It is vital to modify, in line with changing times, rules of contracts that are deeply linked with people’s daily lives.

A subcommittee of the Justice Ministry’s Legislative Council has compiled a proposal that would drastically amend provisions concerning contracts in the Civil Code. The ministry plans to submit the bill to revise the Civil Code to an ordinary Diet session next year.

Since the code was enacted in 1896, no major amendments have been made to the contractual provisions, with disputes having been dealt with through accumulated judicial precedents.

The latest revision of the code is designed to have major judicial precedents reflected properly in statutory law.

Clarifying by statute the rules of various types of contracts can be considered appropriate in protecting people’s rights.

A familiar case in point is a review of the statute of limitation over the discharge of debts. The limitations on claims for unpaid accounts or indebtedness differ among different types of businesses, such as one year for bar and restaurant tabs and three years for medical bills.

Under the proposed rules, the limitation period for payment is uniformly set at five years, regardless of the types of businesses, beginning when a creditor becomes aware of their right to claim an unpaid account. It is quite important to simplify these rules and make them easier for people to understand.

Provisions concerning deposits for rented accommodation have also been included, for the first time, in the code.

Security for tenants

The deposit paid to a landlord when renting an apartment is often explained as money that will be refunded when leaving the property. In reality, however, there are more than a few cases in which scant refunds are made, as landlords subtract from the rental deposit those expenses needed to restore the room to the condition it was in when the lease began.

Under the proposed provisions, the rental deposit is defined as security for house rent and it is stipulated that a landlord is obliged to return it to the renter upon the expiration of the lease. It has also been stipulated that, regarding interior damage from normal wear and tear, a renter will not be obliged to restore the rented property to its original condition. These provisions are reasonable in light of social common sense.

But other problems remain.

Under the proposed revisions, personal surety for a loan to a business corporation is prohibited in principle. As an exceptional case, if someone other than the manager of the company intends to become a guarantor, a notarized document confirming the will of the guarantor must be prepared in the presence of a notary public.

There is no end to tragic cases in which people cosign for loans out of kindness, only to end up being burdened with massive liabilities, having their daily lives collapse and even being driven to suicide. In light of these cases, we can understand that this provision is intended to prevent people from becoming guarantors carelessly.

But there are also cases in which relatives of managers of small companies have no choice but to become guarantors for loans. We are worried that such guarantors may end up facing harsh loan collection measures behind the cloak of a notary document.

On a proposal to incorporate into the code the provisions of “clauses” that business corporations present to consumers as their contractual terms, there are opposing voices from the business world.

As the clauses deal with diverse aspects of such contracts, they tend to cause trouble if a consumer does not understand them sufficiently. Establishing clear rules will be necessary from a viewpoint of protecting consumer interests.