Commercial Transactions

In international business deals the two parties may not share a common language.  In these circumstances, the final contract may be translated into multiple languages and there may be up to two or three different language versions of the same agreement.  Therefore, it is important to specify which language is the “official” version of the contract through a Choice of Language clause.

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.