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Civil Code of Japan

(This translation reflects the recent amendment effective 1st April, 2020 as long as the Article 1 thru 724-2 are concerned. Regarding Article 725 thru 1044 the translation does not necessarily reflects the recent amendment yet which is to follow.)

 

Part I General Provisions

Chapter ‡T Common Provisions

 

˜1@iFundamental Principles)

(1) Private rights must be congruent with the public welfare.

(2) The exercise of rights and performance of duties must be done in good faith.

(3) Abuse of rights is not permitted.

 

˜2@(Standards for Construction)

This Code must be construed so as to honor the dignity of individuals and the essential equality of both sexes.

 

Chapter ‡U Persons

Section 1 Capacity to Hold Rights

 

˜3@iCapacity to Hold Rightsj

(1) The enjoyment of private rights commences at birth.

(2) Unless otherwise prohibited by applicable laws, regulations, or treaties, foreign nationals enjoy private rights.

 

Section 2 Capacity to Act

 

˜4@iAge of Majority)

The age of majority is 18 years of age. (since 1/Apr./2022)

 

˜5@(Juridical Acts by Minors)

(1) A minor must obtain the consent of the minor's legal representative to perform a juridical act; provided, however, that this does not apply to a juridical act for merely acquiring a right or being released from an obligation.

(2) A juridical act in contravention of the provisions of para (1) is voidable.

(3) Notwithstanding the provisions of para (1), a minor may freely dispose of property that the legal representative has permitted the minor to dispose of for a specified purpose, to an extent that falls within the scope of that purpose. The same applies if the minor disposes of property that the legal representative has permitted the minor to dispose of without specifying a purpose.

 

˜6@(Permission for Minors to Conduct Business)

(1) A minor who is permitted to conduct one or multiple types of business has the same capacity to act as an adult as far as that business is concerned.

(2) In a case as referred to para 1, if there are grounds that make the minor unable to sustain that business, the legal representative may revoke or limit the permission therefor in accordance with the provisions of Part IV (Relatives).

 

˜7@(Decisions for Commencement of Guardianship)

The family court may decide to commence a guardianship in respect of a person who constantly lacks the capacity to appreciate the person's own situation due to a mental disorder, at the request of the person in question, that person's spouse, that person's relative within the 4th degree of kinship, the person's guardian of a minor, the person's supervisor of a minor's guardian, the person's curator, the person's curator's supervisor, the person's assistant, the person's assistant's supervisor, or a public prosecutor.

 

˜8@(Adult Wards; Adult Guardians)

A person subject to a decision for commencement of guardianship becomes an adult ward, and an adult guardian is appointed for that person.

 

˜9@(Juridical Acts by Adult Wards under Guardianship)

A juridical act performed by an adult ward is voidable; provided, however, that this does not apply to the purchase of daily necessities or to any other act involved in day-to-day life.

 

˜10@(Rescission of Decisions for Commencement of Guardianship)

If the grounds prescribed in Art 7 cease to exist, the family court must rescind the decision for the commencement of guardianship at the request of the person in question, that person's spouse, that person's relative within the 4th degree of kinship, the guardian (meaning a minor's guardian or an adult guardian), the guardian's supervisor (meaning the supervisor of a minor's guardian or the adult guardian's supervisor), or a public prosecutor.

 

˜11@(Decisions for Commencement of Curatorship)

The family court may decide to commence a curatorship in respect of a person whose capacity to appreciate their own situation is extremely inadequate due to a mental disorder, at the request of the person in question, the person's spouse, the person's relative within the 4th degree of kinship, the guardian, the guardian's supervisor, the assistant, the assistant's supervisor, or a public prosecutor; provided, however, that this does not apply to a person in respect of whom a cause set forth in Art 7 exists.

 

˜12@(Persons under Curatorship; Curators)

A person subject to a decision for commencement of curatorship becomes a person under curatorship, and a curator is appointed for that person.

 

˜13@(Acts Requiring Consent of Curator)

(1) A person under curatorship must obtain the consent of the curator in order to perform any of the following acts; provided, however, that this does not apply to an act provided for in the proviso of Art 9:

(i)receiving or using any property producing civil fruit;

(ii)borrowing money or guaranteeing an obligation;

(iii)performing an act with the purpose of acquiring or losing any right regarding immovables or other

significant property;

(iv)suing any procedural act;

(v)giving a gift, reaching a settlement, or entering into an arbitration agreement (meaning an arbitration

agreement as provided in Art 2 para (1) of the Arbitration Act);

(vi)accepting or renouncing a succession or dividing an estate;

(vii)refusing an offer of a gift, renouncing a legacy, accepting an offer of gift with burden, or accepting a

legacy with burden;

(viii)constructing a new building, renovating, expanding, or undertaking major repairs;

(ix)granting a lease for a term that exceeds the period set forth in Article 602; or

(x)performing any of the acts set forth in the preceding items as a legal representative of a person with

qualified legal capacity (meaning a minor, adult ward, or person under curatorship or a person under

assistance who is subject to a decision as referred to in Art 17 para (1); the same applies hereinafter).

(2) At the request of a person as referred to in the main clause of Art 11 or the curator or curator's supervisor, the family court may decide that the person under curatorship must also obtain the consent of the curator before performing an act other than those set forth in each of the items of para (1); provided, however, that this does not apply to an act provided for in the proviso to Art 9.

(3) If the curator does not consent to an act for which the person under curatorship must obtain the curator's consent even though it is unlikely to prejudice the interests of the person under curatorship, the family court may grant permission that operates in lieu of the curator's consent at the request of the person under curatorship.

(4) An act for which the person under curatorship must obtain the curator's consent is voidable if the person performs it without obtaining the curator's consent or a permission that operates in lieu of it.

 

˜14@(Rescission of Decisions for Commencement of Curatorship)

(1) If the grounds prescribed in the main clause of Art 11 cease to exist, the family court must rescind the decision for the commencement of curatorship at the request of the person in question, that person's spouse, that person's relative within the fourth degree of kinship, the guardian of a minor, the supervisor of a minor's guardian, the curator, the curator's supervisor, or a public prosecutor.

(2) At the request of a person provided for in the preceding paragraph, the family court may rescind all or part of the decision referred to inArt 13 para (2) e.

 

˜15@(Decisions for Commencement of Assistance)

(1) The family court may decide to commence an assistance in respect of a person whose capacity to appreciate their own situation is inadequate due to a mental disorder, at the request of the person in question, that person's spouse, that person's relative within the fourth degree of kinship, the guardian, the guardian's supervisor, the curator, the curator's supervisor, or a public prosecutor; provided, however, that this does not apply to a person with respect to whom there are grounds as prescribed in Art 7 or the main clause of Art 11.

(2) The issuance of a decision for commencement of assistance at the request of a person other than the person in question requires the consent of the person in question.

(3) A decision for commencement of assistance must be made concurrent with a decision as referred to in Art 17 para (1) or a decision as referred to in Arte 876-9 para (1).

 

˜16@(Persons under Assistance; Assistants)

A person subject to a decision for commencement of assistance becomes a person under assistance, and an assistant is appointed for that person.

 

˜17@(Decisions Requiring Person to Obtain Consent of Assistant)

(1) At the request of the person referred to in the main clause of Art 15 para (1) or the assistant or assistant's supervisor, the family court may decide that the person under assistance must obtain the consent of the person's assistant in order to perform a specific juridical act; provided, however, that the acts that such a decision may establish as those for which the person must obtain the consent of the assistant are restricted to a part of the acts provided for in Art 13, para (1).

(2) In order to decide as referred to in para (1) at the request of a person other than the person in question requires the consent of the person in question.

(3) If the assistant does not consent to an act for which the person under assistance must obtain the assistant's consent even though it is unlikely to prejudice the interests of the person under assistance, the family court may grant permission that operates in lieu of the assistant's consent, at the request of the person under assistance.

(4) An act for which the person under assistance must obtain the assistant's consent is voidable if the person performs it without obtaining the assistance's consent or a permission that operates in lieu of it.

 

˜18@(Rescission of Decisions for Commencement of Assistance)

(1) If the grounds prescribed in the main clause of Art 15 para (1) cease to exist, the family court must rescind the decision for commencement of assistance at the request of the person in question, that person's spouse, that person's relative within the fourth degree of kinship, the guardian of a minor, the supervisor of a minor's guardian, the assistant, the assistant's supervisor, or a public prosecutor.

(2) At the request of a person as prescribed in para (1), the family court may rescind all or part of the decision referred to in Art 17 para (1).

(3) If rescinding the decision referred to in Art 17 para (1) and the decision referred to in Art 876-9, para (1) in their entirety, the family court must rescind the decision for commencement of assistance.

 

˜19@(Relationship between Decisions)

(1) If the family court decides to commence a guardianship and the person in question is a person under curatorship or a person under assistance, it must rescind the decision for commencement of the curatorship or commencement of assistance respecting that person.

(2) The provisions of para (1) apply mutatis mutandis if the court decides to commence a curatorship and the person in question is an adult ward or a person under assistance or if the court decides to commence an assistance and the person in question is an adult ward or a person under curatorship.

 

˜20@(Right to Demand of the Other Party to Dealings Involving a Person with Qualified Legal Capacity)

(1) After a person with qualified legal capacity who is involved in dealings with another party becomes a person with the legal capacity to act (meaning a person whose legal capacity to act is not subject to restrictions; the same applies hereinafter), the other party to those dealings may fix a period of one month or longer and demand that the person give a definite answer within that period of time as to whether the person will ratify an act that the person may rescind. In such a case, if the person fails to send a definite answer within that period of time, the person is deemed to have ratified that act.

(2) The second sentence of para (1) also applies if, before the person with qualified legal capacity becomes a person with the legal capacity to act, the other party to dealings involving the person with qualified legal capacity lodges the demand prescribed in para (1) with the legal representative, curator, or assistant of that person with respect to an act within the scope of their authority, and they fail to send a definite answer within the fixed period of time referred to in that paragraph.

(3) If a person does not send notice within the period of time set forth in para (1) & (2) indicating that the person has completed any special formalities that an act requires, the person is deemed to have rescinded that act.

(4) The other party to dealings involving a person with qualified legal capacity may lodge a demand with a person under curatorship or with a person under assistance who is subject to a decision as referred to in Art 17 para (1) to demand that the person get the curator or assistant to ratify an act within the fixed period referred to in para (1). In such a case, if the person under curatorship or person under assistance does not send notice within that period indicating that the person has gotten the curator or assistant to ratify the act in question, the person is deemed to have rescinded that act.

 

˜21@(Use of Fraudulent Means by Persons with Qualified Legal Capacity)

If a person with qualified legal capacity uses fraudulent means to induce another person to believe that the person is a person with legal capacity to act, the person may not rescind the act in question.

 

Section 3 Domicile

 

˜22@iDomicile)

A person's principal place of daily activity is that person's domicile.

 

˜23@(Residence)

(1) If a person's domicile is unknown, the person's residence is deemed to be the person's domicile.

(2) If a person does not have a domicile in Japan, the person's residence is deemed to be the person's domicile, regardless of whether the person is a Japanese national or a foreign national; provided, however, that this does not apply if the law of domicile is to be applied in accordance with the provisions of the laws that establish the governing law.

 

˜24@(Temporary Addresses)

If a temporary address is selected for an act, that temporary address is deemed to be the domicile as far as that act is concerned.

 

Section 4 Administration of Absentee Property; Declarations of Disappearance

 

˜25@(Administration of Absentee Property)

(1) If a person who has taken leave of the domicile or residence up until then ("absentee") has not appointed an administrator for the person's property ("administrator"), the family court, at the request of an interested person or a public prosecutor, may order the necessary dispositions with regard to the administration of that property. The same applies if the administrator's authority is extinguished during the absence of the absentee.

(2) If an absentee appoints an administrator after an order under the provisions of para (1) has been issued, the family court must rescind that order at the request of the person's administrator, an interested person, or a public prosecutor.

 

˜26@(Replacing Administrators)

If an absentee has appointed an administrator but it is unclear whether the absentee is dead or alive, the family court may replace that administrator with another at the request of an interested person or a public prosecutor.

 

˜27@iDuties of Administrators)

(1) An administrator appointed by the family court pursuant to the provisions of Art 25 & 26 must prepare a list of the property that the administrator is to administer. In such a case, the expenses incurred are paid from the property of the absentee.

(2) If it is unclear whether an absentee is dead or alive and an interested person or a public prosecutor so requests, the family court may also order the administrator appointed by the absentee to prepare the list referred to in para (1).

(3) Beyond what is provided for in para (1) & (2), the family court may order the administrator to make the dispositions that the court finds to be necessary to preserve the property of the absentee.

 

˜28@(Administrators' Authority)

If an administrator needs to perform an act exceeding the authority provided for in Art 103, the administrator may perform that act after obtaining the permission of the family court. The same applies if it is unclear whether the absentee is dead or alive and the administrator needs to perform an act exceeding the authority established by the absentee.

 

˜29@iProvision of Security by and Remuneration for Administrator)

(1)The family court may require an administrator to provide reasonable security with respect to the administration and return of the property.

(2)The family court may grant reasonable remuneration to the administrator from the property of the absentee based on the relationship between the administrator and absentee and other circumstances.

 

˜30@(Declarations of Disappearance)

(1) If it has been unclear for 7 years whether an absentee is dead or alive, the family court may enter a declaration of disappearance at the request of an interested person.

(2) The provisions of para (1) also apply if it has been unclear whether a person who has entered a war zone, was aboard a vessel that has sunk, or was otherwise exposed to a danger likely to result in a person's death is dead or alive, for 1 year after the war has ended, the vessel sank, or such other danger has passed.

 

˜31@(Effect of Declarations of Disappearance)

A person subject to a declaration of disappearance pursuant to the provisions of Art 30 para (1) is deemed to have died when the period of time referred to in that paragraph ended, and a person subject to a declaration of disappearance pursuant to the provisions of Art 30 para (2) is deemed to have died when that danger had passed.

 

˜32@(Rescission of Declarations of Disappearance)

(1)Having received proof that a missing person is alive or that a missing person died at a time different from the time set forth in the preceding Article, the family court, at the request of the missing person or an interested person, must rescind the declaration of that person's disappearance. In this case, the rescission does not affect the validity of any act performed in good faith after the declaration of disappearance but before the rescission thereof.

(2)A person who has acquired property due to a declaration of disappearance loses the rights in question due to its rescission; provided, however, that the person has the obligation to return that property only to the extent currently enriched.

 

Section 5 Presumption of Simultaneous Death

 

˜32-2@iPresumption of Simultaneous Deathj

If more than one person dies and it is unclear whether one of them was still alive after the death of another, it is presumed that they all died at the same time.

 

Chapter ‡V Juridical Persons

 

˜33@(Formation of Juridical Persons)

A juridical person is not formed other than pursuant to the provisions of this Code or other laws

 

˜34@(Incorporation of Public Interest Corporations)

An not-for-profit association or foundation that is involved in academic activities, art, charity, worship, religion, or any other matter of public interest may be established as a juridical person with the permission of the competent government agency.

 

˜35@(Restrictions on the Use of Names)

A person that is neither an incorporated association nor an incorporated foundation must not use in its name the characters "ŽÐ’c–@l", "à’c–@l", or other characters likely to be mistaken for them.

 

˜36@(Foreign Juridical Persons)

(1) With the exception of states, administrative divisions of states, and commercial companies, the formation of foreign juridical persons is not permitted; provided, however, that this does not apply to a foreign juridical persons that is permitted pursuant to the provisions of a law or treaty.

(2) A foreign juridical person permitted pursuant to the provisions of the preceding paragraph possesses the same private rights as those possessed by a juridical person of the same kind that has been formed in Japan;

provided, however, that this does not apply to a right that a foreign national is not entitled to enjoy or to any right for which there are special provisions in a law or treaty.

 

˜37@(Articles of Incorporation)

(1) A person seeking to establish an incorporated association must prepare articles of incorporation and include in it the following particulars:

(i) its purpose;

(ii) its name;

(iii) the locality of its office;

(iv) provisions on assets;

(v) provisions on the appointment and dismissal of managing administrators; and

(vi) provisions on the acquisition and loss of membership.

(2) If a change has been made to a particular set forth in one of the items of para 1, a registration of the change must be made within 3 weeks. In such a case, a change may not be duly asserted against a third party before its registration.

(3) If an order of provisional disposition suspending the execution of duties by a representative or appointing a person to execute duties in place of a representative is issued or if a ruling modifying or revoking such an order of provisional disposition is issued, it must be registered. In such a case, the provisions of the 2nd sentence of para 2 apply mutatis mutandis.

(4) If something that must be registered pursuant to the provisions of para 2 & 3 occurs in a foreign state, the period for registration is counted from the day on which notice of this reached the relevant person.

(5) When a foreign juridical person establishes an office in Japan for the first time, a third party may decline to recognize that corporation's formation until it has been registered in the locality of that office.

(6) Having relocated its office, a foreign juridical person must register the relocation within 3 weeks in the former locality and register the particulars set forth in the items of para (1) within 4 weeks in the new locality.

(7) If a foreign corporation relocates its office within the jurisdictional district of the same registry office, it is sufficient for it to register its relocation.

(8) If the representative of a foreign juridical person fails to complete the registration provided for in this Article, the representative is subject to a civil fine of not more than 500,000 yen.

 

Chapter ‡W Things

 

˜85@iDefinition)

The term "things" as used in this Code means tangible objects.

 

˜86@(Immovables and Movables)

(1)Land and any fixtures thereto are immovables.

(2)Things other than immovables are movables.

 

˜87@(Principal Things and Appurtenances)

(1)If the owner of a first thing attaches a second thing that the owner owns to the first thing to serve the ordinary use of the first thing, the thing that the owner attaches is an appurtenance.

(2)An appurtenance is disposed of together with the principal thing if the principal thing is disposed of.

 

˜88@(Natural Fruits and Civil Fruits)

(1)Products obtained from the intended use of a thing are its natural fruits.

(2)Money and other things that may be obtained in exchange for the use of any thing are civil fruits.

 

˜89@(Ownership of Fruits)

(1)The ownership of natural fruits is acquired by the person entitled to obtain them when they are separated from the original thing.

(2)A person acquires civil fruits in proportion to the duration of the right to obtain them, as calculated on a prorated, daily basis.

 

Chapter V Juridical Acts

Section 1 General Provisions

 

˜90@(Public Policy)

A juridical act that is against public policy is void.

 

˜91@(Manifestations of Intention Inconsistent with Default Rules)

If a party to a juridical act manifests an intention that is inconsistent with the provisions of laws and regulations that are not related to public policy, that intention prevails.

 

˜92@(Customs Inconsistent with Default Rules)

If a custom is inconsistent with the provisions of laws and regulations that are not related to public policy and it is found that the party to the juridical act has the intention to abide by that custom, that custom prevails.

 

Section 2 Manifestations of Intention

 

˜93@(Mental Reservations)

(1) The validity of a manifestation of intention is not impaired even if the person making it does so while

knowing that it does not reflect that person's true intention;provided, however, that if the other party knew or could have known that the manifestation was not the true intention of the person who made it, that manifestation of intention is void.

(2) The nullity of a manifestation of intention under the provisions of the proviso to para (1) may not be duly asserted against a third party in good faith.

 

˜94@(False Manifestations of Intention)

(1) A false manifestation of intention that a person makes in collusion with another person is void.

(2) The nullity of a manifestation of intention under the provisions of para (1) may not be duly asserted against a third party in good faith.

(i) a mistake wherein the person lacks the intention that corresponds to the manifestation of intention; or

(ii) a mistake wherein the person making the manifestation of intention holds an understandings that does not correspond to the truth with regard to the circumstances which the person has taken as the basis for the juridical act.

(2) A manifestation of intention under the provisions of para (1) item (ii) may be rescinded only if it has been indicated that the circumstances in question are being taken as the basis for the juridical act.

(3) If a mistake is due to gross negligence on the part of the person making the manifestation of intention, that person may not rescind a manifestation of intention as under para (1), except in the following cases:

(i) if the other party knew, or did not know due to gross negligence, of the mistake on the part of the person making the manifestation of intention; or

(ii) if the other party was under the same mistake as the person making the manifestation of intention.

(4) The rescission of a manifestation of intention under the provisions of para (1) may not be duly asserted against a third party in good faith acting without negligence.

 

˜96@iFraud or Duress)

(1) A manifestation of intention based on fraud or duress is voidable.

(2) If a third party commits a fraud inducing a first party to make a manifestation of intention to a second party, that manifestation of intention is voidable only if the second party knew or could have known that fact.

(3) The rescission of a manifestation of intention induced by fraud under the provisions of para (1) & (2) may not be duly asserted against a third party in good faith acting without negligence.

 

˜97@(Timing of Entry into Effect of Manifestations of Intention)

(1) A manifestation of intention becomes effective at the time notice thereof reaches the other party.

(2) If the other party prevents notice of a manifestation of intention from reaching them without a legitimate reason, the notice is deemed to have reached that party at the time it would have normally reached them.

(3) The effect of a manifestation of intention is not impaired even if the person making it dies, loses mental capacity, or becomes subject to restrictions on their legal capacity to act after having sent the notice.

 

˜98@(Manifestation of Intention by Public Notice)

(1) A manifestation of intention may be made by means of public notice if the person making it is unable to ascertain who the other party is or is unable to ascertain the whereabouts thereof.

(2) Public notice as referred to in para (1) is effected by a notice being posted in the posting area of the relevant court and an indication that that posting has been made being published in the Official Gazette at least once, in accordance with the provisions of the Code of Civil Procedure on service by publication; provided, however, that if the court finds it to be suitable, it may order that a notice be posted in the posting area of the city office, ward office, town hall, or any facility equivalent to these in lieu of the relevant information being published in the Official Gazette.

