in its own name; provided, however, that【3.2.13.04】to 【3.2.13.07】, 【3.2.13.09】, the part “or a third party” of 【3.2.13.10】(1),【3.2.13.14】and【3.2.13.15】are excluded.

	Chapter 14 Life Annuities 【3.2.14.01】(Handling of life annuity contracts) [Proposal A] Rules centering on onerous life annuity contracts shall be established. The contents of such shall be as【3.2.14.02】and following. [Proposal B] The provisions relating to life annuity contracts (Article 689 to Article 694 of the present Civil Code) shall be deleted. 【3.2.14.02】(Definition of a life annuity contract) (1) A life annuity contract means a contract where one party (hereinafter referred to as “the obligee of the life annuity”) assumes the duty of transferring a certain property right to the other party (hereinafter referred to as “the obligor of the life annuity”) and with regard to such, the obligor assumes the duty of paying a periodic payment of money or other thing (hereinafter referred to as “life annuity”) to the obligee of the life annuity until the death of either of the parties or a third party whose life expectancy is used to determine the annuity payments (hereinafter referred to as “annuitant of a life annuity”). (2) A life annuity contract shall not take effect unless it is made in writing (excluding electronic records); provided, however, that this shall not apply if both parties have performed the whole or part of their duties. (3) A life annuity contract in which a third party is the annuitant of a life annuity contract shall not take effect without the consent of the third party. 【3.2.14.03】(Effect of life annuity contracts) A life annuity contract shall not take effect in the following cases: (d) If the annuitant of the life annuity contract was deceased at the time of conclusion of the contract; or (e) If the annuitant of the life annuity contract dies within 30 days of concluding the contract from a cause which already existed at the time of conclusion of the contract. 【3.2.14.04】(Method of payment of life annuities) (1) The life annuity shall be paid in advance at the time of each term. (2) If the annuitant of the life annuity contract was alive at the beginning of the term, the obligor of the life annuity shall pay the total amount of the life annuity for such term. 【3.2.14.05】(Non-performance cancellation of a life annuity contract) (1) If the obligor of a life annuity fails to pay a life annuity or does not perform some other duty, the obligee of the life annuity may cancel the contract after requesting performance. In such case, the obligee of the life annuity shall return the life annuity, which had already been received, to the life annuity obligor and the life annuity obligor shall return the property right, which was transferred and its fruits (including benefits gained through its use), to the life annuity obligee. (2) (1) shall not preclude a claim for damages. 【3.2.14.06】(Cancellation of a life annuity contract due to a premature death) (1) In cases where the annuitant of a life annuity dies an extremely premature death after the conclusion of the life annuity contract, if the total amount of the life annuity received by the obligee of the life annuity up until such death is extremely small when compared to the value of the transferred property right, the obligee of the life annuity or its successor may cancel the life annuity contract. (2) In cases where the annuitant of a life annuity dies due to the intentional act or negligence of the obligor of the life annuity, the life annuity obligee or its successor may cancel the life annuity contract. (3) If the cancellation through (1) or (2) is made, the life annuity obligor or its successor shall return the property right it received to the life annuity obligee or its successor, and the life annuity obligee or its successor shall pay the total amount of the life annuity received, any interest and expenses for the contract to the life annuity obligor or its successor. (4) The right of cancellation through (1) and (2) shall be exercised within [6 months/1 year] of the time of the death of the annuitant of the life annuity. 【3.2.14.07】(Cancellation of a life annuity contract and simultaneous performance) 【3.1.1.54】shall apply mutatis mutandis to cases of【3.2.14.05】and【3.2.14.06】. 【3.2.14.08】(Declaration of continued existence of the life annuity claim) (1) If the death of【3.2.14.02】occurs through the intentional act or negligence of the life annuity obligor, the court may declare that the life annuity contract shall continue to exist for a reasonable period of time on a demand from the life annuity obligee or its successor. (2) (1) shall not preclude the exercising of the right of【3.2.14.05】or【3.2.14.06】. 【3.2.14.09】(Application mutatis mutandis to gratuitous contracts and testamentary gifts) (1) The proposals of this Chapter shall apply mutatis mutandis to gratuitous life annuity contracts and testamentary gifts of life annuities. [Proposal A] Provided, however, that in cases of the proviso of【3.2.14.02】(2) the life annuity obligor of a gratuitous life annuity contract not made in writing may cancel the contract with regard to the future. [Proposal B] A proviso shall not be established. (2) 【3.2.3.02】, 【3.2.3.05】, 【3.2.3.06】, 【3.2.3.16】to【3.2.3.20】out of the proposals on gifts shall apply mutatis mutandis to gratuitous life annuity contracts.

