The Effects of the Corona Crisis on Contractual Obligations under Japanese Law
Abstract
The Corona pandemic has impacted contract law in many respects: Moratoria due to a shortage of funds caused by the pandemic are just as much at issue as the termination of existing contracts, either because the cost of performance has risen significantly or because the pandemic has rendered performance meaningless or decreased its value significantly. With regard to the increased cost of performance, the question arises whether the debtor's obligation to pay damages for non-performance under Art. 415 of the Civil Code ceases to apply if the non-performance is due to the effects of the pandemic. On the other hand, the question also arises whether the increased cost renders performance impossible within the meaning of Art. 412-2 para. 1 CivC, releasing the debtor from his obligation to perform.
In the context of lease contracts, a reduction of rent can be considered in accordance with Art. 611 para. 1 CivC if the object of the lease contract has become impossible to use. While the lack of profitability alone does not constitute impossibility according to the prevailing opinion, the impossibility of use may be considered when the object of the lease contract is not available for use due to a request or order of a local governor. Furthermore, if rent payments are not made and the lessor intends to terminate the lease contract as a result, the non-performance of the lessee has to amount to a breach of mutual trust between the parties under the relevant case law. It can be assumed that the courts will further raise the already high requirements for such a breach of trust in light of the pandemic.
Overall, the impression is that Japan, unlike Germany, prefers to deal with pandemic-related contract disruptions through a more flexible application of already existing regulatory models. Further, in the current period of crisis management, the potential of contract law to be a cornerstone of the “post-Corona society” should not be overlooked.