(3) A manifestation of intention by public notice is deemed to have reached the other party once 2 weeks have passed since the day when the relevant information was last published in the Official Gazette or once 2 weeks have passed since the day on which the relevant information started to be posted in lieu of being so published; provided, however, that the effect of a manifestation of intention having reached the other party does not arise if the person making it was negligent in not ascertaining the other party or the whereabouts thereof.

(4) If the person making a manifestation of intention is unable to ascertain who the other party is, the procedures involved in public notice are under the jurisdiction of the summary court that has jurisdiction over the locality where the person making the manifestation of intention is domiciled; if the person making a manifestation of intention is unable to ascertain the whereabouts of the other party, the procedures involved in public notice are under the jurisdiction of the summary court that has jurisdiction over the locality of the last known domicile of the other party.

(5) The court must have the person making a manifestation of intention prepay the expenses associated with a public notice.

 

˜98-2@(Capacity to Receive Manifestations of Intention)

Any person may not assert a manifestation of intention against the other party thereto if that other party had no mental capacity or was a minor or an adult ward at the time of receiving it; provided, however, that this does not apply after either of the following persons learns of the manifestation of intention:

(1)   the legal representative of the other party; or

(ii) the other party, after that other party's mental capacity has been restored or after that other party has become a person with capacity to act.

 

Section 3 Agency

 

˜99@iRequirements and Effect of Acts of Agency)

(1)A manifestation of intention that an agent makes indicating that they will be making a manifestation of intention on behalf of the principal within the scope of the agent's authority binds the principal directly.

(2)The provisions of para (1) apply mutatis mutandis to a manifestation of intention that a third party makes to an agent.

 

˜100@(Manifestation of Intention That the Agent Does Not Indicate as Being Made on Behalf of the Principal)

A manifestation of intention that an agent makes without having indicated that they will be acting on behalf of the principal is deemed to be one that the agent has made on their own account; provided, however, that if the other party knew or could have known that the agent was acting on behalf of the principal, the provisions of Art 99 para (1) apply mutatis mutandis.

 

˜101@(Defects in Acts of Agency)

(1 )If the validity of a manifestation of intention that an agent has made to the other party is to be influenced by the absence of intention; by mistake, fraud, or duress; or by the knowledge of or negligence in not knowing of a particular circumstance; whether or not any such fact was present is decided as it concerns the agent.

(2) If the validity of a manifestation of intention that the other party has made to the agent is to be influenced by the recipient's knowledge of or negligence in not knowing of a particular circumstance, whether or not any such fact was present is decided as it concerns the agent.

(3) If an agent who has been entrusted with performing a specific juridical act performs that act, the principal may not assert that the agent did not know of any particular circumstance of which the principal knew. The same applies to any circumstance of which the principal did not know due to the principal's own negligence.

 

˜102@iAgent's Capacity to Act)

An act that a person with qualified legal capacity performs as an agent of another person may not be rescinded on the grounds of qualified legal capacity; provided, however, that this does not apply to an act performed by a person with qualified legal capacity as a legal representative of another person with qualified legal capacity.

 

˜103@(Authority of an Agent with No Specifically Defined Authority)

An agent who has no specifically defined authority has the authority to perform the following acts only:

(i)@acts of preservation; and

(ii)@with the purpose of using or improving a thing or right that is the subject matter of the agency, to the extent that this does not change the nature of that thing or right.

 

˜104@(Appointment of Subagents by Agents)

An agent appointed by mandate may not appoint a subagent unless the authorization of the principal is obtained or there is a compelling reason to do so.

 

˜105@(Appointment of Subagents by Legal Representatives)

A legal representative may appoint a subagent on its own responsibility. In such a case, if there is a compelling reason to do so, the legal representative is only liable to the principal for the appointment and supervision of the subagent.

 

˜106@(Authority of Subagents)

(1) A subagent represents the principal with respect to acts within the scope of the authority thereof.

(2) A subagent has the same rights and obligations as an agent in relation to the principal and third parties within the scope of that subagent's authority.

 

˜107@(Abuse of Authority to Represent)

If an agent performs an act that falls within the scope of that agent's authority to represent for the purpose of benefiting the agent's own interests or the interests of a third party, and the other party knew of or could have ascertained that purpose, that act is deemed to be an act performed by a person without authority to represent.

 

˜108@(Self-Contracting and Representation of Both Parties)

(1) An act that a person performs as an agent of the counterparty or as agent of both parties for the same juridical act is deemed to be an act performed by a person without authority to represent; provided, however, that this does not apply to the performance of an obligation or to an act authorized by the principal in advance.

(2) Beyond what is provided for in the main clause of para (1), an act for which the interest of the agent conflicts with the interest of the principal is deemed to be an act performed by a person without authority to represent; provided, however, that this does not apply to an act authorized by the principal in advance.

 

˜109@(Apparent Authority Due to Indication of Grant of Authority to Represent)

(1) A person who indicates to a third party that the person granted certain authority to represent to another person is liable for an act performed between that other person and that third party within the scope of the authority to represent; provided, however, that this does not apply if the third party knew or did not know due to negligence that the other person has not been granted the authority to represent.

(2) If a person who indicates to a third party that the person granted authority to represent to another person is, pursuant to the provisions of para (1), liable for acts performed by that other person in relation to the third party within the scope of the authority to represent, and the other person performs in relation to the third party an act beyond the scope of the authority to represent, the person who makes the indication is liable for that act only if the third party has reasonable grounds for believing that the other person has authority to represent in that act.

 

˜110@iApparent Authority of Act Exceeding Authority)

The provisions of the main clause of Art 109 para (1) apply mutatis mutandis if an agent performs an act exceeding the agent's authority to represent and a third party has reasonable grounds for believing that the agent has the authority as an agent.

 

˜111@(Ground of Extinction of Authority to Represent)

(1) The authority to represent ceases to exist upon:

(i) death of the principal; and

(ii) death of the agent, or being given an order commencing bankruptcy proceeding or a decision for

commencement of guardianship against the agent.

(2)   The authority to represent by mandate ceases to exist, other than on the grounds set forth in the respective items of para (1), upon the termination of the mandate.

 

˜112@(Apparent Authority After Extinction of Authority to Represent)

(1) A person that grants authority to represent to another person is liable towards a third party for an act performed between that other person and the third party within the scope of the authority to represent after the extinction of the authority to represent if that third party does not know the fact that the authority to represent has ceased to exist; provided, however, that this does not apply if the third party does to not know due to negligence the fact.

(2) If a person that grants authority to represent to another person is, pursuant to the provisions of para (1), liable for an act performed between that other person and a third party within the scope of the authority to represent after the extinction of that authority to represent, and the other person performs in relation to the third party an act beyond the scope of the authority to represent, the person that grants authority to represent is liable for that act only if the third party has reasonable grounds for believing that the other person has authority to represent for the act.

 

˜113@(Unauthorized Agency)

(1) A contract concluded by a person who acts as the agent of another person but has no authority to represent does not bind the principal unless the principal ratifies it.

(2) The ratification or refusal to ratify may not be duly asserted against the counterparty unless it is made to that counterparty; provided, however, that this does not apply if the counterparty has come to know the ratification or refusal to ratify.

 

˜114@(Right to Demand of Counterparty of Unauthorized Agency)

In the case referred to in Art 113, the counterparty may demand, by specifying a reasonable period of time, that the principal give a definite answer on whether or not the principal will ratify within that period of time. In this case, if the principal fails to give a definite answer within that period, the principal is deemed to have refused to ratify.

 

˜115@iRight to Rescind of Counterparty of Unauthorized Agency)

A counterparty may rescind a contract that a person without the authority to represent has concluded until the principal ratifies it; provided, however, that this does not apply if the counterparty knew at the time of the conclusion of the contract that the agent had no authority to represent.

 

˜116@iRatification of Act of Unauthorized Agency)

Ratification is retroactive to the time of the conclusion of the contract unless a particular intention is manifested; provided, however, that this may not prejudice the rights of a third party.

 

˜117@(Liability of Unauthorized Agency)

(1) A person who concludes a contract as an agent of another person is liable to the counterparty for the performance of the contract or compensation for loss or damage, as chosen by the counterparty, unless the person proves the authority to represent or the principal ratifies the contract.

(2) The provisions of para (1) do not apply in the following cases:

(i) if the counterparty knew that the person who concluded the contract as an agent of the other person had no authority to represent;

(ii) if the counterparty was negligent in not knowing that the person who concluded the contract as an agent of the other person had no authority to represent; provided, however, that this does not apply if the person who concluded a contract as an agent of the other person knew themselves to have no authority to represent; or

(iii) if the legal capacity to act of the person who concluded the contract as an agent of the other person was subject to restrictions.

 

˜118@iUnauthorized Agency in Unilateral Juridical Act)

With respect to a unilateral juridical act, the provisions of Art 113 thru Art 117 apply mutatis mutandis only if the counterparty, at the time of the act, either agrees for the person holding themselves out as an agent to act without the authority to represent or does not contest the authority to represent of that person. The same applies if a person does a unilateral juridical act vis-a-vis a person without authority to represent with the consent of that person.

 

Section 4 Nullity and Rescission

 

˜119@(Ratification of Void Acts)

A void act does not become effective by ratification; provided, however, that if a party ratifies an act knowing that the act is void, it is deemed that the party did a new act.

 

˜120@(Holder of Right to Rescind)

(1) An act that is voidable on the grounds of the qualified legal capacity to act of the person who did the act may be rescinded only by the person with qualified legal capacity (in the case of an act performed by the person as a legal representative of another person with limited capacity, including that other person with limited capacity), or an agent or successor thereof, or a person who has the authority to give consent thereto.

(2) An act that is voidable on the grounds of a mistake, fraud or duress may be rescinded only by the person who made the defective manifestation of intention, or an agent or successor thereof.

 

˜121@iEffect of Rescission)

An act that has been rescinded is deemed void ab initio.

 

˜121-2@(Obligation of Restoration)

(1) A person that has received payment or delivery as the performance of an obligation based on a void act has an obligation to restore the other party to the original state.

(2) Notwithstanding the provisions of para (1), if a person that receives payment or delivery as the performance of an obligation based on a void gratuitous act did not know that the act was void at the time of receiving the payment or delivery (or if the person did not know that the act was voidable at the time of receiving the payment or delivery in the case of an act which is deemed void ab initio pursuant to the provisions of Art 121 after the receipt of the payment or delivery), has an obligation to return to the extent currently enriched by the act.

(3) Notwithstanding the provisions of para (1), a person who has no mental capacity at the time of performing an act has an obligation to return to the extent currently enriched by the act. The same applies to a person who is a person with qualified legal capacity at the time of performing an act.

 

˜122@iRatification of Voidable Acts)

A voidable act may not be rescinded after the person prescribed in Art 120 ratifies it.

 

˜123@iMethod of Voidance and Ratification)

If the counterparty to a voidable act is identified, the voidance or ratification of that act is made by the manifestation of intention to the counterparty.

 

˜124@iRequirements for Ratification)

(1) The ratification of a voidable act does not become effective unless it is made after the circumstances that made the act voidable cease to exist and the person ratifying the act becomes aware of the right to rescind it.

(2) In the following cases, the ratification referred to in the preceding paragraph is not required to be made after the circumstances that made the act voidable cease to exist:

(i) if a legal representative or a curator or assistant of a person with qualified legal capacity ratifies the

act; or

(ii) if a person with qualified legal capacity (excluding an adult ward) makes the ratification with the

consent of a legal representative, curator or assistant.

 

˜125@(Statutory Ratification)

If, at or after the time when it becomes possible to ratify an act, any of the following facts occur with respect to a voidable act, it is deemed that the act has been ratified; provided, however, that this does not apply if an objection is reserved:

(i) full or partial performance;

(ii) request for the performance;

(iii) novation;

(iv) provision of a security;

(v) assignment of a part of or the whole of a right acquired by the voidable act; or

(vi) compulsory execution.

 

˜126@iLimitation on Period of Right to Rescind)

The right to rescind an act is extinguished by the operation of the prescription if it is not exercised within 5 years from the time when it becomes possible to ratify the act. The same applies if 20 years have passed from the time of the act.

 

Section 5 Conditions and Time Limit

 

˜127@iEffect of Fulfillment of Conditions)

(1) A juridical act subject to a condition precedent becomes effective upon fulfillment of the condition precedent.

(2) A juridical act that is subject to a condition subsequent ceases to be effective upon fulfillment of the condition subsequent.

(3) If the party manifests an intention to make the effects retroactive to the time of or any time prior to the time of the fulfillment, that intention prevails.

 

˜128@(Prohibition of Infringement of Interest of Counterparty Pending Fulfillment of Conditions)

While it is uncertain whether or not a condition will be fulfilled, a party to a juridical act that is subject to a condition may not prejudice the other party's interests that would arise from the juridical act upon fulfillment of the condition.

 

˜129@iDisposition of Rights Pending Fulfillment of Conditions)

While it is uncertain whether or not a condition will be fulfilled, the rights and obligations of the party concerned may be disposed of, inherited or preserved, or a security may be provided therefor, in accordance with the general provisions.

 

˜130@iPrevention of Fulfillment of Conditions)

(1) If a party that would suffer a detriment as a result of the fulfillment of a condition intentionally prevents the fulfillment of that condition, the counterparty may deem that the condition has been fulfilled.

(2) If a party who would enjoy a benefit as a result of the fulfillment of a condition wrongfully has that condition fulfilled, the counterparty may deem that the condition has not been fulfilled.

 

˜131@iFulfilled Conditions)

(1) If a condition has already been fulfilled at the time of a juridical act and that condition is a condition precedent, the juridical act constitutes an unconditional juridical act; if that condition is a condition subsequent, the juridical act is void.

(2) If it has already been established at the time of a juridical act that a condition will not be fulfilled and that condition is a condition precedent, the juridical act is void; if that condition is a condition subsequent, the juridical act constitutes an unconditional act.

(3) In the cases referred to in the provisions of para(1) & (2), the provisions of Art 128 & 129 apply mutatis mutandis until the relevant party becomes aware that the condition has been or has not been fulfilled.

 

˜132@iUnlawful Conditions)

A juridical act subject to an unlawful condition is void. The same applies to a juridical act subject to the condition that an unlawful act not be performed.

 

˜133@iImpossible Conditions)

(1) A juridical act subject to an impossible condition precedent is void.

(2) A juridical act subject to an impossible condition subsequent is an unconditional juridical act.

 

˜134@(Potestative Conditions)

A juridical act subject to a condition precedent is void if the condition is dependent only upon the intention of the obligor.

 

˜135@iEffect of Arrival of Assigned Time)

(1) If a time of commencement is assigned to a juridical act, the performance of that juridical act may not be demanded before the arrival of that assigned time.

(2) If time of expiration is assigned to a juridical act, that juridical act expires upon the arrival of that assigned time.

 

˜136@(Benefit of Time and Waiver)

(1) The time stipulation is presumed to be provided for the benefit of the obligor.

(2) The benefit of time stipulation may be waived; provided, however, that the waiver may not prejudice the interest of the counterparty.

 

˜137@(Acceleration)

The obligor may not assert the benefit of time stipulation if:

(i) the obligor has become subject to the order commencing bankruptcy proceeding;

(ii) the obligor has lost, damaged, or diminished the security; or

(iii) the obligor fails to provide security when it has the obligation to do so.

 

Chapter VI Computation of Period of Time

 

˜138@iCommon Rules on Computation of Period of Time)

The method of computation of a period of time is governed by the provisions of this Chapter unless otherwise provided in the laws and regulations or a judicial order, or unless otherwise provided for by the relevant juridical act.

 

˜139@iCommencement of Period)

When a period is provided for in hours, the period commences immediately at the specified time.

 

˜140@iCommencement of Period)

When a period is provided for in days, weeks, months, or years, the first day of the period is not included in the computation; provided, however, that this does not apply when the period commences at 12 midnight.

 

˜141@iExpiration of Period)

In the case referred to in Art 140, the period expires at the end of the last day.

 

˜142@iExpiration of Period)

If the last day of a period falls on a Sunday, a holiday as provided in the Act on National Holidays, or any other holiday, only when it is customary not to do business on the relevant day, the period expires on the immediately following day.

 

˜143@(Computation of Period with Reference to Calendar)

(1) If a period is provided for in weeks, months, or years, the period is calculated in accordance to the calendar.

(2) If a period does not commence at the beginning of the week, month, or year, that period expires on the day immediately preceding the day which corresponds to the commencement day in the last week, month or year; provided, however, that if the period is provided for in months or years and the last month does not contain a corresponding day, the period expires on the last day of that month.

 

Chapter VII Prescription

Section 1 General Provisions

 

˜144@iEffect of Prescription)

The prescription is retroactive to the commencement day.

 

˜145@iInvocation of Prescription)

The court may not make a judicial decision relying on prescription unless a party (in the case of extinctive prescription, including a guarantor, third-party collateral provider, third party acquirer, or any other person with a legitimate interest in the extinction of a right) invokes it.

 

˜146@iWaiver of Benefits of Prescription)

The benefits of the prescription may not be waived in advance.

 

˜147@(Postponement of Expiry of Prescription Period and Renewal of Prescription Period on the Ground of Demand by Litigation)

(1) If any of the following grounds exists, the period of prescription does not expire until the ground ceases to exist (if the ground ceases to exist while the right remains undetermined by a final and binding judgment or anything that has the same effect as a final and binding judgment, until 6 months have passed from the time of cessation):

(i) demand by litigation;

(ii) demand for payment;

(iii) settlement referred to in Art 275 para (1) of the Code of Civil Procedure or mediation under the Civil Conciliation Act or the Domestic Relations Case Procedure Act; or

(iv) participation in bankruptcy proceeding, rehabilitation proceeding or reorganization proceeding.

(2) In the case referred to in para (1), if a right is determined by a final and binding judgment or anything that has the same effect as a final and binding judgment, a new period of prescription commences to run at the time when the grounds set forth in the items of that paragraph cease to exist;

 

˜148@(Postponement of Expiry of Prescription Period and Renewal of Prescription Period on the Ground of Compulsory Execution)

(1) If any of the following grounds exists, the prescription period does not expire until those grounds cease to exist (or until 6 months after those grounds cease to exist, if they cease to exist due to the withdrawal of a petition or the rescission of a petition for failure to comply with the provisions of the law):

(i) compulsory execution;

(ii) enforcement of a security right;

(iii) auction under the rules of an auction for the enforcement of a security right prescribed in Art 195 of

the Civil Execution Act; or

(iv) asset disclosure procedure prescribed in Art 196 of the Civil Execution Act.

(2) In the case referred to in para (1), a new period of prescription commences to run at the time when the grounds set forth in the items of that paragraph cease to exist; provided, however, that this does not apply if the grounds cease to exist due to the withdrawal of a petition or the rescission of a petition for the failure to comply with the provisions of the law.

 

˜149@(Postponement of Expiry of Prescription Period on the Ground of Provisional Seizure)

If either of the following grounds exists, the prescription period does not expire until 6 months have passed from the time when the ground ceases to exist:

(i) provisional seizure; or

(ii) provisional disposition.

 

˜150@(Postponement of Expiry of Prescription Period on the Ground of Demand)

(1) If a demand is made, the prescription period does not expire until 6 months have passed since the time of the demand.

(2) A second demand made during the postponement of expiry of the prescription period granted on the ground of the first demand does not have the effect of postponement of expiry of prescription period under the provisions of para (1).

 

˜151@(Postponement of Expiry of Prescription Period on the Ground of Agreement on Holding Discussion)

(1) If an agreement on holding a discussion concerning a right is made in writing, the prescription period does not expire until the earliest of the following points in time:

(i) when 1 year has passed from the time of the agreement;

(ii) if the period during which the parties are to hold a discussion is specified by the agreement (limited to a period less than 1 year): when that period has expired; or

(iii) if one of the parties notifies the other party in writing of refusal to continue the discussion: when 6

months have passed from the time of the notice.

(2) If an agreement referred to in para (1) is made a second time during the postponement of expiry of the prescription period granted pursuant to the provisions of that paragraph, the second agreement has the effect of postponement of expiry of prescription period under the provisions of para (1); provided, however, that the period of that effect may not exceed 5 years in total from the time when the prescription period should have expired had the postponement of expiry of the prescription period not been granted.

(3) An agreement referred to in para (1) which is made during the postponement of expiry of the prescription period granted on the ground of a demand does not have the effect of postponement of expiry of prescription period under the provisions of that paragraph. The same applies to a demand made during the postponement of expiry of the prescription period granted pursuant to the provisions of that paragraph.

(4) If an agreement referred to in para (1) is made by means of an electronic or magnetic record, the agreement is deemed to have been made in writing and the provisions of para (1) thru (3) apply thereto.

(5) The provisions of para (4) apply mutatis mutandis to the notice referred to in para (1) item (iii).

 

˜152@(Renewal of Prescription Period on the Ground of Acknowledgment)

(1) If a right is acknowledged, a new period of prescription commences to run at the time of the acknowledgment.

(2) With respect to the disposition of the right of the other party, an acknowledgment referred to in para (1) does not require unlimited capacity to act or authority.

 

˜153@(Scope of Persons Affected by Postponement of Expiry of Prescription Period or Renewal of Prescription Period)

(1) The postponement of the expiry of prescription period or the renewal of prescription period under the provisions of Art 147 or 148 is effective only between the parties with respect to whom grounds to postpone the expiry of prescription period or to renew prescription period have arisen and their successors.

