The Sanctity of Contract: Breach of Good Faith in the Merger Negotiation between Japanese Banks

Methodological Reflection on the Study of Legal Cases as Social Phenomena

Abstract

The paper takes up the 2004 case of the UFJ Financial Group’s breach of an exclusive negotiation agreement it had reached in contemplation of merging with Sumitomo Trust Bank, after which it merged with Mitsubishi Tōkyō Financial Group. Litigation followed, in which Sumitomo Trust Bank filed for a preliminary injunction to uphold the agreement. This article analyses the case from a new perspective by viewing it as a social phenomenon. After describing the facts of the case and the courts’ decisions, the article points out several legal issues that so far have not been discussed sufficiently. It also examines the social as well as economic and political context of the case. This leads to an analysis of the concept of good faith in connection with the conception of shareholders as owners of the company. By clarifying the societal conditions at play in establishing good faith relationships as well as the societal obstacles to keeping them, the article also aims to further comparative contract law scholarship.

(The editors)