Part Ⅱ Obligations
Chapter I General Provisions
Section 3 - Effects Of Obligations
Sub-section 1 Performance
The debtor shall be responsible for his acts, whether intentional or negligent.
The extent of responsibility for one's negligence varies with the particular nature of the affair; but such responsibility shall be lessened, if the affair is not intended to procure interests to the debtor.
Where the debtor is a person of no or limited in capacity to make juridical acts, his responsibility shall be determined according to the provisions of Article 187.
Responsibility for intentional or gross negligent acts shall not be released in advance.
A person who is answerable for such care as he is accustomed to in the management of his own affairs, shall still be responsible for his gross negligent acts.
A debtor shall be responsible for the intentional or negligent acts of his agent and of the person performing the obligation for him to the same extent as he is responsible for his own intentional or negligent acts. Unless otherwise agreed upon by the parties.
The debtor will be released from his obligation to perform if the performance becomes impossible by reason of a circumstance to which he is not imputed.
If the debtor is entitled to claim compensation for the injury against a third party in consequence of the impossibility of the performance under the preceding paragraph, the creditor may claim against the debtor for the transfer of the claim for the injury, or for the delivery of the compensation he has received.
If the performance becomes impossible by reason of a circumstance to which the debtor is imputed, the creditor may claim compensation for any injury arising therefrom.
In the case specified in the preceding paragraph, if one part of the performance becomes impossible and the remaining part, if performed, will be of no interests to the creditor, the creditor may refuse the performance of the remaining part and claim compensation for the injury arising from complete non-performance.
If a debtor incompletely performs his obligation by reason of a circumstance to which the debtor is imputed, the creditor may execute his right according to the provisions of the default or the impossibility of the performance.
In addition to the injury arising from the incomplete performance in the preceding paragraph, the creditor may claim compensation for other injuries arising therefrom, if any.
If the creditor's personality has been injured by reason of the debtor's non-performance, the debtor shall be bound to compensate for the injury in compliance mutatis mutandis with the provisions of Article 192 to Article 195 and Article 197.
If there is change of circumstances which is not predictable then after the constitution of the contract, and if the performance of the original obligation arising therefrom will become obviously unfair, the party may apply to the court for increasing or reducing his payment, or altering the original obligation.
The provision in the preceding paragraph shall apply mutatis mutandis to the obligation not arising from the contract.
Sub-section 2 Defaults
When there is a definite period fixed for the performance of an obligation, the debtor is responsible for the default from the moment when such period expires.
When there is no definite period fixed for the performance of the obligation, and when the creditor may demand the performance, but the debtor failed to perform the same after the creditor has notified him of the demand, the debtor is responsible for the default from the moment when he has been notified. The effect of instituting an action for performance and the service of the complaint, or the service of an order for payment according to the hortatory process, or any other similar act is equivalent to a notice.
If there is a period fixed for the performance in the notice of the preceding paragraph, the debtor is responsible for the default from the moment when such time expires.
The debtor is not being responsible for the default if the prestation has not been made by reason of circumstances to which he is not imputed.
When the debtor is in default, the creditor is entitled to claim compensation for any injury arising therefrom.
So long as the default continues, the debtor under the preceding paragraph shall also be responsible for any injury arising from circumstances of force majeure, unless he can prove that the injury would have been sustained, even if he had performed in due time.
If the performance after the default is of no interests to the creditor, he may refuse the performance and claim compensation for the injury arising from the non-performance.
When the object of an obligation which is in default is the payment of money, the creditor may claim interest for the default, which is to be calculated at the statutory rate. But if the agreed rate of interest is higher, this higher rate shall apply.
There is no need to pay interest for the interest of default.
In cases specified in the preceding two paragraphs, if the creditor can prove other injuries sustained, he may claim compensation for the same.
If the creditor refuses or fails to accept the performance tendered to him, he is responsible for the default from the moment when the performance has been tendered.
If the debtor does not actually tender the performance according to the tenor of the obligation, there will be no effect on this tendering. But if the creditor has previously declared that he will not accept the performance, or if an act of the creditor is necessary for the performance, the debtor may substitute the notice to the creditor announcing that he (the debtor) is ready to perform for the tendering.
If there is no definite deadline for the performance, or if the debtor is entitled to perform before the deadline, the creditor is not responsible for the default when he is temporarily prevented from accepting the tendered performance, unless the performance was tendered by reason of the creditor's notice, or unless the debtor has notified the creditor a reasonable time beforehand.
During the default of the creditor, the debtor is responsible only for his intentional or gross negligent acts.