(2) The postponement of expiry of prescription period under the provisions of Art 149 thru 151 is effective only between the parties with respect to whom grounds to postpone the expiry of prescription period have arisen and their successors.

(3) The renewal of prescription period under the provisions of Art 152 is effective only between the parties with respect to whom grounds to renew prescription period have arisen and their successors.

 

˜154@(Scope of Persons Affected by Postponement of Expiry of Prescription Period or Renewal of Prescription Period)

If the procedure regarding any of the grounds set forth in the items of Art 148, para (1) or the items of Art 149 is not carried out in relation to a person that is to receive the benefit of prescription, it does not have an effect of postponement of expiry of prescription period or renewal of prescription period under the provisions of Art 148 or Art 149 unless the person is notified of it.

 

˜158@(Minor or Adult Ward and Postponement of Expiry of Prescription Period)

(1) If a minor or an adult ward has no legal representative during the period of 6 months preceding the expiration of the period of prescription, the prescription period does not expire with respect to that minor or adult ward until 6 months pass from the time when that minor or adult ward becomes a person with a capacity to act, or a legal representative assumes the position.

(2) If a minor or an adult ward has a right vis-a-vis the minor's or the adult ward's father, mother, or guardian who manages the property, the prescription period does not expire with respect to that right until 6 months have passed from the time when that minor or adult ward becomes a person with capacity to act, or a succeeding legal representative assumes the position.

 

˜159@(Postponement of Expiry of Prescription Period of Rights Between Husband and Wife)

With respect to rights which the husband or wife has vis-a-vis the other spouse, the prescription period does not expire until 6 months have passed from the time of the dissolution of their marriage.

 

˜160@(Postponement of Expiry of Prescription Period Regarding Estate)

With respect to an estate, the prescription period does not expire until 6 months have passed from the time when the heir is identified, the administrator is appointed, or commencement of bankruptcy proceeding is ordered.

 

˜161@(Postponement of Expiry of Prescription Period Due to Natural Disaster)

If it is impossible to carry out the procedure regarding any of the grounds set forth in the items of Art 147, para (1) or the items of Art 148, para (1) upon the expiration of the period of prescription due to a natural disaster or other unavoidable grave incident, the prescription period does not expire until 3 months have passed from the time when that impediment ceases to exist.

 

Section 2 Acquisitive Prescription

 

˜162@iAcquisitive Prescription of Ownership)

(1) A person that possesses the property of another for 20 years peacefully and openly with the intention to own it acquires ownership thereof.

(2) A person that possesses the property of another for 10 years peacefully and openly with an intention to own it acquires ownership thereof if the person was acting in good faith and was not negligent at the time when the possession started.

 

˜163@iAcquisitive Prescription of Property Rights Other Than Ownership)

A person that exercises a property right other than ownership peacefully and openly with the intention to do so on the person's own behalf acquires that right after the passage of 20 years or 10 years, according to the distinction provided for in Art 162.

 

˜164@(Renewal of Acquisitive Prescription Due to Discontinuation of Possession)

The prescription under the provisions of Art 162 is renewed if the possessor discontinues the possession voluntarily or is deprived of that possession by another person.

 

˜165@(Renewal of Acquisitive Prescription Due to Discontinuation of Possession)

The provisions of Art 164 apply mutatis mutandis to the case under Art 163.

 

Section 3 Extinctive Prescription

 

˜166@(Extinctive Prescription of Claims)

(1) A claim is extinguished by prescription in the following cases:

(i) if the obligee does not exercise the right within 5 years from the time when the obligee came to know

that it was exercisable; or

(ii) if the obligee does not exercise the right within 10 years from the time when it became exercisable.

(2) A claim or property right other than ownership is extinguished by prescription if not exercised within 20 years from the time when the right became exercisable.

(3) The provisions of para (1) & (2) do not preclude the commencement of acquisitive prescription for the benefit of a third party that possesses the subject matter of a right with a time of commencement or a right subject to a condition precedent, at the time of commencing the possession; provided, however, that the holder of the right may demand acknowledgment from the possessor at any time to renew the prescription period.

 

˜167@(Extinctive Prescription of Claim for Compensation for Loss or Damage Resulting from Death or Injury to Person)

To apply the provisions of Art 166 para (1) item (ii) to the extinctive prescription of a claim for damages arising from the death or injury to persons, the phrase "10 years" in that item is deemed to be replaced with "20 years".

 

˜168@(Extinctive Prescription of Claims for Periodic Payments)

(1) A claim for periodic payments is extinguished by prescription in the following cases:

(i) if the obligee does not exercise each claim for the delivery of things such as money arising from the

claim for periodic payments within 10 years from the time when the obligee comes to know that each claim

is exercisable; or

(ii) if the obligee does not exercise each claim prescribed in item (i) within 20 years from the time when it

becomes exercisable.

(2) The obligee of periodic payments may require its obligor at any time to issue a written acknowledgment in order to acquire the evidence of the renewal of the prescription period.

 

˜169@(Extinctive Prescription of Right Determined by Judgment)

(1) The period of prescription of a right determined by a final and binding judgment or anything that has the same effect as a final and binding judgment is 10 years even if a period of prescription shorter than 10 years is provided for.

(2) The provisions of para (1) do not apply to a claim which is not yet due and payable at the time when it is determined.

 

PART II Real Rights

Chapter I General Provisions

 

˜175@iEstablishment of Real Rights)

No real right may be established other than those prescribed by laws including this Code.

 

˜176@iCreation and Transfer of Real Rights)

The creation and transfer of a real right becomes effective solely by the manifestations of intention of the parties.

 

˜177@(Requirements of Perfection of Changes in Real Rights on Immovables)

Acquisitions of, losses of and changes in real rights on immovables may not be duly asserted against any third parties, unless the same are registered pursuant to the applicable provisions of the Real Property Registration Act and other laws regarding registration.

 

˜178@(Requirements of Perfection of Transfer of Real Rights Concerning Movables)

The transfer of a real right on movables may not be duly asserted against a third party, unless the movables are delivered.

 

˜179@(Merger of Rights)

(1) If ownership and another real right on the same thing are acquired by the same person, the other real right is extinguished; provided, however, that this does not apply if that thing or the other real right is the object of the right of a third party.

(2) If a real right other than ownership and another right for which that real right is the object are acquired by the same person, the other right is extinguished. In this case, the provisions of the proviso to para (1) apply mutatis mutandis.

(3) The provisions of para (1) & (2) do not apply to possessory rights.

 

Chapter II Possessory Rights

Section 1 Acquisition of Possessory Rights

 

˜180@iAcquisition of Possessory Rights)

Possessory rights are acquired by possessing a thing with the intention to do so on one's own behalf.

 

˜181@iPossession through Agents)

Possessory rights may be acquired through an agent.

 

˜182@iActual Delivery and Summary Delivery)

(1) The transfer of possessory rights is effected by the delivery of the thing possessed.

(2) If a transferee or the agent of a transferee is actually holding the thing under possession, the transfer of possessory rights may be effected by the parties' manifestations of intention alone.

 

˜183@(Constructive Transfer with Retention of Possession)

If an agent manifests the intention to thenceforward possess a thing under the agent's own possession on behalf of the principal, the principal thereby acquires the possessory rights

 

˜184@iTransfer of Possession by Instruction)

If a thing is possessed through an agent, the principal orders that agent to thenceforward possess that thing on behalf of a third party, and that third party consents thereto, the third party acquires the possessory rights.

 

˜185@iChange in Nature of Possession)

If it is assumed, due to the nature of the title, that a possessor does not have the intention to own, the nature of the possessor's possession does not change unless that possessor manifests the intention to own to the person that put the thing under that person's possession, or commences possession under a new title with an intention to own from that time.

 

˜186@(Presumption Regarding Nature of Possession)

(1) A possessor is presumed to possess a thing with the intention to own, in good faith peacefully and openly.

(2) If there is evidence of possession at two different points in time, it is presumed that possession continued during that interval.

 

˜187@iSuccession to Possession)

(1) A successor to a possessor may, as the successor chooses, assert either the successor's own possession only, or the successor's own possession together with that of the predecessor.

(2) If a person asserts the possession of the predecessor together with the person's own, that person also succeeds to defects in the same.

 

Section 2 Effect of Possessory Rights

 

˜188@(Presumption of Lawfulness of Rights Exercised with Respect to Possessed Thing)

The possessor is presumed to lawfully have the rights that a possessor exercises with respect to the thing under possession.

 

˜189@iAcquisition of Fruits by Possessor in Good Faith)

(1) A possessor in good faith acquires fruits derived from the thing under possession.

(2) If a possessor in good faith is defeated in an action on the title that legally supports the possession, that possessor is deemed to be a possessor in bad faith as from the time when the action is filed.

 

˜190@(Return of Fruits by Possessors in Bad Faith)

(1) A possessor in bad faith has the obligation to return fruits, and reimburse the price of fruits that the possessor has already consumed, damaged due to negligence, or failed to collect.

(2) The provisions of para (1) apply mutatis mutandis to a person who takes possession of a thing through assault or duress or through concealment.

 

˜191@iCompensation for Loss or Damage by Possessors)

If a possessed thing has been lost or damaged due to grounds attributable to the possessor, a possessor in bad faith is liable to compensate the person recovering the thing for the entire loss or damage, and a possessor in good faith is liable to compensate that person for the loss or damage to the extent currently enriched as a result of that loss or damage; provided, however, that a possessor that is without the intention to own the thing must compensate the person for the entire loss or damage, even if the possessor has acted in good faith.

 

˜192@(Good Faith Acquisition)

A person that commences the possession of movables peacefully and openly by a transactional act acquires the rights that are exercised with respect to the movables immediately if the person possesses it in good faith and without negligence.

 

˜193@iRecovery of Stolen or Lost Property)

In the cases provided for in Art 192, if the possessed thing constitutes stolen or lost property, the victim or the person that lost the thing may demand the return of that thing from the possessor within 2 years from the time of the loss or theft.

 

˜194@iRecovery of Stolen or Lost Property)

If a possessor has purchased stolen or lost property in good faith at an auction, in a public market, or from a merchant that sells similar things, the victim or the person that lost the thing may not recover the thing without reimbursing the possessor for the price paid.

 

˜195@iAcquisition of Rights through Possession of Animals)

A person possessing a non-domestic animal bred by another person acquires the rights to exercise with respect to that animal if the person possessing it was acting in good faith at the beginning of the possession and the owner of the animal does not demand its return from that person within one month from the time when that animal left the possession of its owner.

 

˜196@iPossessors' Claims for Reimbursement of Expenses)

(1) If a possessor returns a thing in the possession thereof, the possessor may have the person recovering the thing reimburse the possessor for the costs the possessor has paid for its preservation and other necessary expenses; provided, however, that if the possessor has acquired fruits, ordinary and necessary expenses are borne by the possessor.

(2) With respect to the costs paid for by a possessor to improve the thing in the possession thereof and other beneficial expenses, the possessor may have the person recovering the thing reimburse the possessor for either the costs the possessor has paid or the amount of the increased value, whichever the person recovering the thing chooses, but only if there is a current increase in value; provided, however, that with regard to a possessor in bad faith, the court may, at the request of the person recovering the thing, grant a reasonable period of time for the same.

 

˜197@iPossessory Actions)

A possessor may file a possessory action in accordance with the provisions of Art 198 thru Art 202.

The same applies to a person that takes possession on behalf of another person.

 

˜198@iActions for Maintenance of Possession)

If a possessor is obstructed from possession, the possessor may claim for the discontinuation of the obstruction and compensation for loss or damage by filing an action for maintenance of possession.

 

˜199@iActions for Preservation of Possession)

If a possessor is likely to be obstructed from possession, the possessor may demand either the prevention of the obstruction or for the submission of security for the compensation for loss or damage by filing an action for preservation of possession.

 

˜200@iActions for Recovery of Possession)

(1) If a possessor is forcibly dispossessed, the possessor may demand the restitution of the thing and compensation for loss or damage by filing an action for recovery of possession.

(2) An action for recovery of possession may not be filed against a specific successor of a person that forcibly takes possession; provided, however, that this does not apply if that successor had knowledge of the fact that the person has unlawfully taken the possession.


˜201@(Periods of Time for Filing Possessory Actions)

(1) An action for maintenance of possession must be filed during the obstruction or within 1 year after the obstruction stops; provided, however, that if the possessed thing has been damaged due to construction work and either 1 year has passed from the time when the construction was started or the construction has been completed, the action may not be filed.

(2) An action for preservation of possession may be filed so long as the danger of obstruction exists. In this case, the provisions of the proviso to para (1) apply mutatis mutandis if the possessed thing is likely to be damaged by the construction work.

(3) An action for recovery of possession must be filed within1 year from the time when a possessor was forcibly dispossessed.

 

˜202@iRelationship with Actions on Title)

(1) A possessory action does not preclude an action on title that legally supports the possession, and an action on title does not preclude a possessory action.

(2) With respect to possessory actions, no judicial decision may be made on grounds relating to title that legally supports the possession.

 

Section 3 Extinction of Possessory Rights

 

˜203@iGrounds for Extinction of Possessory Rights)

Possessory rights are extinguished when the possessor renounces the intention to possess, or loses possession of the possessed thing; provided, however, that this does not apply if the possessor files an action for recovery of possession.

 

˜204@iGrounds for Extinction of Agent's Possessory Rights)

(1) If a person possesses a thing through an agent, possessory rights are extinguished on the grounds set forth below:

(i) renunciation by the principal of intention to have agent possess;

(ii) manifestation of intention to the principal of an agent to hold the thing possessed on behalf of the

agent itself or a third party; or

(iii) the agent has ceased to hold the thing possessed.

(2) Possessory rights are not extinguished solely as a result of the extinction of the authority to represent.

 

Section 4 Quasi-Possession

 

˜205@iQuasi-Possession)

The provisions of this Chapter apply mutatis mutandis if a person exercises their property rights with the intention to do so on their own behalf.

 

Chapter III Ownership

Section 1 Extent of Ownership

Subsection 1 Content and Scope of Ownership

 

˜206@iContent of Ownership)

An owner has the rights to freely use, profit from and dispose of the thing owned, within the limits of laws and regulations.

 

˜207@iScope of Ownership in Land)

Ownership in land extends to above and below the surface of the land, within the limits of laws and regulations.

 

Subsection 2 Neighboring Relationships

 

˜209@iRequests for Use of Neighboring Land)

(1) An owner of land may request the use of the neighboring land to the extent necessary for constructing or repairing walls or buildings on or in the vicinity of the boundary; provided, however, that the owner may not enter the dwelling house of the neighbor without the approval of the same.

(2) In the case referred to in para (1), if the neighbor sustained damage, the neighbor may claim compensation.

 

˜210@(Right-of-Way over Other Land for Access to Public Roads)

(1) An owner of land that is surrounded by other land and has no access to a public road may pass through the other land that surrounds that owner's land to reach a public road.

(2) Para (1) also applies if an owner cannot reach a public road without passing over a pond, lake, river, waterway, or sea, or if there is an extreme difference in height between the land and the public road on account of a cliff.

 

˜211@(Right-of-Way over Other Land for Access to Public Roads)

(1) In the cases referred to in Art 210, the location and method of passage must be chosen so as to meet the needs of the person that is entitled to the right-of-way under the provisions of that Article and cause the least damage to the other land.

(2) A person that holds the right-of-way under the provisions of Art 210 may construct a road if necessary.

 

˜212@(Right-of-Way over Other Land for Access to Public Roads)

A person that is entitled to the right-of-way under the provisions of Art 210 must pay compensation for damage caused to the other land that the same person passes through; provided, however, that except for damage arising from the construction of a road, compensation may be paid on an annual basis.

 

˜213@(Right-of-Way over Other Land for Access to Public Roads)

(1) If the partition of land creates a parcel of land that has no access to public roads, the owner of that parcel of land may pass to the public roads only through the lands owned by another person that participated in the partition. In this case, it is not necessary to pay compensation.

(2) The provisions of para (1) apply mutatis mutandis if the owner of land transfers part of the land to another person.

 

˜214@iProhibition of Obstruction of Natural Water Streams)

A landowner may not interfere with a natural water stream flowing from a neighboring land.

 

˜215@iRemoval of Impediments to Water Streams)

If a stream is blocked at low-lying ground due to a natural disaster or other unavoidable grave incident, an owner of a higher land may carry out construction work necessary to remove the impediment to the stream at that owner's own expense.

 

˜216@iRepairs of Structures Related to Streams)

If a land suffers or is likely to suffer damage due to destruction or blockage of a structure installed on other land to store, discharge or draw water, the owner of that land may have the owner of that other land repair the structure or remove the impediments, or, if necessary, have the same carry out preventive construction work.

 

˜217@iCustoms with Respect to Allocation of Expenses)

In the cases provided for in Art 215 & ˜216, if there are other customs with respect to the allocation of expenses, those customs prevail.

 

˜218@(Prohibition of Installation of Structures That Discharge Rainwater to Neighboring Lands)

A landowner may not install a roof or other structures that discharge rainwater directly onto neighboring land.

 

˜219@iChanges to Streams)

(1) An owner of a channel, moat, or other such land containing a stream may not change the course or width of the same if the land on the other side is owned by another person.

(2) If the land on both sides of a stream is owned by the owner of the land containing the stream, that owner may change the course or the width of the same; provided, however, that the owner must return the stream to its natural course at the point where the stream meets a neighboring land.

(3) If there are customs that differ from the provisions of para (1) & (2), those customs prevail.

 

˜220@iRunning Water through Lower Ground for Discharge)

An owner of a higher ground may run water through lower grounds to dry out his higher ground in cases where that land is flooded, or to discharge surplus water for household or agricultural or industrial use until the water meets a public stream or sewage system. In such cases, the location and method that cause the least damage to the lower ground must be selected.

 

˜221@iUse of Structures to Direct Water)

(1) A landowner may use a structure installed by the owner of higher or lower land in order to cause water from the landowner's land to pass through that land.

(2) In the cases referred to in para (1), the person using the other person's structure must bear the expenses of the installation and preservation of the structure in proportion to the benefit that person enjoys.

 

˜222@iConstruction and Use of Dams)

(1) If an owner of land containing a stream needs to construct a dam, that owner may construct that dam by fixing it to the other side even if the land on the other side is owned by another person; provided, however, that the owner must pay compensation for damage arising as a result.

(2) The owner of land on the other side of a dam may use the dam referred to in para (1) if that owner owns part of the land containing the stream.

(3) The provisions of Art 221 para (2) apply mutatis mutandis to the cases referred to in para (2).

 

˜223@iInstallation of Boundary Markers)

A landowner may install boundary markers, sharing the expenses with the owner of the neighboring land.

 

˜224@iExpenses of Installation and Preservation of Boundary Markers)

The expenses of installation and preservation of boundary markers are borne equally by neighbors; provided, however, that measuring expenses are borne in proportion to the area of each land.

 

˜225@iInstallation of Fences)

(1) If two buildings are owned by different owners and there is an open lot between them, each owner may install a fence on the boundary, sharing the expenses with the other owner.

(2) If no agreement is reached between the parties, the fence referred to in para (1) must be a wooden fence, a bamboo fence or a fence made of similar material and must be 2 meters high.

 

˜226@iExpenses of Installation and Preservation of Fences)

The expenses of installation and preservation of the fences under Art 225 are borne equally by the neighbors.

 

˜227@iInstallation of Fences by One of Neighbors)

One of neighboring owners may install a fence using materials better than those provided for in Art 225 para (2) or elevating the height provided for under that paragraph; provided, however, that the relevant owner must bear the increase in expenses arising as a result of the same.

 

˜228@iCustoms Relating to Installation of Fences)

If there are customs that differ from the provisions of Art 225 thru 227, those customs prevail.

 

˜229@iPresumption of Co-ownership of Boundary Markers)

Boundary markers, fences, walls, channels and moats installed on boundary lines are presumed to be co-owned by the neighbors.

 

˜230@iPresumption of Co-Ownership of Boundary Markers)

(1) The provisions of the preceding Art 229 do not apply to a wall on a boundary line that constitutes part of a building.

(2) If the height of a wall that separates two neighboring buildings of different heights is higher than the height of the lower building, para (1) also applies with respect to that portion of that wall that is higher than the lower building; provided, however, that this does not apply to fire walls.

 

˜231@iConstruction Work Raising Height of Co-Owned Walls)

(1) One of neighboring owners may raise the height of a co-owned wall; provided, however, that if the wall cannot withstand the construction work, the relevant owner must reinforce that wall as necessary or rebuild the same at the owner's own expense.

(2) If the height of a wall is raised pursuant to the provisions of para (1), the raised portion is owned solely by the owner that carried out the construction work.

 

˜232@iConstruction Work Raising Height of Co- Owned Walls)

In the cases provided for in Art 231, if a neighbor suffers damage, that neighbor may claim compensation for the same.

 

˜233@iCutting of Branches and Roots of Trees and Bamboo)

(1) If a tree or bamboo branch from neighboring land crosses a boundary line, the landowner may have the owner of that tree or bamboo sever that branch.

(2) If a tree or bamboo root from neighboring land crosses a boundary line, the owner of the land may sever that root.

 

˜234@(Restrictions on Buildings Near Boundary Lines)

(1) In order to construct a building, the building must be distanced 50 cm or more away from the boundary line.

(2) If a person attempts to construct a building in violation of the provisions of para (1), the owner of the neighboring land may have the construction suspended or changed; provided, however, that if 1 year passes from the time when that construction started or if that building is completed, the owner may only claim compensation for loss or damage.