	Chapter 15 Settlements 【3.2.15.01】(Definition of a settlement) A settlement means a contract where the parties agree to reciprocally make concessions and to settle the dispute which exists between them. 【3.2.15.02】(Settlements and mistakes) [Proposal A] The following provisions shall be established with regard to settlements and mistakes. (Non-applicability of the provisions on mistakes) Even in cases where one of the parties or both parties mistakenly believed a fact relating to a matter which was the subject of the dispute, the settlement may not be rescinded through【1.5.13】. [Proposal B] Particular provisions shall not be established with regard to settlements and mistakes. 【3.2.15.03】(Changes in rights due to settlements) (1) In cases where one of the parties is recognized, through the settlement, to possess the right which is the subject of the dispute, if conclusive evidence is obtained to the effect that such party did not possess the right in the past, such right shall be deemed to have been transferred or granted to such party through the settlement. (2) In cases where one of the parties is recognized, through the settlement, not to possess the right which is the subject of the dispute, if conclusive evidence is obtained to the effect that such party did possess the right in the past, such right shall be deemed to have been extinguished through the settlement.

	Chapter 16 Supplementary Rules Division 1 Contracts for the Benefit of Third Parties 【3.2.16.01】(Types of contracts for the benefit of third parties) The parties to a contract shall be allowed, through the following modes, to agree that one of the parties (promisor) may promise another party (promisee) that it shall grant a certain right or benefit to a third party (beneficiary): (a) Have the beneficiary acquire a claim vis-à-vis the promisor (claim acquisition type); (b) Have the beneficiary undertake an incidental encumbrance in the cases of (a) (encumbered claim acquisition type); (c) Have the beneficiary form a contract assuming an obligation of counter-performance vis-à-vis the acquisition of a claim receiving the transfer of a property right or the provision of services from the promisor (contract formation type); (d) Have an obligation assumed by the beneficiary vis-à-vis the promisor released (obligation release type); or (e) Make invocation by the beneficiary of a term relating to limits on or release from the responsibility of the beneficiary vis-à-vis the promisor, agreed upon between the promisee and the promisor, possible (term invocation type). 【3.2.16.02】(Claim acquisition type) (1) With regard to the agreement of【3.2.16.01】, if a promise is made that a claim shall be granted to the beneficiary, the beneficiary shall acquire the claim vis-à-vis the promisor immediately. (2) In cases of (1), an encumbrance may not be imposed on the beneficiary. (3) If a beneficiary does not wish to acquire a claim, it may waive the claim through a manifestation of intention made to the promisor and, in such case, the beneficiary shall be treated as not having acquired the claim from the very beginning. (4) If the beneficiary has manifested either clearly or implicitly to the promisor or the promisee that it approves the acquisition of the claim, the beneficiary may not waive such right. (5) If an interested party has emerged on the premise that the beneficiary possesses the claim, a waiver by the beneficiary after such may not be asserted against such interested party. (6) If the beneficiary has made the waiver, it shall be presumed that the promisee stands in the position of the beneficiary as long as this is not contrary to the intent of the contract. 【3.2.16.03】(Encumbered claim acquisition type) With regard to the agreement of【3.2.16.01】, if the beneficiary promises to assume an incidental encumbrance vis-à-vis a claim granted to the beneficiary, the beneficiary shall acquire the claim vis-à-vis the promisor at the time of the beneficiary manifesting an intention of consent to the promisor. 【3.2.16.04】(Contract formation type) With regard to the agreement of【3.2.16.01】, if the beneficiary promises to assume an obligation of counter performance vis-à-vis the acquisition of a claim to receive the transfer of a property right or the provision of services from the promisor, a contract whose contents have been stipulated through an agreement between the promisee and the promisor shall be treated as having been formed between the beneficiary and the promisor at the time of the beneficiary manifesting an intention of consent to the promisor. 【3.2.16.05】(Obligation release type) With regard to the agreement of【3.2.16.01】, if it is promised that the beneficiary shall be released from the obligation assumed vis-à-vis the promisor, the effect of the obligation release shall take effect from the time of the beneficiary manifesting an intention of consent. 【3.2.16.06】(Term invocation type) With regard to the agreement of【3.2.16.01】, if it is promised that the beneficiary may invoke a term, agreed between the promisee and promisor, relating to limits on or release from responsibility vis-à-vis the promisor, by invoking such term the beneficiary shall be deemed to have received application of the term in the relationship with the promisor from the time of the agreement between the promisee and the promisor. 【3.2.16.07】(Possibility of identification /non-existence of a third party) (1) It shall not be required that a beneficiary should exist or should be identifiable at the time of an agreement of a contract between the promisee and the promisor made for the benefit of a third party. (2) If the beneficiary of the contract for the benefit of a third party of【3.2.16.01】(a) does not exist or cannot be identified, the claim of the beneficiary shall accrue from the time of the existence or identification of the beneficiary. (3) With regard to a contract for the benefit of a third party of【3.2.16.01】(a), if the person who is to be the beneficiary still does not exist or cannot be identified at the time of the performance date of the claim to be acquired by the beneficiary, it shall be treated in the same manner as cases in which the waiver by the beneficiary was made. (4) With regard to a contract for the benefit of a third party of【3.2.16.01】(b) and (c), if the person who is to be the beneficiary does not exist or cannot be identified at the time when consent by the beneficiary is required, the effect of the agreement between the promisee and the promisor shall be presumed to have been lost. 【3.2.16.08】(Availability of a demand by the promisee for performance vis-à-vis the promisor) With regard to a contract for the benefit of a third party of【3.2.16.01】(a) and (b), the promisee may demand performance from the promisor to the beneficiary with regard to a claim acquired by the beneficiary. 