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Control of Price Related Terms in Standard Form Contracts in Japan

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Control of Price Related Terms in Standard Form Contracts

Part of the book series: Ius Comparatum - Global Studies in Comparative Law ((GSCL,volume 36))

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Abstract

This national report provides an overview of Japanese law on the topic of control of price terms in standard form contracts. After providing general background information on the primacy of freedom of contract and control of standard terms in general under the Japanese legal system, the report turns to the central question of private law control of price terms in standard contract terms. However, this has not been an issue that has been fully discussed or developed under Japanese law, and therefore, there is a lack of a coherent analytical framework. Nonetheless, there are recent high-profile Supreme Court cases that utilize private law rules such as the Consumer Contract Act to control price terms. In addition, public law regulations that may affect price terms also exist. One recent area that is gaining academic as well as public attention is the pricing practice in mobile telecommunication contracts. These movements may become a trigger for the development of rules on control of price terms in Japan.

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Notes

  1. 1.

    For an overview of the reform process, see, for example, Sono (2014) and Kozuka and Nottage (2014).

  2. 2.

    Article 91 of the Civil Code provides that parties can agree on terms that deviate from non-mandatory rules. There is discussion whether a contrary interpretation of this provision is allowed to conclude that parties cannot deviate from mandatory provisions, and that such agreement is void. Those who disagree with such interpretation consider Article 90 (public policy) is the ground for voiding contracts or terms that deviate from mandatory provisions.

  3. 3.

    See Sect. 3.1 below.

  4. 4.

    See Sect. 3.2.2 below.

  5. 5.

    See Sect. 4.1 below.

  6. 6.

    See (n 2).

  7. 7.

    Parties are even free to choose to enter into a contract even if that means inducing the other party to breach a contract with another party. This extreme position has been questioned since the 1980s. For example, Isomura (1985), p. 395, argues that Japanese scholarship have “overly treated ‘free competition’ as a divine value”, and have coined the term “the myth of free competition”.

  8. 8.

    However, the court may utilize general contract interpretation techniques to exclude incorporation of standard forms. One possibility was demonstrated in Supreme Court, 16 December 2005, Hanrei Jiho 1291–61 (holding that a clause in a residential lease contract obligating the lessee to pay restoration fee does not become part of a contract unless clearly agreed at the time of the contract). See, Okino (2012), p. 11.

  9. 9.

    For standard terms used in public transportation (e.g., rail, buses, road, air, etc.), there are special legislations deeming that this “indication” is given by “publicizing” the use of standard terms.

  10. 10.

    This reasoning led to an important case law development although these are not necessarily consumer law cases. It often happened that in monetary loan contracts, the lender would insert into the contract a clause providing that, in case of default, the lender has the option of obtaining ownership of a specific immovable from the borrower, in lieu of repayment of the debt. That option right could be registered, and by registration it achieved a security agreement status. However, since there tends to be disparity between the amount of outstanding debt and the value of the immovable, these contracts were considered to be highly problematic. Case law developed a “settlement duty” which requires the lender to settle the difference in value. See, Supreme Court (Grand Bench), 23 October 1974, Minshu 28-7-1473. The legislature also followed up with the case law development by enactment in 1978 of the Act on Contract for Establishment of Security Interests by Use of Provisional Registration (Act No. 78 of 1978). See generally, Haley (1974) and Bennett (2009).

  11. 11.

    For example, in a case where an inexperienced 52 years old housewife was lured into futures trading, the Supreme Court ruled that the contract was concluded in a grossly unfair manner, and thus is void as being against public policy. Supreme Court, 29 May 1986, Hanrei Jiho 1196-102.

  12. 12.

    For an overview of the legislative history, see Karaiskos (2010), pp. 14–20.

  13. 13.

    See Sono (2014).

  14. 14.

    This includes not only the written provisions, but also ruling of courts interpreting those provisions. Supreme Court, 15 July 2011, Minshu 65-5-2269.

  15. 15.

    For an overview, see Madderra (2014). In 2013, a separate legislation supplemented this development by allowing certain qualified consumer organizations to bring damages claim for collective redress for property damages incurred by consumers: the Act on Special Measures Concerning Civil Court Proceedings for the Collective Redress for Property Damage Incurred by Consumers (Act No. 96 of 2013). This came into force on 1 October 2016.