 

˜235@iRestrictions on Buildings Near Boundary Lines)

(1) A person that installs a window or porch (including a veranda) at a distance of less than 1 meter from a boundary line allowing the observation of the residential land of another person must put up a privacy screen.

(2) The distance referred to in para (1) is calculated by measuring the length of a straight line from the point on the window or porch closest to the neighboring land, to where it reaches the boundary line at a right angle.

 

˜236@iCustoms Relating to Construction Near Boundary Lines)

If there are customs that differ from the provisions of Art 234 & 235, those customs prevail.

 

˜237@(Restrictions on Digging Near Boundary Lines)

(1) In order to dig a well, service water pit, sewage pit or compost pit, the same must be distanced two or more meters from the boundary line, and in order to dig a pond, cellar or human waste pit, the same must be distanced 1 or more meters from the boundary line.

(2) In order to bury water pipes, or dig a channel or moat, the same must be distanced from the boundary line by a measurement equivalent to at least half the depth of the same; provided, however, that the distance is not required to be exceeding 1 meter.

 

˜238@iDuty of Care Regarding Digging Near Boundary Lines)

When carrying out a construction referred to in Art 237 near a boundary line, necessary care must be taken to ensure the prevention of earth collapses or leakages of water or contaminated liquids.

 

Section 2 Acquisition of Ownership

 

˜239@(Ownership in Ownerless Property)

(1) Ownership of movables without an owner are acquired by possessing the same with the intention to own.

(2) Ownerless immovables belong to the National Treasury.

 

˜240@iFinding of Lost Property)

If the owner of lost property is not identified within 3 months of the time when public notice thereof is effected as prescribed by the Lost Property Act, the person who found the lost property acquires ownership of the same.

 

˜241@iDiscovery of Buried Things)

If the owner of a buried thing is not identified within 6 months of the time when public notice thereof is effected as prescribed by the Lost Property Act, the finder acquires ownership of the same; provided, however, that with respect to a buried thing discovered inside a thing that belongs to another person, the finder and that other person acquire equally proportionate ownership of that buried thing.

 

˜242@iAccession to Immovables)

The owner of immovables acquires ownership of a thing that has been attached thereto as its appurtenance; provided, however, that the rights of the other person that attached that thing by virtue of a title are not prejudiced.

 

˜243@iAccession to Movables)

If two or more movable properties with different owners can no longer be separated without damage due to accession, the ownership of the composite thing belongs to the owner of the principal movable property. The same applies if excessive expense is required to separate the movables.

 

˜244@iAccession to Movables)

If the distinction of principal and accessory cannot be made between the movables united by accession, the owner of each movable property co-owns the composite thing in proportion to the respective price current at the time of the accession.

 

˜245@iMixture)

The provisions of Art 243 & 244 apply mutatis mutandis if the things of different owners are mixed together and can no longer be distinguished.

 

˜246@iProcessing)

(1) If a person ("processor") adds labor to another person's movables, the ownership of the processed thing belongs to the owner of the material; provided, however, that if the value derived from the work significantly exceeds the value of the material, the processor acquires ownership of the processed thing.

(2) In the cases prescribed in para (1), if the processor provides a portion of the materials, the processor acquires ownership of the processed thing only if the value of provided materials added to the value derived from the labor exceeds the value of the other person's materials.

 

˜247@iEffect of Accession, Mixture or Processing)

(1) If the ownership of a thing is extinguished pursuant to the provisions of Art 242 thru 246, other rights existing on that thing are also extinguished.

(2) In the cases prescribed in para (1), if the owner of a thing has become the sole owner of the thing formed by accession or appurtenance, mixture or processing ("composite thing"), other rights existing on that thing thereafter exist on the composite thing, and if the owner of the thing becomes a co-owner of the composite thing, other rights existing on that thing thereafter exist on that owner's interest in the same.

 

˜248@(Demands for Compensation for Accession, Appurtenance, Mixture or Processing)

A person that suffers loss because of the application of the provisions of Art 242 thru Art 247 may demand compensation in accordance with the provisions of Art 703 & Art 704.

 

Section 3 Co-Ownership

 

˜249@iUse of Property in Co-Ownership )

Each co-owner may use the entire property in co-ownership in proportion to each co-owner's interest.

 

˜250@iPresumption of Proportion of Co-Ownership Interests)

Each co-owner's interest is presumed to be equal.

 

˜251@iChanges to Property in Co-Ownership)

No co-owner may make any alteration to the property in co-ownership without the consent of the other co-owners.

 

˜252@iManagement of Property in Co-Ownership)

The particulars of the management of property in co-ownership are determined by a majority according to the value of the interests of the co-owners, except for cases provided for in Art 251; provided, however, that any of the co-owners may perform acts of preservation alone.

 

˜253@(Obligations to Bear Burdens Regarding Property in Co-Ownership)

(1) Each co-owner pays the expenses of management and bears burdens regarding the property in co-ownership, in proportion to each co-owner's interest.

(2) If a co-owner does not perform the obligations referred to in para (1) within 1 year, other co-owners may acquire that co-owner's interest by paying a reasonable compensation.

 

˜254@iClaims on Property in Co-Ownership)

A claim that one of the co-owners holds against other co-owners with respect to the property in co-ownership may be exercised against their specific successors.

 

˜255@(Waiver of Interests and Death of Co-Owners)

If one of co-owners waives interest or dies without an heir, the-waived interest belongs to the other co-owners.

 

˜256@iDemands for Partition of Property in Co-Ownership)

(1) Each co-owner may demand the partition of property in co-ownership at any time; provided, however, that this does not preclude concluding a contract agreeing not to partition that property for a period not exceeding 5 years.

(2) The contract under the proviso to para (1) may be renewed; provided, however, that the period thereof may not exceed 5 years from the time of the renewal.

 

˜257@iDemands for Partition of Property in Co-Ownership)

The provisions of Art 256 do not apply to the property in co-ownership provided for in Art 229.

 

˜258@iPartition of Property in Co-Ownership by Judicial Decision)

(1) If no agreement is reached among co-owners with respect to the partition of property in co-ownership, a request for partition of the same may be submitted to the court.

(2) In cases referred to in para (1), if the property in co-ownership cannot be partitioned in kind, or it is likely that the value thereof will be significantly reduced by the partition, the court may order the sale of the same at auction.

 

˜259@(Payment of Claims Regarding Co-Ownership)

(1) If one of the co-owners holds a claim regarding co-ownership against other co-owners, upon partition, the portion of the property in co-ownership that belongs to the obligor may be appropriated for the payment of the same.

(2) If it is necessary to sell the portion of the property in co-ownership that belongs to the obligor to obtain the payment referred to in para (1), the obligee may demand the sale of the same.

 

˜260@iParticipation in Partition of Property in Co-Ownership)

(1) A person that holds a right with respect to property in co-ownership and a creditor of any of the co-owners may participate in partitions at their own expense.

(2) If, notwithstanding a request for participation under the provisions of para (1), partition is effected without allowing the participation of the person that submitted the request, that partition may not be duly asserted against the person that submitted the request.

 

˜261@iCo-Owners' Warranties upon Partitions)

Each co-owner provides the same warranty as that of a seller in proportion to each co-owner's interest, with regards to the thing other co-owners have acquired by the partition.

 

˜262@iInstruments Regarding Property in Co-Ownership)

(1) When a partition is completed, each of the persons that participated in the partition must retain the instruments regarding things each of them acquired.

(2) Instruments regarding a thing that is partitioned for some or all co-owners must be retained by the person that acquired the largest portion of that thing.

(3) In the cases referred to in para (2), if no person acquired the largest portion, the person that is to retain the instruments is determined by agreement among the persons that participated in the partition. If no agreement is reached, the court designates the same.

(4) A person that is to retain instruments must allow other persons that participated in the partition to use the instruments at the request of the same.

 

˜263@iRights of Common with Nature of Co-Ownership)

Rights of common that have the nature of co-ownership are governed by local customs and are otherwise subject to the application of the provisions of this Section.

 

˜264@iQuasi Co-Ownership)

The provisions of this Section apply mutatis mutandis if two or more persons share property rights other than ownership; provided, however, that this does not apply if otherwise provided by laws and regulations.

 

Chapter IV Superficies

 

˜265@iContent of Superficies)

A superficiary has the right to use another person's land in order to own structures, or trees or bamboo, on that land.

 

˜266@iRents)

(1) The provisions of Art 274 thru 276 apply mutatis mutandis if the superficiary must pay periodical rent to the owners of the land.

(2) Beyond what is provided for in para (1), provisions on leasehold apply mutatis mutandis to rent to the extent that application is not inconsistent with the nature of the same.

 

˜267@iMutatis Mutandis Application of Provisions Regarding Neighboring Relationships)

The provisions of Subsection 2, Section 1 of Chapter 3 (Neighboring Relationships) apply mutatis mutandis between superficiaries or between a superficiary and a landowner; provided, however, that the mutatis mutandis application of the provisions of Art 229 to superficiaries is limited to cases where structures on the boundary line are installed after the establishment of the superficies.

 

˜268@iDuration of Superficies)

(1) If the duration of superficies is not fixed by the act that established the same and there are no relevant customs, the superficiary may waive that right at any time; provided, however, that if rent must be paid, the superficiary must give notice 1 year or more in advance or pay rent for 1 year that has not yet become due and payable.

(2) If the superficiary does not waive that right pursuant to the provisions of para (1), the court may, at the request of the parties concerned, fix a duration of 20 years or more but not more than 50 years, taking into consideration the kind and status of the structures, or trees or bamboo and other circumstances at the time of the creation of the superficies.

 

˜269@iRemoval of Structures)

(1) When the right of the superficiary is extinguished, the superficiary may restore the land to its original state and remove structures and trees or bamboo on the same; provided, however, that if the owner of the land gives notice that the owner will purchase the same by offering to pay an amount equivalent to the market value, the superficiary may not refuse that offer without reasonable grounds.

(2) If there are customs that differ from the provisions of para (1), those customs prevail.

 

˜269-2@iSuperficies for Underground or Airspace)

(1) An underground space or airspace may be established as the subject matter of superficies for ownership of structures, through the specification of upper and lower extents. In such a case, restrictions on the use of that land may be added in the act that establishes superficies for the purpose of facilitating the exercise of the superficies.

(2) The superficies referred to in para (1) may be established even if third parties hold the rights to use or profit from the land provided that all persons holding those rights or rights on them give their consent. In such a case, persons that hold the rights to use or profit from the land cannot prevent the exercise of the superficies to the same.

 

Chapter V Farming Rights (Emphyteusis)

 

˜270@iContent of Farming Rights)

A farming right holder (emphyteuta) has the right to pay rent and engage in cultivation or livestock farming on another person's land.

 

˜271@(Limitations on Alterations to Land by Farming Right Holders)

A farming right holder may not make any alteration of the land that results in irreparable damage.

 

˜272@(Assignment of Farming Rights or Leasing of Land)

A farming right holder may assign the holder's right to another person or lease the land during the duration of the right to cultivate or farm livestock; provided, however, that this does not apply if those acts are prohibited by the act that established that right.

 

˜273@iMutatis Mutandis Application of Provisions Regarding Lease)

Beyond what is provided for in this Chapter and those provided for in the act of establishment, provisions regarding lease apply mutatis mutandis to the obligations of a farming right holder, to the extent that application is not inconsistent with the nature of the same.

 

˜274@iRent Reductions or Releases)

A farming right holder may not demand release from or reduction in the rent even if there is a loss of profits due to force majeure.

 

˜275@iWaiver of Farming Rights)

If a farming right holder has gained no profit whatsoever for 3 or more consecutive years or has gained profits less than the rent for 5 or more consecutive years due to force majeure, that holder may surrender waive that right.

 

˜276@iDemand for Extinction of Farming Rights)

If a farming right holder fails to pay the rent for two or more consecutive years, the landowner may demand the extinction of the farming right.

 

˜277@iCustoms Regarding Farming Rights)

If there are customs that differ from the provisions of Art 271 thru 276, those customs prevail.

 

˜278@iDuration of Farming Rights)

(1) The duration of a farming right is 20 years or more and 50 years or less. Even if an act of establishment provides for a period longer than 50 years, the duration is 50 years.

(2) The establishment of farming right may be renewed; provided, however, that the duration of that right may not exceed 50 years from the time of renewal.

(3) If an act of establishment does not provide for the duration of the farming right, the duration of that right is 30 years unless there are other customs to the contrary.

 

˜279@iRemoval of Structures)

The provisions of Art 269 apply mutatis mutandis to farming rights.

 

Chapter VI Servitudes

 

˜280@iContent of Servitudes)

A servitude holder has the right to use another person's land for the convenience of their own lands in accordance with purposes prescribed in the act establishing the servitude; provided, however, that this right must not violate the provisions (limited to those that relate to public policy) under Section 1 of Chapter 3 (Extent of Ownership).

 

˜281@iAppurtenant Nature of Servitudes)

(1)@Servitudes are appurtenant to ownership in the dominant land (land of a person entitled to a servitude, enjoying benefits from the land of others) and shall be transferred together with that ownership, or shall be the subject of other rights that exist in relation to the dominant land; provided, however, that this shall not apply if the act establishing the servitude provides otherwise.

(2)@Servitudes may neither be assigned nor made the subject of other rights apart from the dominant land.

 

˜282@iIndivisibility of Servitudes)

(1)@One of the co-owners of land may not extinguish, with respect to his own share, a servitude that exists on behalf of or in relation to the land.

(2)@In cases where land is partitioned or a portion thereof is assigned to others, a servitude shall exist on behalf of or in relation to the respective portions of the same; provided, however, that this shall not apply if the servitude, by its nature, relates only to a portion of the land.

 

˜283@iAcquisition of Servitudes by Prescription)

A servitude may be acquired by prescription so long as it is continuously exercised and can be externally recognized.

 

˜284@iAcquisition of Servitudes by Prescription)

(1) If one of the co-owners of land acquires a servitude by prescription, the other co-owners also acquire the same servitude.

(2) Renewal of prescription period does not become effective against co-owners unless it is made against each co-owner that exercises the servitude.

(3) If there are two or more co-owners that exercise a servitude, even if there is any ground for postponement of expiry of prescription period with respect to one of them, the prescription runs in favor of each co-owner.

 

˜285@iWater Servitude)

(1) If water on servient land (meaning a land of a person other than the servitude holder, made available for the benefit of the dominant land) subject to a servitude for water use is insufficient for the demand of the dominant land and the servient land, the water is to be used in proportion to the demand on each parcel of land, firstly for household purposes with the remaining portion used for other purposes; provided, however, that this does not apply if the act establishing the servitude provides otherwise.

(2) If more than one servitude for water use is created with respect to the same servient land, the subsequent servitude holders may not prevent the use of water by the previous servitude holders.

 

˜286@iObligations of Owners of Servient Land to Install Structures)

If the owner of servient land has borne obligations to install or repair structures for the exercise of a servitude at that owner's own expense by the act establishing the servitude or by a contract concluded after the establishment, specific successors of the owner of the servient land also bear those obligations.

 

˜287@iObligations of Owners of Servient Land to Install Structures)

An owner of servient land may be exempted from obligations of Art 286 at any time by abandoning the ownership in the portion of the land necessary for the servitude and transferring the same to the servitude holder.

 

˜288@iUse of Structures by the Owner of Servient Lands)

(1) The owner of a servient land may use structures installed on the servient land for the exercise of the servitude to the extent the use does not obstruct the exercise of that servitude.

(2) In the cases referred to in para (1), the owner of the servient land must bear the expense for the installation and preservation of the structures in proportion to the benefit that owner receives.

 

˜289@(Extinction of Servitude by Acquisition by Prescription of Servient Lands)

If a possessor of servient land has possessed that land in conformity with the necessary requirements for acquisitive prescription, the servitude is extinguished thereby.

 

˜290@(Extinction of Servitude by Acquisition by Prescription of Servient Lands)

The extinctive prescription under Art 289 is renewed by the servitude holder exercising the relevant rights.

 

˜291@iExtinctive Prescription of Servitudes)

The period of the extinctive prescription provided for in Art 166 para (2) commences upon the final exercise of the servitude if the servitude is not exercised continuously, and upon the occurrence of a fact that prevents the exercise of the servitude if the servitude is exercised continuously.

 

˜292@iExtinctive Prescription of Servitudes)

If dominant land is co-owned by more than one person, and expiry of prescription period is postponed or prescription period is renewed in favor of one co-owner, the postponement of expiry of prescription period or the renewal of prescription period is also effective for the benefit of other co-owners.

 

˜293@iExtinctive Prescription of Servitudes)

If a servitude holder does not exercise a portion of that holder's rights, only that portion is extinguished by prescription.

 

˜294@iRights of Common without the Nature of Co-Ownership)

Rights of common that do not have the nature of co-ownership are governed by local customs and are otherwise subject to the mutatis mutandis application of the provisions of this Chapter.

 

Chapter VII Rights of Retention

 

˜295@iContent of Rights of Retention)

(1) If a possessor of a thing belonging to another person has a claim that has arisen in relation to that thing, that possessor may retain that thing until that claim is satisfied; provided, however, that this does not apply if the relevant claim has not yet fallen due.

(2) The provisions of para (1) do not apply if possession commenced by means of a tortious act.

 

˜296@iIndivisibility of Rights of Retention)

A holder of a right of retention may exercise that holder's rights against the whole of the thing retained until the relevant claim is satisfied in its entirety.

 

˜297@iCollection of Fruits by Holders of Rights of Retention)

(1) A holder of a right of retention may collect fruits derived from the thing retained, and appropriate the same to the satisfaction of that holder's own claim prior to other obligees.

(2) The fruits referred to in para (1) must be appropriated first to the payment of interest on the claim, and any remainder must be appropriated to the satisfaction of the principal.

 

˜298@(Custody of Thing Retained by Holders of Rights of Retention)

(1) The holder of a right of retention must possess the thing retained with the due care of a prudent manager.

(2) The holder of the right of retention may not use, lease or provide as a security the thing retained unless that holder obtains the consent of the obligor; provided, however, that this does not apply to uses necessary for the preservation of that thing.

(3) If the holder of a right of retention violates the provisions of para (1) & (2), the obligor may demand that the right of retention be terminated.

 

˜299@(Demands for Reimbursement of Expenses by Holders of Rights of Retention)

(1) If the holder of a right of retention incurs necessary expenses with respect to the thing retained, that holder may have the owner reimburse the same.

(2) If the holder of a right of retention incurs beneficial expenses with respect to the thing retained, to the extent that there is currently an increase in value as a result of the same, that holder may have the expenses incurred or the increase in value reimbursed at the owner's choice; provided, however, that the court may, at the request of the owner, grant a reasonable period of time for the reimbursement of the same.

 

˜300@(Exercise of Rights of Retention and Extinctive Prescription of Claims)

The exercise of a right of retention does not preclude the running of extinctive prescription of claims.

 

˜301@iExtinction of Rights of Retention by Provision of Security)

An obligor may demand that a right of retention be terminated by providing a reasonable security.

 

˜302@iExtinction of Rights of Retention by Loss of Possession)

A right of retention is extinguished if the holder of the right of retention loses possession of the thing retained; provided, however, that this does not apply if the thing retained is leased or it is made the subject of a pledge pursuant to the provisions of Art 298 para (2).

 

Chapter VIII Statutory Liens

Section 1 General Provisions

 

˜303@iContent of Statutory Liens)

The holder of a statutory lien has the rights to have that holder's own claim satisfied prior to other obligees out of the assets of the relevant obligor in accordance with the provisions of laws including this Act.

 

˜304@iExtension of Security Interest to Proceeds of Collateral)

(1) A statutory lien may also be exercised against things including monies that the obligor is to receive as a result of the sale, lease or loss of, or damage to, the subject matter of the statutory lien; provided, however, that the holder of the statutory lien must attach the same before the payment or delivery of the monies or other thing.

(2) The provisions of para (1) also apply to the consideration for real rights created by the obligor on the subject matter of the statutory lien.

 

˜305@iIndivisibility of Statutory Liens)

The provisions of Art 296 apply mutatis mutandis to statutory liens.

 

Section 2 Kinds of Statutory Liens

Subsection 1 General Statutory Lien

 

˜306@iGeneral Statutory Lien)

A person that has a claim arising from the causes set forth below has a statutory lien over the entire assets of the obligor:

(i) expenses for the common benefit;

(ii) an employer-employee relationship;

(iii) funeral expenses; or

(iv) the supply of daily necessaries.

 

˜307@iStatutory Liens for Expenses for Common Benefit)

(1) Statutory liens for expenses for the common benefit exist with respect to the expenses of preservation, liquidation or distribution of the assets of the obligor incurred for the common benefit of all obligees.

(2) With respect to expenses referred to in para (1) that were not beneficial for all obligees, the statutory lien exists solely in relation to obligees that benefited from those expenses.

 

˜308@iStatutory Liens for Employer-Employee Relationships)

Statutory liens for employer-employee relationships exist with respect to salaries and other claims that arise from the employer-employee relationship between the obligor and the employee.

 

˜309@(Statutory Liens for Funeral Expenses)

(1) Statutory liens for funeral expenses exist with respect to the reasonable expenses of a funeral held for the obligor.

(2) The statutory lien referred to in para (1) also exists with respect to the reasonable expenses of a funeral held by the obligor for a relative whom the obligor is bound to support.

 

˜310@iStatutory Liens for Daily Necessaries)

Statutory liens for daily necessaries exist with respect to the supply of food and drink items, fuel and electricity for the most recent 6 months required for the household of the obligor or cohabiting relatives whom the obligor is bound to support and the domestic servants of the same.

