Private Law Theory

ABSTRACT
This article hypothesizes that the uniqueness of contract formation methods in contemporary Japan, especially in the realm of long-term transactions, might have led to a contractual practice that does not necessarily serve to strengthen the binding force of contracts. Given the characteristics of Japanese society, where ambiguity is preferred in contractual obligations, the use of offer and acceptance analysis to explore the intentions of the parties at the time of contract conclusion has been undervalued as an institutional foundation. Instead, the maturity of the negotiation is emphasized in contract formation, whereby the parties’ substantive intentions are assessed based on the entirety of factual circumstances.

Japanese judicial practice tends to emphasize situational ex-post redistribution to resolve unexpected issues arising after the conclusion of a contract; this practice does not favour interpretation based on a return to the contract’s original intent. The protection of the offeree’s expectations and reliance is not a primary consideration in Japan’s contract formation process, with the result that there is little case law addressing the offeree’s understanding or expectations within such negotiation processes. Consequently, implied norms are less likely to accumulate, narrowing the scope of contract formation. To fill this gap, courts tend to intervene through reference to norms outside of the contract. The reluctance of courts to make decisions based on the parties’ implied intent at the time of contract formation has to a certain extent deprived Japanese contractual practice of the opportunity to share and assimilate contract norms within corporate practice. This has resulted in an immature style of contractual design, especially in long-term transactions. For instance, the multistage contract method in software development does not impose a project completion obligation on the vendor, and there is a lax attitude towards adherence to construction schedules in construction contracts.

The contract formation criteria and the problem-solving methods employed in Japanese contractual practice may be adequate among homogeneous parties within Japanese society, but they could be perceived as less acceptable internationally. By contrasting Japanese contract formation and interpretation with international standards, the present analysis provides valuable insights into the nature of contract law.

Kobayashi, Ichiro, Understanding Japanese Contract Law – Contract Formation and Interpretation without an Offer and Acceptance Paradigm (July 19, 2024), Journal of Japanese Law, no 57, pp 41-82 (2024).