  16. 16.

    However, Article 8-2 CCA was added later in 2016 and Article 8-3 CCA in 2018.

  17. 17.

    Kyoto District Court, 21 January 2015, Minshu 71-1-17. The order was overturned upon appeal by both the court of second instance and the Supreme Court, but that was on the grounds that the misleading representation has already ceased. Osaka High Court, 25 February 2016, Minshu 71-1-34, Supreme Court, 24 January 2017, Minshu 71-1-1.

  18. 18.

    The 2016 revision broadened what can be “important matters” for the purpose of Article 4 CCA. Prior to the revision, “important matters” was defined as information about the “subject” of the transaction. That definition was revised to add “circumstances” that usually affect consumer’s decisions. Thus even if there was no misrepresentation about the subject of transaction, consumer contracts may be rescinded if there was misrepresentation about the circumstances.

  19. 19.

    Kozuka (2007), pp. 83–84; Pardieck (2008).

  20. 20.

    Supreme Court, 18 November 1964, Minshu 18-9-1868.

  21. 21.

    Supreme Court, 13 November 1968, Minshu 22-12-2526.

  22. 22.

    The development is too intricate to spell out in this report. See, Kozuka (2007) and Pardieck (2008).

  23. 23.

    Yamamoto (1999); Kuwaoka (2002), pp. 356–357 provides a brief overview of the discussion.

  24. 24.

    Consumer Policy Committee of the 16th Quality of Life Council (1998), p. 49. Consumer Policy Committee of the 16th Quality of Life Council (1999), p. 41; the 17th Quality of Life Council (2000), p. 648 takes the same position.

  25. 25.

    The commentary of CCA written in 2000 by the Economic Planning Agency, which was responsible for consumer matters at the time, emphasized that “the price and subject matter of the contract is outside the scope of contract terms that are to be examined for possible invalidation under [the CCA]”. This has not changed in its latest edition: Shohishacho Shohishaseidoka (2018), p. 20.

  26. 26.

    Yamamoto (2000), p. 62; Ochiai (2001), pp. 152–153. Only reluctantly so, Yamamoto (2016), pp. 203–205 and 270–271.

  27. 27.

    Kawakami (1988), p. 250; Hirose (1992), pp. 43–45.

  28. 28.

    Yamamoto (1998), pp. 83–85; Omura (2011), pp. 146–147. Yoshio Shiomi disagrees in Taniguchi and Igarashi (1996), p. 213 arguing that even price terms should be regulated if the parties have not autonomously determined it.

  29. 29.

    Consumer Policy Committee of the 16th Quality of Life Council (1998), p. 49.

  30. 30.

    Okino (1998), p. 53; Shiomi (1999), pp. 144–153; Matsuoka (2001), pp. 84–86; Nihonbengoshirengokai Shohishamondaitaisakuiinkai (2015), pp. 195–197; Tanaka (2001), p. 233 n 58. Yamamoto (2016) is also in line with these arguments.

  31. 31.

    Most notably, Yamamoto (1999), pp. 107–109.

  32. 32.

    There are also several lower court decisions on cancellation fees of consumer contracts. See Maruyama (2015), pp. 342–345. Some of those lower court decision concern fees related to mobile telecommunication contracts. Control of fees in mobile telecommunication contracts will be briefly mentioned in Sect. 5 below.

  33. 33.

    Supreme Court, 3 April 2007, Minshu 61-3-967. See also Kozuka (2007).

  34. 34.

    On Article 49 ASCT, see generally, Maruyama (2015), pp. 276–280.

  35. 35.

    Article 49 (2) ASCT provides:

    Where a Specified Continuous Service Contract has been canceled pursuant to the provisions of the preceding paragraph, the Service Provider may not demand that the recipient of the Specified Continuous Services pay an amount of money that exceeds the total of the amount specified in each of the following items in accordance with the case listed therein and the amount of the relevant delinquency charges based on the statutory interest rate, even if there is an agreement for liquidated damages or a provision for penalties:

    1. (i)

      where the Specified Continuous Service Contract was canceled after the Specified Continuous Services began to be provided: the total of the following amounts:

      1. (a)

        the amount equivalent to the consideration for the Specified Continuous Services that were provided; and

      2. (b)

        …

  36. 36.