 

Subsection 2 Statutory Liens over Movables

 

˜311@iStatutory Liens over Movables)

A person that has a claim arising from the causes set forth below has a statutory lien against specific movables of the obligor:

(i) a lease of immovables;

(ii) a lodging at a hotel;

(iii) the transportation of passengers or luggage;

(iv) the preservation of movables;

(v) the sale of movables;

(vi) the supply of seeds and seedlings or fertilizer (including eggs of silkworms or mulberry leaves provided to feed silkworms);

(vii) agricultural labor; or

(viii) industrial labor.

 

˜312@iStatutory Liens for Leases of Immovables)

Statutory liens for a lease of immovables exist against the movables of the lessee in connection with the rent of the relevant immovables and other obligations of the lessee that arise from that lease relationship.

 

˜313@(Scope of Subject Matter of Statutory Liens for Leases of Immovables)

(1) The statutory lien of a lessor of land exists against movables furnished to that land or buildings for the use of that land, movables provided for the use of that land, and fruits of that land in the possession of the lessee.

(2) The statutory lien of a lessor of a building exists against movables furnished to that building by the lessee.

 

˜314@(Scope of Subject Matter of Statutory Liens for Leases of Immovables)

In the case of an assignment of lease or subleasing, the statutory lien of the lessor extends to the movables of the assignee or sublessee. The same applies to monies that the assignor or sublessor is to receive.

 

˜315@(Scope of Secured Claims under Statutory Liens for Leases of Immovables)

When all of the lessee's assets are to be liquidated, the statutory lien of the lessor exists only with respect to the rent and other obligations for the previous, current and next terms, and obligations to compensate for loss or damage that arise in the previous and current terms

 

˜316@(Scope of Secured Claims under Statutory Liens for Leases of Immovables)

If a lessor has received a security deposit prescribed in Art 622-2 para (1), the lessor has a statutory lien solely against the portion of the lessor's claim that will not be satisfied by that security deposit.

 

˜317@iStatutory Liens for Lodging at Hotels)

Statutory lien for lodging at hotels exist against the hand luggage of a hotel guest left at that hotel, in connection with room charges, and food and beverage charges, that should be borne by the hotel guest.

 

˜318@iStatutory Liens for Transportation)

Statutory liens for transportation exist against luggage in the possession of the carrier, in connection with transportation charges for passengers or freight charges for luggage and expenses incidental to the same.

 

˜319@iMutatis Mutandis Application of Provisions on Good Faith Acquisition)

The provisions of Art 192 thru 195 apply mutatis mutandis to statutory liens under the provisions of Art 312 thru 318.

 

˜320@(Statutory Liens for Preservation of Movables)

Statutory liens for the preservation of movables exist against movables, in connection with expenses required for the preservation of those movables, or expenses required for the preservation, approval or enforcement of rights regarding those movables.

 

˜321@iStatutory Liens for Sale of Movables)

Statutory liens for the sale of movables exist against movables, in connection with the price of those movables and interest on the same.

 

˜322@iStatutory Liens for Supply of Seeds and Seedlings or Fertilizer)

Statutory liens for the supply of seeds and seedlings or fertilizer exist against fruits (including eggs of silk worms or any thing derived from the use of mulberry leaves provided to feed silkworms) derived from land where the seeds and seedlings or fertilizer were used, within 1 year of that use, in connection with the price of those seeds and seedlings or fertilizer and interest on the same.

 

˜323@iStatutory Liens for Agricultural Labor)

Statutory liens for agricultural labor exist against fruits derived from labor, in connection with the most recent year's wages of the person who engages in that labor.

 

˜324@iStatutory Liens for Industrial Labor)

Statutory liens for industrial labor exist against manufactured things derived from labor, in connection with the most recent 3 months' wages of the person who engages in that labor.

 

Subsection 3 Statutory Liens for Immovables

 

˜325@iStatutory Liens for Immovables)

A person that has a claim arising from the causes set forth below has a statutory lien over specific immovables of the obligor:

(i) the preservation of immovables;

(ii) construction work for immovables; or

(iii) the sale of immovables.

 

˜326@iStatutory Liens for Preservation of Immovables)

Statutory liens for the preservation of immovables exist against the relevant immovables, in connection with the expenses required for the preservation of the immovables or the expenses required for the preservation, approval or enforcement of rights regarding the immovables.

 

˜327@iStatutory Liens for Construction Work for Immovables)

(1) Statutory lien for construction work for immovables exists, with respect to immovables, in connection with the expenses of construction work performed by a person that designs, constructs or supervises construction regarding the immovables of the obligor.

(2) The statutory liens referred to in para (1) exist with respect to the relevant increased value alone, but only if there is a current increase in the value of the immovables resulting from the construction work.

 

˜328@iStatutory Liens for Sales of Immovables)

Statutory liens for sales of immovables exist, with respect to immovables, in connection with the price of the immovables and interest on the same.

 

Section 3 Order of Priority of Statutory Liens

 

˜329@iOrder of Priority of General Statutory Liens)

(1) If there are competing general statutory liens, the order of priority follows the order set forth in each item of Art 306.

(2) If there are competing a general statutory lien and a special statutory lien, the special statutory lien has priority over the general statutory lien; provided, however, that statutory liens on expenses for the common benefit have priority being effective against all obligees who benefit from the same.

 

˜330@iOrder of Priority of Statutory Liens over Movables)

(1) If there are competing special statutory liens against the same movables, the order of priority follows the order set forth below. In this case, if there are two or more preservers with respect to the statutory liens for preservation of movables set forth in item (ii), a new preserver has priority over previous preservers:

(i) statutory liens for leases of immovables, lodging at hotels and transportation;

(ii) statutory liens for the preservation of movables; and

(iii) statutory liens for the sale of movables, the supply of seeds and seedlings or fertilizer, agricultural

labor and industrial labor.

(2) In the cases referred to in para (1), if a holder of a statutory lien ranked first knew at the time of acquiring the relevant claim of the existence of a holder of a statutory lien of the 2nd or 3rd rank, that holder may not exercise the relevant rights of priority against those persons. The same applies to the exercise against persons that have preserved things on behalf of the holder of a statutory lien of the first rank.

(3) Regarding fruits, the first rank belongs to persons who engage in agricultural labor, the second rank belongs to persons that supply seeds and seedlings or fertilizer, and the third rank belongs to lessors of land.

 

˜331@iOrder of Priority of Statutory Liens over Immovables)

(1) If there is conflict among special statutory liens against the same immovables, the order of priority follows the order set forth in the items of Art 325.

(2) If the same immovables are subject to successive sales, the order of priority of the statutory liens for the sale of the immovables among sellers follows the chronological order of the sales.

 

˜332@iStatutory Liens with Same Priority)

If there are two or more holders of statutory liens with the same priority with respect to the same object, the holders of statutory liens are paid in proportion to the amounts of their claims.

 

Section 4 Effect of Statutory Liens

 

˜333@iStatutory Liens and Third Party Acquirers)

Statutory liens may not be exercised against the movables that are the subject matter of the same after the obligors have delivered those movables to third party acquirers.

 

˜334@iConflict between Statutory Liens and Pledges on Movables )

If there is conflict between a statutory lien and a pledge on movables, the pledgee of those movables has the same rights as those of the holder of a statutory lien of the first rank under Art 330.

 

˜335@iEffect of General Statutory Liens)

(1) Holders of general statutory liens cannot be paid out of immovables unless they are first paid out of property other than immovables and a claim that is not satisfied remains.

(2) With respect to immovables, holders of general statutory liens must first be paid out of those that are not the subject matters of special security.

(3) If holders of general statutory liens fail to participate in distributions in accordance with the provisions of para (1) & (2), they may not exercise their statutory liens against registered third parties with respect to amounts that would have been paid to them if they had participated in the distribution.

(4) The provisions of para (1) thru (3) do not apply if the proceeds of immovables are distributed prior to the proceeds of assets other than immovables, or if the proceeds of immovables that are the subject matter of a special security are distributed prior to the proceeds of other immovables.

 

˜336@iPerfection of General Statutory Liens)

General statutory liens may be duly asserted against obligees without special security, even if the liens are not registered with respect to the relevant immovables; provided, however, that this does not apply to registered third parties.

 

˜337@(Registration of Statutory Liens for Preservation of Immovables)

In order to preserve the effectiveness of statutory liens for preservation of immovables, registration must be carried out immediately after the completion of the act of preservation.

 

˜338@(Registration of Statutory Liens for Construction Work for Immovables)

(1) In order to preserve the effectiveness of statutory liens for construction work for immovables, the budgeted expenses of the construction work must be registered prior to the commencement of the same. In this case, if the expenses of the construction work exceed the budgeted amount, a statutory lien does not exist with respect to the amount in excess of the same.

(2) The amount of increase in value of immovables that resulted from construction work must be evaluated by an appraiser appointed by the court at the time of the participation in the distribution.

 

˜339@iRegistered Statutory Liens for Preservation of Immovables or Construction Work for Immovables)

Statutory liens registered in accordance with the provisions of Art 337 & 338 may be exercised prior to mortgages.

 

˜340@iRegistration of Statutory Liens for Sales of Immovables)

In order to preserve the effectiveness of statutory liens for the sale of immovables, a statement to the effect that the price of the immovables or interest on the same has not been paid must be registered simultaneously with the execution of the sales contract.

 

˜341@iMutatis Mutandis Application of Provisions regarding Mortgages)

Beyond what is provided for in this Section, the provisions regarding mortgages apply mutatis mutandis to the effects of statutory liens, provided that it is not inconsistent with the nature of the same.

 

Chapter IX Pledges

Section 1 General Provisions

 

˜342@iContent of Pledges)

Pledgees shall have the right to possess Thing received from obligors or third parties as security for their

A pledgee has the right to possess a thing received from an obligor or a third party as security for their claims and to have their own claims paid prior to other obligees out of that thing.

 

˜343@iSubject Matter of Pledges)

A thing that cannot be transferred to another person may not be made the subject of a pledge.

 

˜344@iCreation of Pledges)

The creation of a pledge becomes effective thru delivery of the subject matter of the pledge to the obligee.

 

˜345@iProhibition of Possession thru Pledgors as Agents)

A pledgee may not allow a pledgor to possess the thing pledged on behalf of the pledgee.

 

˜346@iScope of Secured Claims under Pledges)

A pledges secures the principal, interest, penalties, expenses of enforcing the pledge, expense of preserving the thing pledged and the compensation of loss or damage arising from failure to perform obligations or latent defects in the thing pledged; provided, however, that this does not apply if the act establishing the pledge provides otherwise.

 

˜347@iRetention of the Thing Pledged)

The pledgee may retain the thing pledged until the claims provided for in Art 346 are satisfied; provided, however, that this right cannot be duly asserted against an obligee that has priority over the pledgee.

 

˜348@iSubpledges)

The pledgee may subpledge the thing pledged within the duration of the pledgee's right, upon the pledgee's own responsibility. In this case, the pledgee is responsible for any loss arising from the subpledge even if the same is caused by force majeure.

 

˜349@iProhibition on Disposition of the Thing Pledged by Contract)

The pledgor may not, either by the acts establishing pledges or by contracts made prior to the due dates for the obligations, allow the pledgee to acquire ownership of the thing pledged as satisfaction of the obligations, nor promise to allow the pledgee to dispose of it in any manner other than is prescribed by law.

 

˜350@(Mutatis Mutandis Application of Provisions on Rights of Retention and Statutory Liens)

The provisions of Art 296 thru 300 and those of Art 304 apply mutatis mutandis to pledges.

 

˜351@(Third-Party Collateral Providers' Rights to Reimbursement)

If a person that creates a pledge to secure an obligation of another person performs that obligation or loses ownership of the thing pledged due to the enforcement of the pledge, that person has the right to reimbursement from the obligor in accordance with the provisions regarding guarantee obligations.

 

Section 2 Pledges on Movables

 

˜352@iRequirements for the Perfection of Pledges on Movables)

A pledgee of movables cannot duly assert the pledge against third parties unless that pledgee is in continuous possession of the thing pledged.

 

˜353@iRecovery of Possession of the Thing Pledged )

A pledgee of movables may, if the pledged thing is usurped, recover the same solely by filing an action for recovery of possession.

 

˜354@(Enforcement of Pledges on Movables)

If the claim of a pledgee of movables is not satisfied, the pledgee may make a request to the court seeking the immediate appropriation of the thing pledged for the satisfaction of that claim in accordance with the evaluation of an appraiser only when there are reasonable grounds. In this case, the pledgee of movables must notify the obligor in advance of the request.

 

˜355@iOrder of Priority of Pledges on Movables)

If more than one pledge is created with respect to the same movables, the order of priority of those pledges follow the chronological order of their creation.

 

Section 3 Pledges of Immovables

 

˜356@(Use of and Obtaining Profit from Immovables by Pledgees)

The pledgee of immovables may use and profit from the immovables that are the subject matter of a pledge in line with the way the relevant immovables are used.

 

˜357@(Management Expenses Borne by Pledgees of Immovables)

The pledgee of immovables pays the expenses of management and otherwise bear burdens in relation to the immovables.

 

˜358@(Prohibition on Demanding Interest by Pledgees of Immovables)

The pledgee of immovables may not demand interest on the relevant claim.

 

˜359@(Special Provisions in Act of Establishment)

The provisions of Art 356 thru 358 do not apply if the acts establishing pledges provide otherwise or execution against earnings from the immovable collateral (referring to the execution against earnings from immovable collateral provided for in Art 180, item (ii) of the Civil Execution Act) has been commenced.

 

˜360@iDuration of Pledges of Immovables)

(1) The duration of pledges of immovables may not exceed 10 years. Even if a longer period is provided for in the act establishing the pledge, the duration of the same is 10 years.

(2) The creation of pledges of immovables may be renewed; provided, however, that the duration of the same may not exceed 10 years from the time of the renewal.

 

˜361@iMutatis Mutandis Application of Provisions on Mortgages)

Beyond what is provided for in this Section, the provisions of the next Chapter (Mortgages) apply mutatis mutandis to pledges of immovables, provided that it is not inconsistent with the nature of the same.

 

Section 4 Pledges of Rights

 

˜362@iSubject Matter of Pledges of Rights)

(1)   A pledge may have a property right for its subject matter.

(2) Beyond what is provided for in this Section, the provisions of Section 1 thru 3 (General Provisions, Pledges on Movables and Pledges of Immovables) apply mutatis mutandis to pledges referred to in para (1), provided that it is not inconsistent with the nature of the same.

 

˜364@iRequirements for Perfection of Pledges over Claims)

The creation of a pledge over a claim (including a pledge over a claim which has not yet arisen) may not be duly asserted against a third party obligor and other third parties unless notice of the creation of the pledge is given to that third party obligor in accordance with the provisions of Art 467, or unless that third party obligors gives consent to the same.

 

˜366@iCollection of Claims by Pledgees)

(1) A pledgee may directly collect the claim that is the subject matter of the pledge.

(2) If monies are the subject matter of a pledged claim, the pledgee may collect the same to the extent of the portion that corresponds to the amount of the pledgee's own claim.

(3) If the due date of the pledged claim referred to in para (2) arrives prior to the due date of the claim of the pledgee, the pledgee may have the third party obligor deposit with official depository that amount to be paid to the pledgee. In this case, the pledge exists over the amount so deposited.

(4) If the subject matter of the pledged claim is not monies, the pledgee has the pledge over the thing received for the satisfaction of the claim.

 

Chapter X Mortgages

Section 1 General Provisions

 

˜369@iContent of Mortgages)

(1) A mortgagee has the right to have the mortgagee's claim satisfied prior to other obligees out of the immovables that the obligor or a third party provided to secure the obligation without transferring possession.

(2) Superficies and farming rights may be the subject matter of a mortgage. In this case, the provisions of this Chapter apply mutatis mutandis.

 

˜370@iScope of Effect of Mortgages)

A mortgage extends to the things that form an integral part of the immovables that are the subject matter of the mortgage ("mortgaged immovables") except for buildings on the mortgaged land; provided, however, that this does not apply if the act establishing the mortgage provides otherwise or the rescission of fraudulent act may be demanded as prescribed in Art 424 para (3) with regard to the act of the obligor.

 

˜371@iScope of Effect of Mortgages)

If there is a default with respect to a claim secured by a mortgage, the mortgage extends to the fruits of the mortgaged immovables derived after the default.

 

˜372@iMutatis Mutandis Application of Provisions on Right of Retention)

The provisions of Art 296, 304 and 351 apply mutatis mutandis to mortgages.

 

Section 2 Effect of Mortgages

 

˜373@iOrder of Priority of Mortgages)

If more than one mortgage is created with respect to the same immovables, the order of priority of those mortgages follows the chronological order of their registration.

 

˜374@iChanges in Order of Priority of Mortgages)

(1) The order of priority of mortgages may be changed with the agreement of all mortgagees; provided, however, that if there are interested persons, the consent of the same must be obtained.

(2 The changes in order referred to in para (1) do not become effective unless registered.

 

˜375@iScope of Secured Claims under Mortgages)

(1) If a mortgagee has the right to demand periodic payments including interest, that mortgagee may exercise the mortgage solely with respect to payments of the last 2 years before maturity; provided, however, that with respect to prior periodic payments, if special registration is effected after maturity, the mortgagee is not precluded from exercising the mortgage as from the time of that registration.

(2) If the mortgagee has the right to claim compensation for loss or damage resulting from defaults in obligations, the provisions of para (1) also apply mutatis mutandis to the loss or damage of the most recent 2 years; provided, however, that the aggregate period including the interest and other periodic payments may not exceed 2 years.

 

˜376@iDisposition of Mortgages)

(1) A mortgagee may apply the mortgage to secure other claims, or assign or waive that mortgage, or its order of priority, for the benefit of other obligees of the same obligor.

(2) In the cases referred to in para (1), if a mortgagee disposes of the mortgage for the benefit of two or more persons, the order of priority of the rights of persons who benefit from that disposition follows the chronological order of supplemental registration in the registration of the mortgage.

 

˜377@iRequirements for Perfection of Disposition of Mortgages)

(1) In the cases in Art 376, the mortgagee may not duly assert the disposition of mortgages against principal obligors, guarantors, mortgagors or their respective successors unless the disposition is notified to the principal obligors or the principal obligors consent to that disposition in accordance with the provisions of Art 467.

(2) If the principal obligors have received the notice or given the consent pursuant to the provisions of

para (1), payments made without the consent of the persons who benefit of the disposition of the mortgage may not be duly asserted against those beneficiaries.

 

˜378@(Direct Satisfaction of Mortgage with Purchase Price)

If a third party that purchases the ownership or superficies of a mortgaged immovables pays the price of the same to a mortgagee at the request of the same mortgagee, that mortgage is terminated for the benefit of that third party.

 

˜379@iClaims for Extinguishment of Mortgages)

A third party acquirer of a mortgaged immovables may make a claim for the extinguishment of a mortgage as prescribed in Art 383.

 

˜380@iClaims for Extinguishment of Mortgages)

No principal obligor, guarantor or successor of the same may make a claim for the extinguishment of a mortgage.

 

˜381@iClaims for Extinguishment of Mortgages)

A third party acquirer of a mortgaged immovables that is subject to a condition precedent may not make a claim for the extinguishment of a mortgage while it is uncertain whether or not the condition precedent will be fulfilled.

 

˜382@iTiming of Claims for Extinguishment of Mortgages)

A third party acquirer of a mortgaged immovables must make a claim for the extinguishment of a mortgage before attachment under auction procedure as a result of the enforcement of the mortgage takes effect.

 

˜383@(Procedures for Claims for Extinguishment of Mortgages)

If a third party acquirer of a mortgaged immovables makes a claim for the extinguishment of a mortgage, that third party must send the documents set forth below to each registered obligee:

(i)a document that specifies the cause and date of the acquisition, the name and address of the assignor and the acquirer, the nature, location and price of the mortgaged immovables and burdens of the acquirer;

(ii) a certificate of registered information regarding the mortgaged immovables (limited to certificates certifying all registered information currently in effect); and

(iii) a document to the effect that, if an obligee does not enforce the mortgage by filing a petition for auction within 2 months, the third party acquirer of the mortgaged immovables will pay the price provided for in item (i) or an amount specifically fixed in accordance with the order of priority of claims, or will deposit the price or that amount with official depository.

 

˜384@iDeemed Approval of Obligees)

In the cases set forth below, the obligee that has received the documents set forth in each item of Art 383 is deemed to have approved the price or amount that the third party acquirer of the mortgaged immovables has offered as stated in the document set forth in item (iii) of that Article:

(i) if the obligee does not enforce the mortgage by filing a petition for auction within 2 months after receipt of the documents set forth in each item of Art 383;

(ii) if the obligee withdraws a petition under item (i);

(iii) if a decision dismissing a petition under item (i) has become final and binding; or

(iv) if a decision rescinding auction procedures based on a petition under item (i) (excluding rulings under the provisions of Art 63 para (3) or Art 68-3 para (3) of the Civil Execution Act applied mutatis mutandis under Art 188 of that Act, or under the provisions of Art 183, para (2) of that Act if the certified copy under para (1), item (v) of that Article is submitted) has become final and binding.

 

˜385@iNotice of Petitions for Auction)

If an obligee that has received the documents set forth in each item of Art 383 files a petition under Art 384 item (i), that obligee must give notice to that effect to the obligor and assignor of the mortgaged immovables within the period under that item.

 

˜386@iEffect of Claims for Extinguishment of Mortgages)

A mortgage is extinguished if all registered obligees approve the price or amount offered by the third party acquirer of the mortgaged immovables, and the third party acquirer of the mortgaged immovables has paid or deposited with the official depository the price or amount approved.

