When one party breaches a contract by not fulfilling their promise, the other party usually has grounds to sue them for damages. A successful lawsuit will compel a court to award a monetary value that is determined to be equal to the amount of damage the non-breaching party has sustained. The monetary amount of these damage awards can be very subjective and will vary from case to case since wide discretion is given to the judge.
However, in contracts for the sale of specific goods (such as a specific used car), where the product is damaged or lost through no fault of the seller, Japanese contract law dictates that the buyer is responsible for the resulting damage unless otherwise agreed in the contract. In other words, the buyer still has to pay the purchase price to the seller, even though the product was damaged or lost before the buyer received it. This rather obscure rule has been criticized as unfairly placing the risk of loss on a buyer that has no control over the situation. It provides a good example of why parties to a contract should specifically allocate the risk of loss in their written contract.
If you have any questions about contract law in Japan, please contact our office to set up a legal consultation.