Abstract
This report focuses on the problem of whether financial crises can be covered by the doctrine of change of circumstances. The report describes two types of lawsuits caused by the biggest financial crisis in Japan: the 1990s bubble crash. One type involves the “sub-lease” contracts, most famous at that time, in which incorrect predictions of future economic changes were especially significant. The other type involves claims against country club management companies for the return of deposits, a rare situation in which the doctrine of change of circumstances was claimed in court. In conclusion, two particular characteristics in Japan will be observed. One is that companies are required to predict future changes in economic circumstances. The other is that the most popular dispute resolution method is the interpretation of contracts, rather than the application of the doctrine of change of circumstances.
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Notes
- 1.
Before the decision of the Supreme Court in 2003, about 50 lower court decisions can be found in the Japanese database LEX/DB.
- 2.
In Japan, the Land and House Lease Law can be applied to both residential and office properties. Thus, Art.32 (1) is applicable to office rent agreements including sub-lease contracts.
- 3.
A claim to decrease the rent on the basis of Art.32 is recognized immediately in effect to avoid the judicial strategy of the lessor prolonging the trial. Of course, in cases where the parties cannot agree on a new rent, the court will make the final decision whether the lessee’s claim is just.
- 4.
Legal literature notes that the two referenced cases (1956 and 1981) here concerned themselves with the effects of a renegotiation clause; therefore, they are not proper precedents for this case, which concerns an automatic price increase clause.
- 5.
Several other similar decisions rejected the applicability of the clauses by means of the doctrine of change of circumstances : the decision of the Tokyo District Court, June 13, 1996; the decision of the Tokyo Court of Appeal, September 29, 1998; and the decision of the Tokyo Court of Appeal, December 25, 1998, etc.
- 6.
More than a hundred decisions can be found in the Japanese database LEX/DB.
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Kitayama, S. (2016). Effects of a Bubble Economy on the Binding Force of Contracts: The 1990s Experience of Japan and Its Implications. In: Başoğlu, B. (eds) The Effects of Financial Crises on the Binding Force of Contracts - Renegotiation, Rescission or Revision. Ius Comparatum - Global Studies in Comparative Law, vol 17. Springer, Cham. https://doi.org/10.1007/978-3-319-27256-6_11
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