 

˜387@(Perfection of Leases with Registered Consent of Mortgagees)

(1) A registered lease may be duly asserted against mortgagees that hold mortgages registered prior to the registration of that lease if all mortgagees that hold those mortgages give their consent and those consents are registered.

(2) For a mortgagee to give the consent referred to in para (1), the approval of the persons that hold rights for which the mortgage is the subject matter and other persons that will suffer detriment as a result of the consent of the mortgagee must be obtained.

 

˜388@iStatutory Superficies)

If the land and a building on that land belong to the same owner, a mortgage is created with respect to that land or building, and the enforcement of that mortgage causes them to belong to different owners, it is deemed that a superficies has been created with respect to that building. In this case, the rent is fixed by the court at the request of the parties.

 

˜389@iAuction of Buildings on Mortgaged Lands)

(1) If a building is constructed on a mortgaged land after the creation of a mortgage, the mortgagee may auction the building together with the land; provided, however, that the right of priority of that mortgagee may be exercised solely against the proceeds of the land.

(2) The provisions of para (1) do not apply if the owner of that building has rights with respect to the possession of the mortgaged land that may be duly asserted against the mortgagee.

 

˜390@(Purchases of Mortgaged Immovables by Third Party Acquirers)

A third party acquirer of a mortgaged immovables may be the purchaser at the auction of the same.

 

˜391@iClaims for Reimbursement of Expenses by Third Party Acquirers of Mortgaged Immovables)

If a third party acquirer of a mortgaged immovables has incurred necessary or beneficial expenses with respect to the mortgaged immovables, that third party may obtain reimbursement of the same out of the proceeds of the mortgaged immovables prior to other obligees, in accordance with the distinctions in Art 196.

 

˜392@(Distribution of Proceeds in Cases of Joint Mortgages)

(1) If an obligee holds mortgages on several immovables to secure the same claim, and the proceeds of those immovables are to be distributed simultaneously, the burden of the claim is divided in proportion to the value of each of the immovables.

(2) If an obligee holds mortgages on several immovables to secure the same claim, and the proceeds from only one of the immovables are to be distributed, the mortgagee may receive the payment of the entire claim out of those proceeds. In this case, subordinated mortgagees may exercise their mortgages in subrogation of that mortgagee, up to the amount that that mortgagee that receives payment would otherwise be entitled to receive from the proceeds of other immovables, in accordance with the provisions of para (1).

 

˜393@(Supplemental Registration of Subrogation in Case of Joint Mortgages)

A person that exercises a mortgage by way of subrogation pursuant to the provisions of the second sentence of Art 392 para (2) may note that subrogation in the registration of that mortgage.

 

˜394@(Payment from Assets Other than Mortgaged Immovables)

(1) A mortgagee may receive payment from assets other than the mortgaged immovables only for the portion of that mortgagee's claim that is not paid from the proceeds of the relevant mortgaged immovables.

(2) The provisions of para (1) do not apply if the proceeds of other assets are to be distributed prior to the proceeds of the mortgaged immovables. In these cases, each other obligee may demand that the amount to be distributed to the mortgagee be deposited in order to have the mortgagee receive payment under the provisions of that paragraph.

 

˜395@iSuspension of Delivery by Users of Mortgaged Buildings)

(1) A person that uses or profits from a building subject to a mortgage by virtue of a lease that cannot be duly asserted against the mortgagee, and that is set forth as follows ("mortgaged building user") is not required to deliver that building to the purchaser thereof until 6 months have passed from the time when the purchaser purchased that building at auction:

(i) a person that has been using or profiting from the building since prior to the commencement of auction

procedures; or

(ii) a person that is using or profiting from the building by virtue of a lease given after the commencement

of auction procedures by the administrator of compulsory administration or execution against earnings

from immovable collateral.

(2) The provisions of para (1) do not apply if the purchaser, specifying a reasonable period of time, issues a notice to the mortgaged building user demanding payment of consideration for a period of 1 month or more with respect to the use of the building referred to in that paragraph that has been made after the time of purchase by the purchaser, and no payment is made within that reasonable period of time.

 

Section 3 Extinction of Mortgages

 

˜396@iExtinctive Prescription of Mortgages)

No mortgage is extinguished by prescription in relation to obligors and mortgagors unless it is extinguished simultaneously with the claim the mortgage secures.

 

˜397@(Extinction of Mortgages by Acquisition by Prescription of Mortgaged I Immovables)

If a person that is neither an obligor nor a mortgagor has possessed the mortgaged immovables in complete conformity with the requirements for acquisitive prescription, the mortgage is extinguished thereby.

 

˜398@iRenunciation of Mortgaged Superficies)

Even if a holder of superficies or a farming right holder that created mortgage on that holder's superficies or farming right renounces the relevant rights, the renunciation may not be duly asserted against the mortgagee.

 

Section 4 Revolving Mortgages

 

˜398-2@(Revolving Mortgages)

(1) Mortgages may be created, by an establishing act, in order to secure unspecified claims of a certain scope, up to the limit of a maximum amount.

(2) The scope of the unspecified claims to be secured by the mortgage under the provisions of para (1) ("revolving mortgage") must be prescribed by limiting the scope to claims arising from specific contracts with the obligor for continuous transactions or other claims arising from certain kinds of transactions with the obligor.

(3) Claims that arise continuously with the obligor pursuant to a specific cause, claims under negotiable instruments or checks, or electronically recorded monetary claims (meaning electronically recorded monetary claims prescribed in Art 2 para (1) of the Electronically Recorded Monetary Claims Act); the same applies in Art 398-3 para (2)) may be treated as claims that are to be secured by a revolving mortgage, notwithstanding the provisions of para (2).

 

˜398-3@(Scope of Secured Claims under Revolving Mortgages)

(1) A revolving mortgagee may exercise the relevant revolving mortgage up to the maximum amount with respect to all of crystallized principal as well as periodic payments including interest and compensation for loss or damage resulting from failure to perform obligations.

(2) If a claim under a negotiable instrument or check or electronically recorded monetary claim acquired from causes other than the transactions with the obligor is agreed to be treated as a claim to be secured by a revolving mortgage, and any of the following grounds exist, that revolving mortgage may be exercised only with respect to claims acquired before those grounds arose; provided, however, that even with respect to claims acquired after the grounds arose, the exercise of the revolving mortgage is not precluded as far as the claims were acquired without knowledge of those grounds:

(i) the suspension of payments by the obligor;

(ii) a petition to commence bankruptcy proceeding, the commencement of rehabilitation proceeding, the

commencement of reorganization proceeding or the commencement for special liquidation with respect to

the obligor; or

(iii) a petition for commencement of auction procedure in relation to a mortgaged immovables or

attachment for disposition of delinquency.

 

˜398-4@(Alterations in Scope of Secured Claims under Revolving Mortgages and of Obligors)

(1) The scope of the claims to be secured by a revolving mortgage may be changed if the change is effected before the principal is crystallized. The same applies with respect to change of obligors.

(2) In order to effect the changes referred to in the preceding paragraph, it is not required that the approval of third parties including subordinated mortgagee be obtained.

(3) If the change under paragraph (1) is not registered before the principal is crystallized, it is deemed that the change was not effected.

 

˜398-5@(Changes in Maximum Amounts of Revolving Mortgages)

Changes in the maximum amount of a revolving mortgage may not be made unless the consent of the interested parties is obtained.

 

˜398-6@(Provisions of Principal Crystallization Date of Revolving Mortgage)

(1) With respect to the principal secured by a revolving mortgage, the date when the principal is to be crystallized may be specified or changed.

(2) The provisions of Art 398-4, para (2) apply mutatis mutandis to the cases referred to in para (1).

(3) The date under para (1) must be within 5 years of the day when the date was prescribed or changed.

(4) If registration with respect to a change in the date under para (1) is not effected before the old date, the principal secured is crystallized on that old date.

 

˜398-7@(Assignments of Secured Claims under Revolving Mortgages)

(1) A person that acquires a claim from a revolving mortgagee before the principal is crystallized may not exercise the revolving mortgage with respect to that claim. The same applies to a person that made payment for or on behalf of an obligor before the principal was crystallized.

(2) If an obligation is assumed before the principal is crystallized, the revolving mortgagee may not exercise the revolving mortgage with respect to the obligation of the person that assumes the obligation.

(3) If the assumption of obligation releasing an old obligor is effected before the principal is crystallized, the obligee may not transfer the revolving mortgage to the obligation assumed by the new obligor, notwithstanding the provisions of Art 472-4, para (1).

(4) If any novation due to the substitution of the obligee is effected before the principal is crystallized, the obligee before the novation may not transfer the revolving mortgage to the obligations after the novation, notwithstanding the provisions of Art 518 para (1). The same applies to the obligee in the case of novation due to the substitution of the obligor before the principal is crystallized.

 

˜398-8@(Succession of Revolving Mortgagees or Obligors)

(1) If succession involving a revolving mortgagee commences before the principal is crystallized, the revolving mortgage secures the claims that exist at the time of the commencement of succession and otherwise secures claims that were agreed upon by the heirs and the mortgagor of the revolving mortgage and that an heir acquires after the commencement of succession.

(2) If succession involving an obligor commences before the principal is crystallized, the revolving mortgage secures the obligations that exist at the time of the commencement of succession and otherwise secures the claims that were agreed upon by the revolving mortgagee and the mortgagor of the revolving mortgage and that an heir assumes after the commencement of succession.

(3) The provisions of Art 398-4, para (2) apply mutatis mutandis if an agreement as referred to in para (1) & (2) is reached.

(4) If the agreements referred to in para (1)& (2) are not registered within 6 months of the commencement of succession, the principal secured is deemed to have been crystallized at the time of the commencement of succession.

 

˜398-9@(Mergers of Revolving Mortgagees or Obligors)

(1) If there is a merger with respect to a revolving mortgagee before the principal is crystallized, the revolving mortgage secures the claims that exist at the time of the merger and otherwise secures claims that a corporation that survives the merger or a corporation that is incorporated by the merger acquires after the merger.

(2) If there is a merger with respect to an obligor before the principal is crystallized, the revolving mortgage secures the obligations that exist at the time of the merger and otherwise secures the obligations that a corporation that survives the merger or a corporation that is incorporated by the merger assumes after the merger.

(3) In the cases provided for in para (1) and (2), the mortgagor of the revolving mortgage may demand that the principal secured be crystallized; provided, however, that this does not apply, in the cases referred to in para (2), if the relevant obligor is the mortgagor of the revolving mortgage.

(4) If a demand under the provisions of para (3) is made, the principal secured is deemed to have been crystallized at the time of the merger.

(5) The demand under the provisions of para (3) may not be made if 2 weeks have passed since the day when the mortgagor of the revolving mortgage acquired knowledge of the merger. The same applies if 1 month has passed from the day of the merger.

 

˜398-10@(Company Splits of Revolving Mortgagees or Obligors)

(1) If, before the principal is crystallized, a company split in which the relevant revolving mortgagee is the company to be split is effected, the revolving mortgage secures the claims that exist at the time of the split and otherwise secures claims acquired after the split by the split company and the company incorporated by the split, or claims acquired after the split by the company that succeeded to some or all of the rights and obligations of the split company regarding its business.

(2) If, before the principal is crystallized, a split in which the relevant obligor is the company to be split is effected, the revolving mortgage secures the obligations that exist at the time of the split and otherwise secures obligations that are assumed after the split by the split company and the company incorporated by the split, or claims acquired after the split by the company that assumed some or all of the rights and obligations of the split company regarding its business.

(3) The provisions of para (3) thru (5) of Art 398-9 apply mutatis mutandis to cases under para (1) & (2).

 

˜398-11@(Disposition of Revolving Mortgages)

(1) Before the principal is crystallized, a revolving mortgagee may not dispose of a revolving mortgage under the provisions of Art 376 para (1); provided, however, that the revolving mortgagee is not precluded from applying that revolving mortgage to secure other claims.

(2) The provisions of Art 377 para (2) do not apply to payments made before the principal is crystallized in the cases provided for in the proviso to para (1).

 

˜398-12@(Assignments of Revolving Mortgages)

(1) Before the principal is crystallized, a revolving mortgagee may assign a revolving mortgage, with the approval of the mortgagor of the revolving mortgage.

(2) A revolving mortgagee may divide the revolving mortgage into two revolving mortgages and assign either of the same pursuant to the provisions of para (1). In this case, the rights for which that revolving mortgage is the subject matter is extinguished with respect to the revolving mortgage that was assigned.

(3) In order to effect an assignment under the provisions of para (2), the approval of the person that holds the rights for which that revolving mortgage is the subject matter must be obtained.

 

˜398-13@(Partial Assignments of Revolving Mortgages)

Before the principal is crystallized, a revolving mortgagee may, with the approval of the mortgagor of the revolving mortgage, effect a partial assignment of the revolving mortgage (meaning assignments of revolving mortgages that the assignor effects without dividing the revolving mortgage in order to co-own the same with the assignee; hereinafter the same applies in this Section).

 

˜398-14@(Co-Ownership of Revolving Mortgages)

(1) Co-owners of a revolving mortgage are paid in proportion to the amount of their respective claims; provided, however, that if before the principal is crystallized, a proportion other than the above is agreed upon, or if it is agreed upon that a certain person will be paid prior to another, that agreement prevails.

(2) A co-owner in a revolving mortgage may, with the consent of the other co-owners, assign rights of the same pursuant to the provisions of Art 398-12 para (1).

 

˜398-15@(Assignments or Waivers of Order of Priority of Mortgages and Assignments or Partial Assignments of Revolving Mortgages)

If a revolving mortgagee that has accepted an assignment or waiver of the order of priority of a mortgage has assigned or partially assigned that mortgagee's revolving mortgage, the assignee benefits from the assignment or waiver of that order of priority.

 

˜398-16@(Joint Revolving Mortgages)

The provisions of Art 392 & 393 apply with respect to a revolving mortgage only when the fact that the revolving mortgage has been simultaneously established on several immovable properties to secure the same claim is registered.

 

˜398-17@(Changes in Joint Revolving Mortgages)

(1) An change in the scope, obligors or maximum amount of the claims to be secured, or assignment or partial assignment of the revolving mortgages for which registration is effected in accordance with Art 398-16 does not take effect unless registration is effected with respect to all immovable properties over which that revolving mortgages are established.

(2) The principal secured by the revolving mortgage for registered pursuant to Art 398-16 is crystallized even when grounds on which the principal is crystallized arise only with respect to one immovable property alone.

 

˜398-18@(Aggregate Revolving Mortgages)

A person that has a revolving mortgage on several immovable properties may exercise the right of priority with respect to the proceeds of each immovable property up to the respective maximum amounts, except for cases provided for in Art 398-16.

 

˜398-19@(Requests for Crystallizing of Principal of Revolving Mortgages)

(1) If 3 years have passed from the time of the creation of a revolving mortgage, the mortgagor of the revolving mortgage may request the crystallizing of the principal secured. In this case, the principal secured is crystallized when 2 weeks have passed since the time of that request.

(2) A revolving mortgagee may request the crystallizing of the principal secured at any time. In this case, the principal secured is crystallized on the request of the same.

(3) The provisions of para (1) & (2) do not apply if the date on which the principal secured is to be crystallized is specified.

 

˜398-20@(Grounds for Crystallizing of Principal of Revolving Mortgages)

(1) The principal secured by a revolving mortgage is crystallized in the following cases:

(i) if the revolving mortgagee has filed, with respect to the mortgaged immovables, a petition for auction

or execution against earnings from immovable collateral or the attachment under the provisions of Art 304 as applied mutatis mutandis pursuant to Art 372; provided, however, that this provision applies only if the commencement of either auction procedures or execution procedures against earnings from immovable collateral, or an attachment has been effected;

(ii) if the revolving mortgagee has effected an attachment for disposition of delinquency against the

mortgaged immovables;

(iii) if 2 weeks have passed from the time when the revolving mortgagee acquired knowledge of the commencement of auction procedures or attachment for disposition of delinquency against the mortgaged immovables; or

(iv) if the obligor or mortgagor of the revolving mortgage has become subject to an order commencing

bankruptcy proceeding.

(2) If the commencement of auction procedures, the attachment under item (iii) of para (1) or the order commencing bankruptcy proceeding under item (iv) of para (1) ceases to be effective, it is deemed that the principal secured was not crystallized; provided, however, that this does not apply if a person has acquired that revolving mortgage or a right for which the revolving mortgage is the subject matter on the assumption that the principal was crystallized.

 

˜398-21@(Requests for Reductions in Maximum Amount of Revolving Mortgages)

(1) After the principal is crystallized, the mortgagor of the revolving mortgage may request a reduction in the maximum amount of that revolving mortgage, to the amount of the obligations actually in existence plus the amount of the periodic payments including interest and the amount of compensation for loss or damage due to default in obligations that will arise in the following 2 years.

(2) As to the reduction in the maximum amount of a revolving mortgage registered pursuant to Art 398-16, it suffices to make the request referred to in para (1) with respect to one of those immovable properties.

 

˜398-22@(Requests for Extinguishment of Revolving Mortgages)

(1) If the amount of the obligations currently in existence after the principal is crystallized exceeds the maximum amount of a revolving mortgage, the person that created the revolving mortgage to secure the obligations of another person or a third party that has acquired ownership, superficies, farming rights, or a lease that can be duly asserted against any third party with respect to the mortgaged immovables may request the extinguishment of that revolving mortgage on paying or depositing with an official depository an amount equivalent to that maximum amount. In this case, that payment or deposit has the effect of performance of the obligation.

(2) A revolving mortgage that has been registered pursuant to Art 398-16 is extinguished if the request for extinguishment referred to in para (1) is made with respect to one immovable property.

(3) The provisions of Art 380 and 381 apply mutatis mutandis to the requests for extinguishment under

para (1).

 

Part III Claims

Chapter I General Provisions

Section 1 Subject Matter of Claim

 

˜399@iSubject Matter of Claim)

Even something that cannot be given an estimated monetary value may be the subject matter of a claim.

 

˜400@iDuty of Care in Cases of Delivery of Specific Things)

If the subject matter of a claim is the delivery of a specific thing, the obligor must retain the thing with the due care of a prudent manager, which is determined in light of the contract or other sources of claims and the common sense in the transaction, until the delivery.

 

˜401@iFungible Claim)

(1) If the object of a claim is designated only with reference to a type and its quality cannot be determined in light of the nature of the juridical act or intention of the parties, the obligor must deliver a thing of medium quality.

(2) In the case referred to in para (1), if the obligor has completed the acts necessary to deliver the thing, or has designated the thing the obligor is to deliver with the consent of the obligee, that thing thenceforth constitutes the subject matter of the claim.

 

˜402@iMonetary Claim)

(1) If the subject matter of a claim is money, the obligor, at the obligor's own choice, may make the payment in currency of any kind; provided, however, that this does not apply to if the delivery of a specific kind of currency is the subject matter of the claim.

(2) If the specific kind of currency that is the subject matter of the claim has lost its mandatory circulating power at the time of the payment, the obligor must make payment in other currency.

(3) The provisions of para (1) & (2) apply mutatis mutandis if the delivery of the currency of a foreign state is the subject matter of the claim.

 

˜403@iMonetary Claim in Foreign Currency)

If the amount of the claim is designated in the currency of a foreign state, the obligor may make the payment in Japanese currency converted with the foreign exchange rate at the place of the performance.

 

˜404@iStatutory Interest Rate)

(1) Unless the parties manifest a particular intention with respect to a claim which bears interest, the rate of the interest is the statutory interest rate as of the time when the interest first accrues.

(2) The statutory interest rate is 3% per annum.

(3) Notwithstanding the provisions of para (2), pursuant to the provisions of Ministry of Justice Order, the statutory interest rate is to change pursuant to the provisions of para (4) for each term consisting of 3 years.

(4) The statutory interest rate for each term is the rate calculated by adding or deducting the rate equivalent to the difference between the benchmark rate for the most recent term during which there was a change in the statutory interest rate pursuant to the provisions of this paragraph ("most recent term of change") and the benchmark rate for the current term (any part of the ratio which is less than 1% is disregarded), to or from the statutory interest rate for the most recent term of change.

(5) The term "benchmark rate" prescribed in para (4) means the rate announced by the Minister of Justice as the rate calculated by dividing, by 60, the sum of the average interest rate for short-term loans for each month (meaning the average of the interest rates for loans (limited to loans for a term of less than 1 year) extended by banks in each month)) during the period from January of the year 6 years prior to the year which contains the first day of each term to December of the year 2 years prior to the year which contains the first date of each term (any part of the rate which is less than 0.1% is disregarded), pursuant to the provisions of Ministry of Justice Order.

 

˜405@iIncorporation of Interest into Principal)

If the payment of interest corresponding to one year or more is delayed, and if the obligor does not pay that interest notwithstanding the demand by the obligee, the obligee may incorporate that interest into the principal.

 

˜406@iAttribution of Right of Choice in Cases of Alternative Obligation)

If the subject matter of the claim is to be determined by a choice being made from among more than one performance, the right to choose belongs to the obligor.

 

˜407@iExercise of Right to Choose)

(1) The right to choose under Art406 is exercised by manifesting the intention to the counterparty.

(2) The manifestation of intention referred to in para (1) may not be withdrawn without the consent of the counterparty.

 

˜408@iTransfer of Right to Choose)

If a claim is due and, notwithstanding a demand by the counterparty specifying a reasonable period of time, the party that holds the right to choose does not exercise the right within that period of time, the right to choose is transferred to the counterparty.