The debtor is not responsible for interest during the default of the creditor.
If the debtor has to return the profits produced by an object or to make reimbursement for them, he is only responsible for the profits which he has actually acquired during the default of the creditor.
In case of the default of the creditor, the debtor may claim compensation for the necessary expenses incurred from the tendering as well as from the safekeeping of the object of the prestation.
When the debtor is under an obligation to deliver a real property, he may, after the creditor is in default, abandon its possession.
In the case of abandonment under the preceding paragraph, the debtor shall be bound to notify the creditor in advance, unless such notice is impossible.
Sub-section 3 Preservation
The creditor may, in order to preserve his prestation, exercise in his the name of himself any right of the debtor which the debtor neglects to exercise, except rights which are exclusively belonged to the debtor.
So long as the debtor is not in default, the creditor shall not exercise the right specified in the preceding article, except those rights which are exclusively for the preservation of the rights of the said debtor.
If a gratuitous act done by the debtor is likely to be prejudicial to the rights of the creditor, the creditor may apply to the court for the revocation of such act.
If a non-gratuitous act done by the debtor is likely to be prejudicial to the rights of the creditor and the debtor knew of it at the time of doing that act, the creditor may apply to the court for the revocation of such act, provided that the party profited by the act (the beneficiary) also knew of the circumstances on the receipt of the interests.
The provisions of the preceding two paragraphs do not apply to the act done by the debtor, if the object of which is not on the property or is only prejudicial to the prestation of delivering a specific thing.
When the creditor applies to the court for the revocation according to the provision of the first or the second paragraph, he may also apply for ordering the beneficiary or the person who acquires the object afterwards (the afterwards acquiring person) to restore to the status quo ante, except the afterwards acquiring person did not know of the ground for revocation at the time of acquiring.
The claim for revocation in the provisions of the preceding article shall be extinguished by prescription if not exercised within one year from the moment when the creditor knew of the ground for revocation, or shall be extinguished after ten years from the date of doing the act.
Sub-section 4 Contracts
Even though the contract is not constituted, one of the parties is responsible for the injury caused to the other party who without his own negligence believed in the constitution of the contract when he, in order to prepare or negotiate for the contract, has done either of the following:
(1) Hidden in bad faith or dishonestly explained the gravely relevant matter of the contract when the other party inquired.
(2) Intentionally or gross negligently spilt out the other party's secret known or held by himself which the other party has explicitly expressed to be kept in secret.
(3) Any other matter obviously against good faith.
The claim for the injury in the preceding paragraph shall be extinguished by prescription if not exercised within two years.
If the prestation of a contract is impossible, it is void. However, if the impossibility can be removed and if the parties, at the time when the contract was constituted, intended to have it performed after the removal of the impossibility, the contract is still valid.
If the contract is subject to a suspenseful condition or to a time of commencement, and if the impossibility has been removed prior to the fulfillment of the condition or the arrival of the time, the contract is valid.
When a contract is void on account of the impossibility of the performance, the party who at the time of constituting the contract knew or might know the impossibility is responsible for the injury caused to the other party who, without his own negligence, believed in the validity of the contract.
The provision of the preceding paragraph shall be mutatis mutandis applied if the prestation is partially impossible and the contract is valid in respect to the possible part, or if one of the several prestations subject to a choice is impossible.
The claims for the injury in the preceding two paragraphs shall be extinguished by prescription if not exercised within two years.
If a contract has been constituted according to the provisions which were prepared by one of the parties for contracts of the same kind, the agreements which include the following agreements and are obviously unfair under that circumstance are void.
(1) To release or to reduce the responsibility of the party who prepared the entries of the contract.
(2) To increase the responsibility of the other party.
(3) To make the other party waive his right or to restrict the exercise of his right.
(4) Other matters gravely disadvantageous to the other party.
When one of the parties to a contract receives earnest money from the other, the contract is presumed to be constituted.
Unless otherwise agreed upon by the parties, the following rules apply to the earnest money:
(1) When the contract has been performed, the earnest money shall be returned or treated as one part of the payment.
(2) If the contract cannot be performed owing to a circumstance to which the party who gave the earnest money is imputed, such party shall not claim for the return of the earnest money.
(3) If the contract cannot be performed owing to a circumstance to which the party who received the earnest money is imputed, such party shall return double amounts of earnest money.
(4) If the contract cannot be performed owing to a circumstance to which neither of the parties is imputed, the earnest money shall be returned.
The parties may agree on a penalty to be paid by the debtor in case the debtor does not perform the obligation.