    Kozuka (2007). However, Morita (2012), p. 263 is critical of this decision because consequence will follow from this decision that the school will stop or limit the use of large volume discounts. It will be too risky for them to continue this discount because consumers will no longer purchase the tickets at the full rate even if they have no intention of using all the tickets they purchase. This may not always be in the interest of consumers in general.

  37. 37.

    For an overview of these cases, see Ohsawa (2010), pp. 16–28.

  38. 38.

    Supreme Court, 27 November 2006, Minshu 60-9-3597. See also, Kozuka (2007).

  39. 39.

    This is not a totally convincing argument as it would also be too late for a university to find a substitute student if a student terminated the contract on 31 March. See Ohsawa (2010), pp. 26–27.

  40. 40.

    Okino (2012), pp. 10–14; Karaiskos (2015), pp. 91–93.

  41. 41.

    Supreme Court, 24 March 2011, Minshu 65-2-903 and Supreme Court, 12 July 2011, Hanrei Jiho 2128-43. The quotation is taken from an English translation of the decision available from http://www.courts.go.jp/app/hanrei_en/search? with minor modifications. For an overview of these cases, see Okino (2012), pp. 12–13.

  42. 42.

    Supreme Court, 15 July 2011, Minshu 65-2-2269. The quotation below is taken from an English translation of the decision available from http://www.courts.go.jp/app/hanrei_en/search? with minor modifications.

  43. 43.

    Omura (2011), p. 296.

  44. 44.

    In the past, products such as soy beans, soy sauce, kerosene, gasoline, cotton products, tissue papers, toilette papers, synthetic detergents were designated. Currently, no such designation exists.

  45. 45.

    For an analysis of these cases, see, Ohsawa (2013); Maruyama (2013), pp. 312–295; Karaiskos (2016).

  46. 46.

    ICT Service Security Study Group (2014).

  47. 47.

    See e.g., Horikoshi (2018).

  48. 48.

    Fair Trade Commission (2018).

  49. 49.

    See, Horikoshi (2018).

  50. 50.

    Article 5(ii) AUPMR provides:

    No Entrepreneur may make a Representation as provided for in any one of the following items in connection with the transaction of goods or services which the Entrepreneur supplies:

    1. (ii)

      Any Representation by which price or any other trade terms of goods or services could be misunderstood by general consumers to be significantly more advantageous than the actual goods or services, or than those of other Entrepreneurs who supply the same kind of or similar goods or services as those supplied by the relevant Entrepreneur, thereby being likely to induce customers unjustly and to interfere with general consumers’ voluntary and rational choice-making

  51. 51.

    http://www.caa.go.jp/policies/policy/representation/fair_labeling/guideline/pdf/100121premiums_35.pdf. Accessed 16 Oct 2018.

  52. 52.

    By this transfer, the nature of the AUPMR has changed from competition law to consumer protection law.

  53. 53.

    Omoto (2017), p. 131.

  54. 54.

    When the rate for consumption taxes was raised from 5% to 8% in 2013, Shohizei Tenka Taisaku Tokubetsusochiho [Act on Special Measures concerning Passing of Consumption Taxes] (Act No. 41 of 2013) was also enacted. Among others, it prohibits labeling such as those indicating that consumption tax is not passed on the price, or that the amount of consumption tax will be discounted (Article 6). This is a temporary legislation effective until March 2021.

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Acknowledgment

This work was supported by JSPS KAKENHI Grant Number JP16K13326.

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  1. Hokkaido University, School of Law, Sapporo, Japan

    Hiroo Sono

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  1. Faculty of Law, University of Bern, Bern, Switzerland

    Yeşim M. Atamer

  2. Faculty of Law, Istanbul Bilgi University, Istanbul, Turkey

    Yeşim M. Atamer

  3. Faculty of Law, University of Fribourg, Fribourg, Switzerland

    Pascal Pichonnaz

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Sono, H. (2020). Control of Price Related Terms in Standard Form Contracts in Japan. In: Atamer, Y.M., Pichonnaz, P. (eds) Control of Price Related Terms in Standard Form Contracts. Ius Comparatum - Global Studies in Comparative Law, vol 36. Springer, Cham. https://doi.org/10.1007/978-3-030-23057-9_18

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