 

˜409@iRight to Choose of Third Party)

(1) If a third party makes the choice, that choice is made by manifesting intention to either the obligee or the obligor.

(2) In the case prescribed in para (1), if the third party is unable to make the choice or has no intention to make the choice, the right to choose is transferred to the obligor.

 

˜410@iIdentification of Alternative Obligation Due to Impossibility)

If a performance included in the subject matter of a claim is impossible, and the impossibility is by negligence of the party that has the right to choose, the claim exists to the extent of the remaining performances.

 

˜411@iEffect of Choice)

The choice becomes effective retroactively as of the time of the accrual of the claim; provided, however, that this may not prejudice the rights of a third party.

 

Section 2 Effects of Claims

Subsection 1 Liability for Non-Performance

 

˜412@iTime of Performance and Delay in Performance)

(1) If a fixed due date is assigned to the performance of an obligation, the obligor is liable for delay from the time that due date arrives.

(2) If an uncertain due date is assigned to the performance of an obligation, the obligor is liable for delay from the time when the obligor receives the request for performance after the due date arrives or the time when the obligor becomes aware of the arrival of that due date, whichever comes earlier.

(3) If no time limit is assigned to the performance of an obligation, the obligor is liable for delay from the time the obligor receives the request for performance.

 

˜412-2@(Impossibility of Performance)

(1) If the performance of an obligation is impossible in light of the contract or other sources of claims and the common sense in the transaction, the obligee may not request the performance of the obligation.

(2) The impossibility of the performance of an obligation based on a contract as of the time of the formation of the contract does not preclude claiming compensation for loss or damage that arises from the impossibility of the obligation pursuant to the provisions of Art 415.

 

˜413@iObligee's Delay in Acceptance)

(1) If the obligee refuses, or is unable, to accept the tender of the performance of an obligation, and the subject matter of the obligation is the delivery of a specific thing, it is sufficient for the obligor to retain the thing by exercising care identical to that the obligor exercises for the obligor's own property, during the period from the time of the tender of the performance until the delivery of the thing.

(2) If the obligee's refusal or inability to accept the performance of an obligation results in increasing the expenses for the performance, the amount of increase is borne by the obligee.

 

˜413-2@(Impossibility of Performance during Obligor's Delay in Performance or Obligee's Delay in Acceptance, and Grounds Attributable)

(1) If the performance of an obligation becomes impossible due to grounds not attributable to either party during a period in which the obligor is liable for delay in performance of the obligation, the impossibility of performance is deemed to be due to grounds attributable to the obligor.

(2) If the obligee refuses or is unable to accept the performance of an obligation, and the performance of the obligation becomes impossible due to grounds not attributable to either party after the obligor's tender of the performance, the impossibility of performance is deemed to be due to grounds attributable to the obligee.

 

˜414@(Compelling Performance)

(1) If an obligor voluntarily fails to perform an obligation, the obligee may request the court to enforce obligor to perform through methods such as direct compulsion, execution by substitution, or indirect compulsion, in accordance with the provisions of the Civil Execution Act and other laws and regulations concerning the procedure for compulsory execution; provided, however, that this does not apply if the nature of the obligation does not permit the enforcement.

(2) The provisions of para (1) do not preclude claiming compensation for loss or damage.

 

˜415@(Compensation for Loss or Damage Due to Non-Performance)

(1) If an obligor fails to perform consistent with the purpose of the obligation or the performance of an obligation is impossible, the obligee may claim compensation for loss or damage arising from the failure; provided, however, that this does not apply if the failure to perform the obligation is due to grounds not attributable to the obligor in light of the contract or other sources of obligation and the common sense in the transaction.

(2) If the obligee is entitled to claim compensation for loss or damage pursuant to the provisions of para (1), and any of the following cases applies, the obligee may claim compensation for loss or damage in lieu of the performance of the obligation:

(i) the performance of the obligation is impossible;

(ii) the obligor manifests the intention to refuse to perform the obligation; or

(iii) the obligation has arisen from a contract, and the contract is cancelled or the obligee acquires the right to

cancel the contract on the ground of the obligor's failure to perform the obligation.

 

˜416@iScope of Compensation for Loss or Damage)

(1) The purpose of the claim for compensation for the loss or damage for failure to perform an obligation is to have the obligor to pay the compensation for loss or damage which would ordinarily arise from the failure.

(2) The obligee may also claim the compensation for damage which has arisen from any special circumstances if the party did foresee, or should have foreseen, the circumstances.

 

˜417@(Method of Compensation for Loss or Damage)

Unless a particular intention is manifested, the amount of the compensation for loss or damage is determined with reference to monetary value.

 

˜417-2@(Deduction of Interim Interest)

(1) In the case of determining the amount of compensation for loss or damage in relation to profits to be acquired in the future and deducting an amount equivalent to interest that is to accrue until the time of acquiring the profits, the deduction is made by applying the statutory interest rate applicable as of the time when the claim for the compensation for loss or damage arises.

(2) The para (1) also applies in the case of determining the amount of compensation for loss or damage to cover expenses to be incurred in the future and deducting an amount equivalent to interest that is to accrue until the time of incurring the expenses.

 

˜418@(Comparative Negligence)

If the obligee is negligent regarding the failure to perform the obligation or the occurrence or spreading of a damage caused thereby, the court determines the liability for compensation for loss or damage and the amount thereof by taking these elements into consideration.

 

˜419@(Special Provisions for Monetary Debt)

(1) The amount of the compensation for loss or damage for failure to perform an obligation to deliver money is determined with reference to the statutory interest rate as of the time when the obligor first assumes the responsibility for the delay; provided, however, that if the agreed-upon interest rate exceeds the statutory interest rate, the agreed-upon interest rate prevails.

(2) The obligee is not be required to prove loss or damage with respect to the compensation for loss or damage referred to in para (1).

(3) The obligor may not raise the defense of force majeure with respect to the compensation for loss or damage referred to in para (1).

 

˜420@iLiquidated Damages)

(1) The parties may agree on the amount of liquidated damages with respect to the failure to perform the obligation.

(2) The agreement on liquidated damages do not preclude the request for performance or the exercise of the cancellation right.

(3) A penalty is presumed to constitute liquidated damages.

 

˜421@iLiquidated Damages)

The provisions of Art 420 apply mutatis mutandis if the parties agree in advance to appropriate anything other than money as compensation for loss or damage.

 

˜422@iSubrogation for Compensation for Loss or Damage)

If an obligee receives the full value of a thing or right which is the subject matter of the claim as compensation for loss or damage, the obligor subrogates the obligee to that thing or right by operation of law.

 

˜422-2@(Right to Demand Substitute)

If the obligor acquires a right or profit as a substitute for the subject matter of the obligation due to the same cause as the one that has rendered the performance of the obligation impossible, the obligee may demand the transfer of the right or reimbursement of the profit from the obligor, to the extent of the amount of damage sustained thereby.

 

Subsection 2 Obligee's Right of Subrogation

˜423@(Requirements for Obligee's Right of Subrogation)

(1) An obligee may exercise the right of the obligor ("subrogor's right") when it is necessary to do so in order to preserve the obligee's own claim; provided, however, that this does not apply to rights which belong exclusively to and are personal to the obligor or rights which are immune from attachment.

(2) The obligee may not exercise the subrogor's right unless and until the obligee's claim becomes due; provided, however, that this does not apply to an act of preservation.

(3) The obligee may not exercise the subrogor's right if the obligee's claim is not enforceable by compulsory execution.

 

˜423-2@(Scope of Exercise by Subrogation)

If the obligee exercises the subrogor's right, and the subject matter of the subrogor's right is divisible, the obligee may exercise the subrogor's right only to the extent of the amount of the obligee's own claim.

 

˜423-3@(Payment or Delivery to Obligee)

If the obligee exercises the subrogor's right, and the subject matter of the subrogor's right is the payment of money or delivery of movables, the obligee may demand that the other party make the payment or delivery to the obligee. In such a case, if the other party makes the payment or delivery to the obligee, the subrogor's right is extinguished thereby.

 

˜423-4@(Defense of the Other Party)

If the obligee exercises the subrogor's right, the other party may duly assert against the obligee any defense that can be asserted against the obligor.

 

˜423-5@(Obligor's Authority to Collect and Dispose)

Even if the obligee exercises the subrogor's right, the obligor is not precluded from independently collecting or otherwise disposing of the subrogor's right. In such a case, the other party is not precluded from performing the obligation to the obligor with respect to the subrogor's right.

 

˜423-6@(Notice of Suit to Be Given by Obligee That Has Filed Action Concerning Exercise of Subrogor's Right)

If the obligee files an action concerning the exercise of the subrogor's right, the obligee must give a notice of suit to the obligor without delay.

 

˜423-7@(Obligee's Right of Subrogation to Preserve the Right to Request Registration)

A person that has acquired by assignment from another person a property for which the acquisition or loss of rights and the change to rights cannot be duly asserted against a third party unless registered may exercise the assignor's right to request a third party to complete the registration procedure if the assignor does not exercise that right. In such a case, the provisions of Art 423-4 thru 423-6 apply mutatis mutandis.

 

Subsection 3 Obligee's Right to Demand Rescission of Fraudulent Act

Division i Requirements for Obligee's Right to Demand Rescission of Fraudulent Act

 

˜424@iObligee's Demand for Rescission of Fraudulent Act)

(1) An obligee may demand the court to rescind an act which the obligor commits knowing that it will prejudice the obligee; provided, however, that this does not apply if a person that benefits from that act ("beneficiary") does not know, at the time of the act, that the obligee will be prejudiced.

(2) The provisions of para (1) do not apply to an act with a subject matter other than property rights.

(3) The obligee may make the demand under the provisions of para (1) ("demand for rescission of fraudulent act") only if the obligee's claim has arisen from a cause that existed before the act prescribed in para (1).

(4) The obligee may not make demand for rescission of fraudulent act if the obligee's claim is not enforceable by compulsory execution.

 

˜424-2@(Special Provisions for Act of Disposing of Property in Exchange for Reasonable Value)

If the obligor commits an act of disposing of a property held thereby, and, in exchange, acquires a reasonable value from the beneficiary, the obligee may make demand for rescission of fraudulent act with respect to that act only if the act satisfies all of the following requirements:

(i) the act is actually likely to cause the obligor to engage in a disposition that will be prejudicial to other obligees such as concealment and gratuitous conveyance ("concealment or other disposition") by changing the kind of the property through that disposition such as realization of immovables;

(ii) the obligor, at the time of the act, has the intention to engage in concealment or other disposition of any property such as money that the obligor acquires as in exchange for the act; and

(iii) the beneficiary, at the time of the act, knows that the obligor has the intention to engage in concealment or other disposition.

 

˜424-3@(Special Provisions for Provision of Security to Specific Obligee)

(1)The obligee may make demand for rescission of fraudulent act with respect to an act concerning the provision of a security or extinguishment of an obligation that is committed by the obligor with regard to an existing obligation, only if the act satisfies all of the following requirements:

(i) the act is committed while the obligor is unable to pay debts (meaning the condition in which the obligor, due

to lack of ability to pay, is generally and continuously unable to pay debts as they become due); and

(ii) the act is committed by the obligor in collusion with the beneficiary with the intention to prejudice other

obligees.

(2) If the act prescribed in para (1) is not within the scope of the obligor's obligation or the time of the act is not such that is required as the obligor's obligation, and it satisfies all of the following requirements, the obligee may make demand for rescission of fraudulent act with respect to that act, notwithstanding the provisions of that paragraph:

(i) the act is committed within 30 days before the obligor became unable to pay debts; and

(ii) the act is committed by the obligor in collusion with the beneficiary with the intention to prejudice other

obligees.

 

˜424-4@(Special Provisions for Substitute Performance for Excessive Consideration)

With respect to an act concerning the extinguishment of an obligation which has been committed by the obligor, if the value of the payment or delivery received by the beneficiary exceeds the amount of the obligation extinguished by that act, and the act satisfies the requirement prescribed in Art 424, the obligee may make demand for rescission of fraudulent act with regard to the part other than the part corresponding to the amount of the obligation extinguished, notwithstanding the provisions of Art 424-3 para (1).

 

˜424-5@(Demand for Rescission of Fraudulent Act against Subsequent Acquirer)

If the obligee is entitled to make demand rescission for fraudulent act against the beneficiary, and a person subsequently acquires the property which has been transferred to the beneficiary, the obligee may also make demand for rescission of fraudulent act against the subsequent acquirer only in the situations specified in the following items according to the categories set forth in the respective items:

(i) if the subsequent acquirer acquires the property from the beneficiary:the subsequent acquirer, at the time of the acquisition, knows that the obligor's act will be prejudicial to the obligee; or

(ii) if the subsequent acquirer acquires the property from another subsequent acquirer:the relevant subsequent acquirer and all the subsequent acquirers that previously acquired the property, at the time of their respective acquisitions, know that the obligor's act will be prejudicial to the obligee.

 

Division ii Method of Exercising Right to Demand Rescission of Fraudulent Act

 

˜424-6@(Demand of Return of Property or Reimbursement of Value)

(1) In making demand for rescission of fraudulent act against the beneficiary, the obligee may demand the rescission of the act committed by the obligor and also demand the return of the property which has been transferred to the beneficiary as a result of that act. If it is difficult for the beneficiary to return the property, the obligee may demand the reimbursement of its value.

(2) In making demand for rescission of fraudulent act against the subsequent acquirer, the obligee may demand the rescission of the act committed by the obligor and also demand the return of the property which has been acquired by the subsequent acquirer. If it is difficult for the subsequent acquirer to return the property, the obligee may demand the reimbursement of its value.

 

˜424-7@(Defendant and Notice of Suit)

(1) In an action concerning demand for rescission of fraudulent act, the person specified in each of the following items according to the categories set forth in the respective items stands as a defendant:

(i) an action concerning demand for rescission of fraudulent act against the beneficiary: the beneficiary; or

(ii) an action concerning demand for rescission of fraudulent act against the subsequent acquirer: the

subsequent acquirer that is the other party to the demand for rescission of fraudulent act.

(2)   If the obligee files an action concerning demand for rescission of fraudulent act, the obligee must give notice of

suit to the obligor without delay.

 

˜424-8@(Scope of Fraudulent Act to Be Rescinded)

(1) If the obligee makes demand for rescission of fraudulent act, and the subject matter of the act committed by the obligor is divisible, the obligee may demand rescission of the act only to the extent of the amount of the obligee's own claim.

(2) The para (1) also applies if the obligee demands the reimbursement of value pursuant to the provisions of the 2nd sentence of Art 424-6, para (1) or the 2nd sentence of para (2) of that Article.

 

˜424-9@(Payment or Delivery to Obligee)

(1) If the obligee demands the return of property from the beneficiary or subsequent acquirer pursuant to the provisions of the first sentence of Article 424-6, para (1) or the first sentence of para (2) of that Article, and the subject matter of the demand for return is the payment of money or delivery of movables, the obligee may demand that the beneficiary make the payment or delivery to the obligee or that the subsequent acquirer make the delivery to the obligee. In such a case, if the beneficiary or subsequent acquirer makes the payment or delivery to the obligee, they are not required to make the payment or delivery to the obligor.

(2) The para (1) also applies if the obligee demands the reimbursement of value from the beneficiary or subsequent acquirer pursuant to the provisions of the 2nd sentence of Art 424-6, para (1) or the 2nd sentence of para (2) of that Article.

 

Division iii Effect of Exercise of Right to Demand Rescission of Fraudulent Act

 

˜425@(Scope of Persons Affected by Upholding Judgment)

A final and binding judgment upholding demand for rescission of fraudulent act is effective against the obligor and all obligees.

 

˜425-2@(Beneficiary's Right for Counter-Performance Received by Obligor)

If an act concerning the disposition of property conducted by the obligor (excluding an act concerning the extinguishment of an obligation) is rescinded, the beneficiary may demand that the obligor return the counter-performance that the beneficiary completed in order to acquire the property. If it is difficult for the obligor to return the counter-performance, the beneficiary may demand the reimbursement of its value.

 

˜425-3@(Restoration of Beneficiary's Claim)

If an act concerning the extinguishment of an obligation conducted by the obligor is rescinded (excluding the case of rescission pursuant to the provisions of Art 424-4), and the beneficiary returns the payment or delivery received from the obligor or reimburse its value, this restores the beneficiary's claim against the obligor to its original state.

 

˜425-4@(Right of Subsequent Acquirer Subject to Demand for Rescission of Fraudulent Act)

If an act done by the obligor is rescinded by the demand for rescission of fraudulent act made against the subsequent acquirer, the subsequent acquirer may exercise the right specified in each of the following items according to the categories set forth in the respective items; provided, however, that this is limited to the value of the counter-performance which was completed by the subsequent acquirer in order to acquire the property from the predecessor or the value of the claim which was extinguished as a result of the acquisition of the property by the subsequent acquirer from the predecessor:

(i) if the act prescribed in Art 425-2 is rescinded:the beneficiary's right to demand return of the counter- performance or right to demand reimbursement of its value from the obligor, which should have arisen pursuant to the provisions of that Article if the act were rescinded by the demand for rescission of fraudulent act against the beneficiary; or

(ii) if the act prescribed in Art 425-3 is rescinded (excluding the case of rescission pursuant to the provisions of Art 424-4):the beneficiary's claim against the obligor, which should have been restored pursuant to the provisions of Art 425-3 if the act were rescinded by demand for rescission of fraudulent act against the beneficiary.

 

Division iv Limitation on Period for Right to Demand Rescission of Fraudulent Act

 

˜426@iLimitation on Period for Right to Demand Rescission of Fraudulent Act)

No action for demand for rescission of fraudulent act may be filed if 2 years have passed from the time when the obligee came to know that the obligor committed the act knowing that it would be prejudicial to the obligee. The same applies if 10 years have passed from the time of the act.

 

Section 3 Claims and Obligations with Multiple-Parties

Subsection 1 General Provisions

 

˜427@iDivisible Claims and Divisible Obligations)

If there are more than one obligee or obligor, unless a particular intention is manifested, each obligee or each obligor has rights or obligations in equal ratios.

 

Subsection 2 Indivisible Claims and Indivisible Obligations

 

˜428@iIndivisible Claim)

The provisions of Subsection III (Joint and Several Claims) (excluding the provisions of Art 433 & 435) apply mutatis mutandis if the subject matter of a claim is indivisible by nature and the claim is held by two or more obligees.

 

˜429@(Novation or Release between Obligor and One Obligee of Indivisible Claim)

Even if there is a novation or release between one of the obligees of an indivisible claim and the obligor, other obligees may request the obligor to perform the obligation in whole. In such a case, the benefit which should have been allocated to that one obligee if that obligee did not lose the relevant right must be reimbursed to the obligor.

 

˜430@(Indivisible Obligation)

The provisions of Subsection IV (Joint and Several Obligation) (excluding the provisions of Art 440) apply mutatis mutandis if the subject of an obligation is indivisible by nature and there are multiple obligors.

 

˜431@iChanging into Divisible Claims or Divisible Obligations)

If an indivisible claim becomes a divisible claim, each obligee may request the performance only of the share of the claim to which each obligee is entitled, and if an indivisible obligation becomes a divisible obligation, each obligor is liable only for the share of the obligation for which each obligor is liable.

 

Subsection 3 Joint and Several Claims

 

˜432@iRequest by Joint and Several Obligees for Performance)

If the subject matter of a claim is divisible by nature, and two or more persons hold the claim jointly and severally based on the provisions of laws and regulations or the manifestation of intention of the parties, each obligee may request the performance in whole or in part for the benefit of all obligees, and the obligor may perform for each obligee for the benefit of all obligees.

 

˜433@(Novation or Release between Obligor and One Joint and Several Obligee)

If there is a novation or release between one of the joint and several obligees and the obligor, the other obligees may not request performance of the part concerning the benefit which should have been allocated to that one obligee if the obligee did not lose the relevant right.

 

˜434@(Set-Off between Obligor and One Joint and Several Obligee)

If the obligor has a claim against one of the joint and several obligees, and the obligor invokes a set-off, the set-off becomes effective against other joint and several obligees as well.

 

˜435@(Merger of Obligor with One Joint and Several Obligee)

If there is a merger between one of the joint and several obligees and the obligor, the obligor is deemed to have performed the obligation.

 

˜435-2@(Principle of Relative Effect)

Except in cases prescribed in Art 432 thru 435, any act of one of the joint and several obligees or any circumstances which have arisen with respect to one of the joint and several obligees do not become effective in relation to other joint and several obligees; provided, however, that if one of the other joint and several obligees and the obligor manifest a particular intention, their intention prevails with respect to the effect in relation to the remaining other joint and several obligees.

 

Subsection 4 Joint and Several Obligations

 

˜436@iRequest to Joint and Several Obligors for Performance)

If the subject matter of an obligation is indivisible by nature, and two or more persons bear the obligation jointly and severally based on the provisions of laws and regulations or the manifestation of intention of the parties, the obligee may request one of the joint and several obligors, or all of the joint and several obligors, simultaneously or successively, to perform the obligation, in whole or in part.

 

˜437@(Invalidity of Juridical Act with Respect to One of Joint and Several Obligors)

Even if there are grounds for the invalidity or rescission of a juridical act with respect to one of the joint and several obligors, the validity of the obligation of other joint and several obligor is not impaired.

 

˜438@(Novation between Obligee and One Joint and Several Obligor)

If novation takes place between one of the joint and several obligors and the obligee, the claim is extinguished for the benefit of all joint and several obligors.

 

˜439@(Set-Offs by One Joint and Several Obligor)

(1) If one of the joint and several obligors has a claim against the obligee and invokes a set-off, the claim is extinguished for the benefit of all joint and several obligors.

