Non-Performance of an Obligation under Japanese Law｜Specific Performance, Damages and Termination

The goods have been delivered and the price has not been paid; the contractor is long past the completion date; what arrived does not match the agreed specification. Foreign businesses trading with Japanese companies meet these situations regularly. The Civil Code of Japan provides a complete set of remedies for non-performance, and a creditor may demand performance, claim damages, or terminate the contract. The requirements differ from one remedy to the next, however, and choosing the wrong one costs months. What follows sets out those requirements, and how they work in practice, under the law of Japan.

Contents

Three forms of non-performance, and what the amended Code requires
The three remedies open to a creditor
The requirements for termination
The scope of recoverable loss, and the special rules for money debts
The relationship with liability for non-conformity with the contract
Evidence, prescription and provisional attachment
In closing
How to contact us

Three forms of non-performance, and what the amended Code requires

Japanese law analyses non-performance in three forms. There is delay, where the obligation has fallen due, performance remains possible, and the debtor has not performed. There is impossibility, where performance has become impossible judged against the contract and the other sources of the obligation and in the light of common sense in the transaction — in which case performance can no longer be demanded (Article 412-2, paragraph 1, of the Civil Code of Japan). And there is defective performance, where something has been rendered but it does not answer to the tenor of the obligation.

The Civil Code was amended with effect from 1 April 2020. Damages may now be claimed where the debtor has failed to perform in accordance with the tenor of the obligation, or where performance is impossible (Article 415, paragraph 1, main clause). The proviso to the same paragraph withholds damages where the non-performance is due to grounds not attributable to the debtor, judged against the contract and the other sources of the obligation and in the light of common sense in the transaction. The allocation of proof matters greatly in practice: the creditor need only assert and prove the content of the obligation and the fact of non-performance, while it falls to the debtor to raise and establish that the failure was not attributable to him.

The three remedies open to a creditor

A demand for performance — requiring the other party to render what was promised. This is not available where performance has become impossible.
A claim for damages — loss caused by the delay may be claimed alongside performance itself. Where performance is impossible, where the debtor has clearly stated that he refuses to perform, or where the contract has been terminated, damages may instead be claimed in substitution for performance (Article 415, paragraph 2).
Termination of the contract — releasing oneself from the contract and recovering what has already been paid. Termination does not bar a claim for damages (Article 545, paragraph 4).

Where the other party retains both the means and the willingness to perform, demanding performance is usually the right starting point. Where his solvency is already in doubt, the focus should shift to termination and damages, with steps to secure assets taken early.

The requirements for termination

Termination takes two forms. The first is termination after demand (Article 541): the creditor demands performance within a reasonable period, and may terminate if the period expires without performance. Termination is not permitted, however, where the non-performance at the expiry of that period is minor, judged against the contract and common sense in the transaction. A few days’ delay, or a trivial shortfall in quantity, will generally not reach the threshold.

The second is termination without demand (Article 542), available where performance of the whole obligation is impossible; where the debtor has clearly stated that he refuses to perform the whole; where partial impossibility or partial refusal leaves the remainder incapable of achieving the purpose of the contract; where the contract is one that must be performed at a fixed time if it is to serve any purpose at all; or where there is no prospect that a demand would produce performance sufficient to achieve the purpose of the contract.

One point deserves emphasis. Since the amendment, termination does not require fault on the debtor’s part. Termination exists to release a creditor from a contract that can no longer be expected to be performed, so it is available even where the failure arose from grounds not attributable to the debtor. Conversely, termination is not available where the non-performance is due to grounds attributable to the creditor himself (Article 543). Once terminated, each party is under an obligation to restore the other to his original position (Article 545).

The scope of recoverable loss, and the special rules for money debts

Article 416 governs what may be recovered. Loss that would ordinarily arise is always recoverable. Loss arising from special circumstances is recoverable only where the parties ought to have foreseen those circumstances. Whether lost profit on a resale, the price differential on an emergency substitute purchase, or the cost of a stopped production line falls within the second category turns on what was known when the contract was made. It is therefore worth stating expressly in the contract what the goods are for, why the delivery date matters, and what is to happen if it is missed — provisions of that kind carry real weight when a claim is later advanced.

Money debts are governed by a distinct rule (Article 419). Damages are measured by the statutory interest rate in force when the debtor first fell into delay, or by the contractual rate where that is the higher; the creditor need not prove any actual loss; and the debtor may not plead force majeure as a defence. A delay in paying for goods or in repaying a loan therefore attracts liability even if it was caused by a natural disaster or a failure in a remittance system. The statutory rate was 3 per cent per annum when the amended Code came into force, and is subject to review every three years under a floating system.

The relationship with liability for non-conformity with the contract

Where goods delivered or work completed do not conform to the contract in kind, quality or quantity, the Civil Code of Japan lays down its own regime (Articles 562 and following). The buyer may demand cure — repair, delivery of a substitute, or making up a shortfall; may demand a reduction of the price where cure serves no purpose; and may claim damages and terminate under the general rules on non-performance.

There is one time limit here that is very easily missed. As regards non-conformity in kind or quality, a buyer who does not notify the seller within one year of becoming aware of it is in principle barred from relying on it at all (Article 566). The period is short. As soon as an inspection reveals a defect, notice specifying what is wrong should go out in writing, by content-certified mail (naiyo shomei yubin), a Japanese postal system that certifies the content and date of a letter.

Evidence, prescription and provisional attachment

Evidence. The contract (with the specification, the delivery date and the inspection terms), the purchase order, the delivery note, the certificate of inspection and acceptance, the record of any demand, and the correspondence and meeting notes. Japanese proceedings turn on documents; a variation agreed orally is very hard to prove afterwards, so variations should always be recorded in writing.
Extinctive prescription. Five years from the time the creditor became aware that the right could be exercised, or ten years from the time it could be exercised, whichever comes first (Article 166). A demand by content-certified mail postpones completion of the prescription for six months only; to renew it, an action must be filed or a demand for payment (shiharai tokusoku) applied for within that window.
Provisional attachment (kari-sashiosae). Where there is a risk that the other party will conceal or dispose of his assets, provisional attachment may be applied for before proceedings are commenced, freezing bank deposits or immovable property. It requires a prima facie showing of the right to be preserved and of the necessity of preservation, together with a security bond deposited with the Legal Affairs Bureau. A judgment can be obtained; finding assets left to attach by the time it arrives is another matter, and cases where nothing remains are not rare.

In closing

Handling non-performance well comes down to identifying early which form the case takes, choosing correctly between performance, damages and termination, and fixing the failure in documentary evidence. The one-year notice period for non-conformity and the securing of assets are the two points where an opportunity once lost cannot be regained. We act for foreign businesses trading with Japanese companies, and are equally glad to work through the client’s own counsel abroad.

How to contact us

Telephone 03-6435-8418 within Japan, or +81-3-6435-8418 from overseas. Lines are open from 08:00 to 24:00 Japan time, including Saturdays, Sundays and public holidays. Enquiries are also received at any hour through the form on this site.

M&A Partners Law Office LPC　Katsuhiro Tsuchiya, Representative Attorney-at-Law (Tokyo Bar Association, Registration No. 26775)　17F Mori Trust Shiroyama Trust Tower, 4-3-1 Toranomon, Minato-ku, Tokyo, Japan

This article is a general explanation based on the laws and practice of Japan as at August 2026 (Reiwa 8). The outcome of any particular matter depends on its own facts, and no specific result is guaranteed.

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