contracts

A choice of law clause, also called a “governing law clause” or “proper law clause,” is a clause used in contracts to identify the type of law that should be applied to interpret the contract.  Since the laws of various countries can differ in how they interpret contracts, without a choice of law clause, a contract may be valid when interpreted under one country’s laws but may be found invalid under the laws of another country.

In Japan, most contract rights are assignable to third parties.  This general rule is limited to rights that are of an assignable nature (such as collecting payment) and to contracts that do not explicitly prevent assignments.  This means that a party to a contract may assign his right to collect ten million yen over the course of a year, to a third party in exchange for nine million yen immediately.  This rule favoring assignment allows parties to freely contract to suit their needs and ideally should promote the best possible economic outcome for all parties.

Japan does not have a separate code of law for contracts to determine what laws govern contracts in Japan. Instead, contract law is governed by various laws contained in the Civil Code, the law of torts, the law of property, the law of succession and family law. While these codes contain the basic rules governing contract formation and execution in Japan, special rules relating to contracts between merchants are contained in the Commercial Code. Furthermore there are many other laws relating to protection of consumers and regulation of business operators.

Unmarried persons under the age of 20 are considered minors in Japan. Minors may not enter into contractual relationships without a parent’s (or guardian’s) permission. Therefore, a contract may be rescinded after-the-fact if a court finds that one of the parties was a minor without parental permission. Due to this requirement, idol groups and sports teams must secure the parental permission of their youngest recruits before having them sign an employment contract.