【3.2.16.09】(Modification/revocation of a right) (1) With regard to a contract for the benefit of a third party of【3.2.16.01】(a), if the promisee or the promisor has notified the beneficiary of an agreement which does not reserve the right of revocation or the right of modification, or if the beneficiary has manifested an intention approving acquisition of the right to the promisee or the promisor, the promisee and the promisor may not modify the contents of the agreement or revoke it. (2) With regard to a contract for the benefit of a third party of【3.2.16.01】(b) and (c), if the promisee or the promisor has notified the beneficiary of an agreement which does not reserve the right of revocation or the right of modification, or if the beneficiary has manifested an intention of consent to the promisee or the promisor, the promisee and the promisor may not modify the contents of the agreement or revoke it. (3) With regard to a contract for the benefit of a third party of【3.2.16.01】(e), the promisee and the promisor may not modify or revoke a term to be invoked by the beneficiary after the beneficiary has come to know of the contents of the agreement without the consent of the beneficiary; provided, however, that this shall not preclude a separate agreement being formed. 【3.2.16.10】Right of cancellation) With regard to a contract for the benefit of a third party of【3.2.16.01】(a) and (b), if the promisor does not perform such obligation, the promisee may cancel the contract with the promisor pursuant to the provisions of the Civil Code after acquiring the consent of the beneficiary. 【3.2.16.11】(Defense of the promisor) The promisor may assert the defense, which can be raised against the promisee based on the contract with the promisee, against the beneficiary. Division 2 Continuous Contracts 【3.2.16.12】(Definition of a continuous contract) A continuous contract means a contract where, in light of the nature of the contract, the performance of one or both parties should be implemented continuously over a certain period of time; provided, however, that this does not include a contract (hereinafter referred to as “contract of divided performance”) where a performance with a stipulated total amount should be performed, through the agreement of the parties, divided into sections. 【3.2.16.13】(Termination of a contract without a set term) A continuous contract without a set term shall terminate with regard to the future through one of the parties setting a reasonable date and giving notice of termination to the other party. 【3.2.16.14】(Termination of a contract with a set term) (1) A continuous contract with a set term shall terminate on the expiry of the term. (2) In cases where it is recognized that an agreement was formed either expressly or implicitly to renew the contract in (1) between the parties at the time of conclusion of the contract or afterwards up until the time of expiry of the term, such contract shall be renewed. (3) Even in cases where the agreement of (2) is not recognized, if in light of the object of the contract, the contract term, the process of past renewals, the reasons why the party is refusing renewal and other circumstances, it is judged that refusal of the renewal is inappropriate in accordance with the principle of good faith, the party may not refuse a request for renewal from the other party. (4) If the renewal is made through (2) or (3), it shall be presumed with regard to the parties that a contract was continued with the same conditions as those of the previous contract; provided, however, that it is presumed that a term has not been set. 【3.2.16.15】(Effect of cancellation) The cancellation of a continuous contract shall take effect only with regard to the future (from the time of cancellation or the time of the grounds for cancellation accruing corresponding to the nature of the contract or the grounds for cancellation); provided, however, that this shall not apply in cases where it was agreed that the performance of one of the parties or both parties is indivisible. 【3.2.16.16】(Cancellation of a contract of divided performance) (1) With regard to a contract of divided performance (in this proposal, excluding cases where only the payment of money is divided up), in cases where the non-performance of an obligation by one of the parties with regard to any of the parts of the divided performance is a serious non-performance of such part, the other party may cancel the contract with regard to such part. (2) If through the non-performance of an obligation by one of the parties with regard to any of the parts of the divided performance, there is the clear risk of a serious non-performance of the contract emerging with regard to a future divided performance of such party, the other party may demand such party take measures to prevent the occurrence of the non-performance. If such measure is not taken, the other party may cancel the contract with regard to the part of the future divided performance. (3) In cases where, through the agreement of the parties, a certain part of a divided performance [is interdependently related/indivisible] with other parts of the divided performance, if the grounds of (1) accrue with regard to a certain part of the divided performance, the other party may also cancel the contract with regard to the other parts of the divided performance. 【3.2.16.17】(Continuous contracts with multiple parties) With regard to a continuous contract concluded between one of the parties and multiple other parties with common conditions attached with regard to the same type of performance, if each of the contracts presupposes that other similar contracts are to be concluded in order to achieve the object of the contract, such party may not treat some of the persons out of all of the other multiple parties discriminatively in the performance or the dissolution of the contract without reasonable grounds.

	Part Three. Claims Based on Law 【3.3.01】 (Grounds for exemption from damages) Further consideration shall be given to whether provisions allowing exemption in cases of damages by reason of non-performance of an obligation occurring through grounds other than the contract are required. 【3.3.02】 (Scope of damages) In cases of the claim for damages on the grounds other than non-performance of a contractual obligation, damage which is the subject of protection under the rules which form the basis for such liability for damages and damage which occurs as the reasonable outcome of such damage shall be compensated.

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