Unless otherwise agreed upon by the parties, the penalty shall be deemed to be the total amount of damages due to the non-performance. If it is agreed that the penalty shall be paid when the debtor does not perform the obligation at the agreed time or in the agreed way, this penalty shall be deemed to be the total amount of damages due to this non-performance, besides the creditor may claim for the performance.
If the obligation has been partially performed, the court may reduce the penalty proportionately as the interests received by the creditor due to the partial performance.
If the agreed penalty is disproportionately high, the court may reduce it to a reasonable amount.
The provisions of the preceding three articles shall apply mutatis mutandis to the agreed non-pecuniary payment for the breach of a contract.
When a party to a contract is in default, the other party may fix a reasonable period and notify him to perform within that period. If the party in default does not perform within that period, the other party may rescind the contract.
If according to the nature of the contract or the expression of intent of the parties, the purpose of the contract can not be accomplished if not performed within the fixed period, and if one of the parties does not perform the contract within that period, the other party may rescind the contract without giving the notice specified in the preceding article.
In cases provided by Article 226, the creditor may rescind the contract.
If there is no deadline for the exercise of the right of rescission, the other party may fix a reasonable one and notify the party having the right of rescission to make a definite reply within such deadline whether he will rescind the contract or not. If the notice of rescission is not received before such deadline, the right of rescission is extinguished.
The right of rescission shall be exercised with the expression of intent to the other party.
If there are several persons on either side of the contract, the expression of intent specified in the preceding paragraph shall be made by all of them or to all of them.
The expression of intent to rescind a contract shall not be revoked.
Unless otherwise provided by the act or by the contract, each party shall, in case of rescission, restore the other party to his status quo ante according to the following rules:
(1) Each party shall return the prestation received to the other party.
(2) If the prestation received consisted of money, interest calculated from the time of receipt shall be added.
(3) If the prestation received consisted of service or of the use of a thing, the value of such service or use at the time of receipt shall be reimbursed in money.
(4) If a thing to be returned has produced profits, such profits shall be returned.
(5) If necessary or beneficial expenses of the thing to be returned have been paid, such expenses may be claimed for to the extent to which the other party is benefited at the time of return.
(6) If a thing to be returned has been damaged or destroyed or cannot be retuned owing to any other cause, its value shall be reimbursed.
The exercise of the right of rescission does not prejudice to the claim for compensation.
The provisions of Articles 264 to 267 shall mutatis mutandis apply to the mutual obligations of the parties resulting from the rescission of the contract.
When the person entitled to the right of rescission is imputed to the damage or destruction of the thing received or any other circumstance which causes the return impossible, his right of rescission is extinguished. The same rule shall be applied when the kind of the thing received has been altered by process or remodeling.
The provisions of Articles 258 and 260 shall be mutatis mutandis applied when the parties terminate the contract in accordance with the provisions of the act.
A party to a mutual contract may refuse to perform his part until the counter-prestation has been performed by the other party, except he is bound to perform first.
When one party has partially performed his part, the other party shall not refuse his counter-prestation if circumstances are such that a refusal to perform would be against the manners of good faith.
A person who is bound to perform his part first may, if after the constitution of the contract the property of the other party have obviously decreased whereby the counter-prestation might become difficult to be performed, refuse to perform his part, until the other party has performed his part or furnished security for such performance.
If none of the parties is imputed to the impossibility of one party's performance, the other party shall be released from his obligation to perform the counter-prestation. If the impossibility is only partial, the counter-prestation shall be reduced proportionately.
In the case provided in the preceding paragraph, if the counter-prestation has been wholly or partially performed, it may be claimed for the reimbursement in accordance with the provisions concerning Unjust Enrichment.
If one of the parties is imputed to the impossibility of the other party's performance, the later may claim for the counter-prestation, but the interests saved or ought to be saved arising from the release of the performance shall be deducted from the counter-prestation claimed.
One of the parties to a contract who has undertaken that an obligation shall be performed by a third party shall be responsible for the injury if the third party does not perform the obligation.
When it is provided in a contract that an obligation shall be performed to a third party, the offeror may demand the debtor to perform the obligation to the third party, and such third party also has the right to demand performance direct from the debtor.
So long as the third party has not expressed his intent to take advantage of the contract specified in the preceding paragraph, the parties may modify the contract or revoke it.
If the third party expresses to either of the parties his intent not to take advantage of the contract, he is deemed to never have any right under the contract.
The debtor specified in the preceding article may take all the valid defenses arising out of the contract against the beneficial third party.