(2) Until the joint and several obligor that has the claim referred to in para (1) invokes a set-off, other joint and several obligors may refuse to perform the obligation to the obligee only to the extent of that joint and several obligor's share of the obligation.

 

˜440@(Merger with One of Joint and Several Obligors)

If there is a merger between one of the joint and several obligors and the obligee, the joint and several obligor is deemed to have performed the obligation.

 

˜441@(Principle of Relative Effect)

Except in cases prescribed in Art 438, Art 439 para (1) and Art 440, any circumstances which have arisen with respect to one of the joint and several obligors is not effective in relation to other joint and several obligors; provided, however, that if the obligee and one of the other joint and several obligors manifest a different intention, their intention prevails with respect to the effect in relation to the remaining other joint and several obligees.

 

˜442@iRight to Reimbursement among Joint and Several Obligors)

(1) If one of the joint and several obligors performs the obligation or otherwise obtain a common discharge in exchange for that obligor's own property, the joint and several obligor has the right to reimbursement from other joint and several obligors for the amounts in proportion to their respective shares of the obligation of the amount of the property expended by the joint and several obligor in order to obtain the discharge (if the amount of property exceeds the amount after the common discharge, the amount thus discharged), regardless of whether the amount discharged exceeds the amount of the joint and several obligor's own share.

(2) The reimbursement under the provisions of para (1) includes the compensation of the statutory interest which accrues on or after the day of the performance of the obligation or other discharge, and the compensation for unavoidable expenses and other loss or damage.

 

˜443@(Limitation on Reimbursement to Joint and Several Obligor That Has Failed to Give Notice)

(1) If one of the joint and several obligors performs the obligation or otherwise obtains a common discharge in exchange for that obligor's own property, while knowing the existence of other joint and several obligors but without giving notice of the common discharge to the other joint and several obligors, another joint and several obligor has a defense that can be duly asserted against the obligee, the other joint and several obligor may duly assert that defense against the joint and several obligor that obtained the discharge to the extent of the other obligor's share of the obligation. In such a case, if the other joint and several obligor duly asserts a set-off as defense against the joint and several obligor that obtained the discharge, the joint and several obligor may request the obligee to perform the obligation which should have been extinguished due to set-off.

(2) If one of the joint and several obligors that has performed the obligation or otherwise obtained a common discharge in exchange for that obligor's own property, while knowing the existence of other joint and several obligors, fails to give notice of the acquisition of the discharge to the other joint and several obligors, and as a result, another joint and several obligor performs the obligation or performs another act in good faith to obtain discharge in exchange for that obligor's own property, the other joint and several obligor may deem that the act performed to obtain the discharge is valid.

 

˜444@(Allocation of Share of Person Who Does Not Have Sufficient Financial Resources for Reimbursement)

(1) If one of the joint and several obligors does not have the sufficient financial resources to make the reimbursement, the portion that is unable to be reimbursed is borne by the joint and several obligor that demands the reimbursement and the other joint and several obligors that have the financial resources, in proportion to their respective shares of the obligation.

(2) In the case prescribed in para (1), if neither the joint and several obligor that demands the reimbursement nor the other obligors that have the financial resources have shares of the obligation, the portion that is unable to be reimbursed is borne equally among the joint and several obligor that demands the reimbursement and the other obligors that have the financial resources.

(3) Notwithstanding the provisions of para (1) & (2), if the joint and several obligor that demands the reimbursement is unable to receive the reimbursement due to negligence, that joint and several obligor may not request other joint and several obligors to bear their respective shares of the obligation.

 

˜445@iRelease of One Joint and Several Obligor and Right to Reimbursement)

Even if one of the joint and several obligors is released from the obligation or the prescription period expires for one of the joint and several obligors, other joint and several obligors may exercise the right to reimbursement referred to in Art 442 para (1) against that one joint and several obligor.

 

Subsection 4 Guarantee Obligation

Division i General Provisions

 

˜446@iResponsibility of Guarantor)

(1) A guarantor has the responsibility to perform the obligation of the principal obligor when the latter fails to perform that obligation.

(2) No guarantee contract becomes effective unless it is made in writing.

(3) If a guarantee contract is concluded by electronic or magnetic record which records the terms thereof, the guarantee contract is deemed to be made in writing, and the provisions of para (2) apply.

 

˜447@iScope of Guarantee Obligation)

(1) The guarantee obligation includes interest, penalty and compensation for loss or damage in connection with the principal obligation, and all other charges secondary to that obligation.

(2) A guarantor may stipulate the amount of penalty or compensation for loss or damage with regard to the guarantor's own guarantee obligation only.

 

˜448@(Burden of Guarantor, and Subject Matter or Terms of Principal Obligation)

(1) If the burden of a guarantor is more onerous than the principal obligation as to either its subject matter or terms, it is reduced to the extent of the principal obligation.

(2) Even if the subject matter or terms of the principal obligation are made more onerous after the conclusion of a guarantee contract, the burden of the guarantor remains unchanged.

 

˜449@iGuarantee of Voidable Obligations)

If a guarantor that guarantees an obligation which may be voidable due to the principal obligor's limited capacity to act, is aware, at the time of entering into a guarantee contract, of the cause for its voidability, that guarantor is presumed to have assumed an independent obligation of the same subject matter in the event of non-performance by the principal obligor or rescission of the obligation.

 

˜450@iRequirements for Guarantor)

(1) If an obligor has the obligation to provide a guarantor, that guarantor must:

(i) be a person with capacity to act; and

(ii) have sufficient financial resources to pay the obligation.

(2) If the guarantor ceases to meet the requirements set forth in item (ii) of para (1), the obligee may demand that some other person meeting the requirements set forth in any item of the same paragraph be substituted for that guarantor.

(3) The provisions of para (1) & (2) do not apply if the obligee has designated the guarantor.

 

˜451@iProviding Other Security)

If an obligor is unable to provide a guarantor meeting the requirements set forth in any item of Art 450 para (1), the obligor may provide other security in lieu thereof.

 

˜452@iDefense of Demand)

If an obligee has requested performance of an obligation from the guarantor, the guarantor may request the obligee to demand performance of the principal obligor first; provided, however, that this does not apply if the principal obligor is subject to an order commencing bankruptcy proceeding or if the principal obligor's whereabouts are unknown.

 

˜453@iDefense of Debtor's Financial Resources)

Even after the obligee has made a demand to the principal obligor in accordance with the provisions of Art 452, the obligee must first execute on the property of the principal obligor if the guarantor proves that the principal obligor has the financial resources to pay the obligation and that the execution can be easily performed.

 

˜454@iSpecial Provisions for Joint and Several Guarantee)

If a guarantor has assumed an obligation jointly and severally with the principal obligor, the guarantor does not have the rights set forth in Art 452 & 453.

 

˜455@iEffect of Defense of Demand and Defense of Debtor's Financial Resources)

If after the guarantor makes a request or gives proof pursuant to the provisions of Art 452 or 453, the obligee fails to demand or to levy execution and becomes unable to obtain full performance from the principal obligor as a result of that, the guarantor is released from the obligation to the extent that the obligee would have received payment if the obligee had immediately demanded or levied execution.

 

˜456@iCases with Multiple Guarantors)

If there are multiple guarantors, the provisions of Art 427 apply even if their obligations arise from individual acts.

 

˜457@ (Effect of Circumstance Which Arises with Respect to the Principal Obligor)

(1) The postponement of expiry of prescription period and the renewal of prescription period due to grounds such as a request for performance in relation to the principal obligor are also effective in relation to the guarantor.

(2) A guarantor may assert against the obligee a defense that can be raised by the principal obligor.

(3) If the principal obligor has a right to set-off, right to rescind or right to cancel against the obligee, the guarantor may refuse to perform the obligation to the obligee to the extent that the principal obligor should have been released from the obligation by exercising these rights.

 

˜458@(Effect of Circumstance Which Arises with Respect to Jointly and Severally Liable Guarantor)

The provisions of Art 438, Art 439 para (1), Art 440 & 441 apply mutatis mutandis to circumstances which arise with regard to the guarantor that bears the obligation jointly and severally with the principal obligor.

 

˜458-2@(Obligee's Duty to Provide Information on the Status of Performance of Principal Obligation)

If a guarantor gives a guarantee as requested by the principal obligor, the obligee, upon request of the guarantor, must provide, without delay, the guarantor with information concerning whether or not there has been a default in terms of the principal of the principal obligation or any interest, penalty or compensation for loss or damage in connection with the principal obligation or any other charges secondary to the obligation, as well as the remaining amount of these items and the amount of those already due.

 

˜458-3@(Obligee's Duty to Provide Information If Principal Obligor Forfeits the Benefit of Time)

(1) If the principal obligor has the benefit of time forfeits the benefit, the obligee must notify the guarantor to that effect within 2 months from the time when the obligee comes to know the principal obligor's forfeiture of the benefit.

(2) If the obligee fails to notify the guarantor as referred to in para (1) within the period referred to that paragraph, the obligee may not request the guarantor to perform the guarantee obligation for any delay damages that have accrued after the principal obligor is accelerated and becomes immediately due until the obligee notifies the guarantor pursuant to the provisions of that paragraph (excluding those that should have accrued even if the principal obligor maintains the benefit of time).

(3) The provisions of para (1) & (2) do not apply if the guarantor is a corporation.

 

˜459@(Right to Reimbursement of Guarantor Guaranteeing by Request)

(1) If a guarantor gives a guarantee as requested by the principal obligor, and performs the obligation on behalf of the principal obligor or performs any other act that causes the obligation to be extinguished in exchange for the guarantor's own property ("act for extinguishment of obligation"), the guarantor has a right to reimbursement from the principal obligor for the amount of property expended for that act (if the amount of property exceeds the amount of the principal obligation extinguished by the act for extinguishment of obligation, the amount thus extinguished).

(2) The provisions of Art 442, para (2) apply mutatis mutandis to the cases set forth in para (1).

 

˜459-2@(Right to Reimbursement in Case of Guarantor Guaranteeing by Request Who Performed Obligation Before Due Date)

(1) If a guarantor gives a guarantee as requested by the principal obligor and performs an act for extinguishment of obligation before the due date of the principal obligation, the guarantor has the right to reimbursement from the principal obligor to the extent that the principal obligor was enriched at the time of the act. In such a case, if the principal obligor alleges to have had grounds for set-off prior to the day of the act for extinguishment of obligation, the guarantor may request the obligee to perform the obligation which should have been extinguished due to the set-off.

(2) Reimbursement under the provisions of para (1) includes the statutory interest which accrues on and after the due date of the principal obligation and compensation for loss or damage including expenses which could not have been avoided even if an act for extinguishment of obligation were performed on or after the due date.

(3) The right to reimbursement referred to in para (1) may not be exercised before the due date of the principal obligation.

 

˜460@iRight of Guarantor Guaranteeing by Request to Reimbursement in Advance)

If a guarantor has given a guarantee as requested by the principal obligor, the guarantor may exercise in advance the right to reimbursement against the principal obligor if:

(i) the principal obligor is subject to an order commencing bankruptcy proceeding, and the obligee does not participate in the distribution of the bankruptcy estate;

(ii) the obligation is due; provided, however, that no extension of time granted by the obligee to the principal obligor after the conclusion of the guarantee contract may be duly asserted against the guarantor; and

(iii) the guarantor is, without negligence, rendered a judicial decision ordering the guarantor to perform the obligation to the obligee.

 

˜461@iCases in Which a Principal Obligor Reimburses Guarantor)

(1) If a principal obligor reimburses a guarantor pursuant to the provisions of Art 460, the principal obligor may demand the guarantor to provide security or to obtain an exemption for the principal obligor until the obligee receives the full satisfaction of the entire obligation.

(2) In the case prescribed in para (1), the principal obligor may be released from the obligation for reimbursement by making a deposit with an official depository, by providing security, or by procuring the discharge of the liabilities of the guarantor.

 

˜462@(Right to Reimbursement of Guarantor Guaranteeing without Request by Principal Obligor)

(1) The provisions of Art 459-2, para (1) apply mutatis mutandis if a person, that has given guarantee without the request of the principal obligor, performs an act for extinguishment of obligation.

(2) A person that has become a guarantor against the will of the principal obligor has the right to reimbursement only to the extent currently enriched. In this case, if the principal obligor asserts to have grounds for set-off against the obligee prior to the day of the demand for reimbursement, the guarantor may demand that the obligee perform the obligation which would have been extinguished by that set-off.

(3) The provisions of Art 459-2, para (3) apply mutatis mutandis to the exercise of the right to reimbursement if the guarantor referred to in para (1) & (2) performs an act for extinguishment of obligation before the due date of the principal obligation.

 

˜463@(Limitation on Reimbursement for Guarantor Who Failed to Give Notice)

(1) If a guarantor gives a guarantee as requested by the principal obligor and performs an act for extinguishment of obligation without giving prior notice to the principal obligor, the principal obligor may assert against the guarantor any defense that could have been asserted against the obligee. In such a case, if the principal obligor asserts a set-off against the guarantor, the guarantor may request the obligee to perform the obligation which should have been extinguished due to the set-off.

(2) If a guarantor gives a guarantee as requested by the principal obligor and performs an act for extinguishment of obligation in good faith because of the principal obligor's failure to notify the guarantor of the principal obligor's performance of an act for extinguishment of obligation, the guarantor may deem that the guarantor's own act for extinguishment of obligation is valid.

(3) If the principal obligor performs an act for extinguishment of obligation after the guarantor has performed an act for extinguishment of obligation, the principal obligor may deem that the guarantor's own act for extinguishment of obligation is valid, not only if the guarantor has given guarantee against the will of the principal obligor but also if the principal obligor has performed an act for extinguishment of obligation in good faith because of the guarantor's failure to notify the principal obligor of the guarantor's performance of act for extinguishment of obligation.

 

˜464@(Right to Reimbursement of Guarantor for Joint and Several Obligation or Indivisible Obligation)

A person that has become a guarantor for one of the joint and several obligors or for one of the indivisible obligors has the right to reimbursement from the other obligors only to the extent of that person's share of the obligation.

 

˜465@iRight of Joint Guarantors to Reimbursement for One Obligation)

(1) If there are multiple guarantors, and one guarantor has paid the entire amount of the obligation or any amount exceeding that guarantor's share because the principal obligation is indivisible, or because there is a special provision to the effect that each guarantor should pay the entire amount, the provisions of Art 442 thru 444 apply mutatis mutandis.

(2) Except in the cases prescribed in para (1), if one of the guarantors that are not jointly and severally liable has paid the entire amount or any amount exceeding that guarantor's share, the provisions of Art 462 apply mutatis mutandis.

 

Division ii Contract for Revolving Guarantee by Individual

 

˜465-2@(Liability of Guarantor of Contract for Revolving Guarantee by Individual)

(1) A guarantor to a guarantee contract under which the principal obligation is one or more unidentified obligations within a certain specified scope ("contract for revolving guarantee") and the guarantor is not a corporation ("contract for revolving guarantee by an individual") is liable to perform the obligation in terms of the amounts of the principal of the principal obligation, any interest, penalty and compensation for loss or damage in connection with the principal obligation, and all the other charges secondary to the obligation, as well as the amount of any penalty or compensation for loss or damage which is agreed- upon on with regard to the guarantee obligation, up to a certain maximum amount which pertains to all of these amounts.

(2) A contract for revolving guarantee by an individual does not become effective unless it provides for the maximum amount prescribed in para (1).

(3) The provisions of Art 446 para (2) & (3) apply mutatis mutandis to the provisions concerning a maximum amount prescribed in para (1) in a contract for revolving guarantee by an individual.

 

˜465-3@(Principal Crystallization Date for Contract for Revolving Guarantee by Individual for Loans)

(1) If a contract for revolving guarantee by an individual under which the scope of the principal obligation includes an obligation to be borne as a result of loans or receiving a discount of a negotiable instrument ("loan obligation"; "contract for revolving guarantee by an individual for loans") provides for the date on which the principal of the principal obligation should be crystallized ("principal crystallization date"), and it also provides that the principal crystallization date is to fall on or after the day on which 5 years have passed after the day of the conclusion of the contract for the revolving guarantee by an individual for loans, the provisions concerning the principal crystallization date do not become effective.

(2) If a contract for revolving guarantee by an individual for loans does not provide for a principal crystallization date (or if the provisions concerning the principal crystallization date do not become effective pursuant to the provisions of para (1)), the principal crystallization date is to fall on the day on which 3 years have passed from the day of the conclusion of the contract for revolving guarantee by an individual for loans.

(3) If a change of the principal crystallization date provided for in a contract for revolving guarantee by an individual for loans is to be effected, and the principal crystallization date as changed falls on a day later than the day on which 5 years have passed after the day of the change, that change of the principal crystallization date does not become effective; provided, however, that this does not apply if the change of the principal crystallization date is effected within 2 months immediately preceding the principal crystallization date, and the principal crystallization date as changed falls on a day within 5 years from the original principal crystallization date.

(4) The provisions of Art 446 para (2) & (3) apply mutatis mutandis to the provisions concerning a principal crystallization date in a contract for revolving guarantee by an individual for loans and a change thereof (excluding provisions to the effect that the principal crystallization date is to fall on a day within 3 years from the day of the conclusion of that contract for revolving guarantee by an individual for loans, and any change which is intended to change the principal crystallization date to a day preceding the original principal crystallization date).

 

˜465-4@(Grounds for Crystallization of Principal in Contract for Revolving Guarantee by Individual)

(1) The principal of the principal obligation under a contract for revolving guarantee by an individual is crystallized in the following cases; provided, however, that in the case set forth in item (i), it is crystallized only if the procedure for compulsory execution or enforcement procedure of a security right is commenced:

(i) if an obligee files a petition for compulsory execution or enforcement of any security right for a claim for payment of money with regard to any property of the guarantor;

(ii) if the guarantor receives an order commencing bankruptcy proceeding; or

(iii) the relevant principal obligor or guarantor has died.

(2) Beyond the case prescribed in para (1), the principal of the principal obligation under a contract for revolving guarantee by an individual for loans is crystallized in the following cases; provided, however, that in the case set forth in item (i), it is crystallized only if the procedure for compulsory execution or enforcement procedure of a security right is commenced:

(i) if the obligee files a petition for compulsory execution or enforcement of a security right for a claim for

payment of money with regard to property of the principal obligor; or

(ii) if the principal obligor receives an order commencing bankruptcy proceeding.

 

˜465-5@(Right to Reimbursement in Contract for Revolving Guarantee When the Guarantor Is a Corporation)

(1) If a contract for revolving guarantee under which the guarantor is a corporation does not provide for the maximum amount prescribed in Art 465-2 para (1), a guarantee contract under which the principal obligation is an obligation arising from the right to reimbursement held by the guarantor of the contract for revolving guarantee against the principal obligor does not become effective.

(2) If a contract for revolving guarantee under which the guarantor is a corporation and the scope of the principal obligation includes a loan obligation does not provide for the principal crystallization date, or its provisions concerning the principal crystallization date or any change thereof would not become effective should the provisions of Art 465-3, para (1) or (3) be applied, a guarantee contract under which the principal obligation is an obligation arising from the right to reimbursement held by the guarantor of the revolving guarantee contract against the principal obligor does not become effective. The same applies to a contract for revolving guarantee under which the scope of the principal obligation includes an obligation arising from the right to reimbursement.

(3) The provisions of para (1) & (2) do not apply if the guarantor of a guarantee contract under which the principal obligation is an obligation arising from the right to reimbursement or of a contract for revolving guarantee under which the scope of the principal obligation includes an obligation arising from the right to reimbursement is a corporation.

 

Division 3 Special Provisions for Guarantee Contract for Obligations Arising from Business

 

˜465-6@(Preparation of Notarial Instrument and Effect of Guarantee)

(1) A guarantee contract under which the principal obligation is a loan obligation assumed for business or a contract for a revolving guarantee under which the scope of the principal obligation includes a loan obligation assumed for business does not become effective unless the person that will become a guarantor manifests, prior to the conclusion of the contract, the intention to perform the guarantee obligation by means of a notarial instrument prepared within one month prior to the day of conclusion of the contract.

(2) The notarial instrument referred to in para (1) must be prepared in compliance with the following formalities:

(i) the person that will become a guarantor gives the notary oral instructions regarding the particulars specified

in (a) or (b) below for the category of contract set forth therein:

(a) a guarantee contract (excluding the one set forth in (b)):the obligee and obligor of the principal obligation, the principal of the principal obligation, whether any interest, penalty or compensation for loss or damage in connection with the principal obligation or any other charges secondary to the obligation are provided for in the contract and, if so, the details thereof, as well as the fact that the person that will become a guarantor has the intention to pay the entire amount of the obligation if the principal obligor fails to perform the obligation (if the person that will become a guarantor seeks to assume the obligation jointly and severally with the principal obligor, the intention to pay the entire amount of the obligation, regardless of whether the obligee has made a demand to the principal obligor, whether the principal obligor is able to perform the obligation, or whether the principal obligor has any other guarantor); or

(b) a contract for a revolving guarantee: the obligee and obligor of the principal obligation, the scope of the principal obligation, the maximum amount under the contract for revolving guarantee, whether the principal crystallization date is provided for in the contract and, if so, the details thereof, as well as the fact that the person that will become a guarantor has the intention to pay the entire amount of the obligation with regard to the principal of the principal obligation and any interest, penalty, and compensation for loss or damage in connection with the principal obligation and any other charges secondary to the obligation, which are to arise by the principal crystallization date or the time when an event that causes the crystallization of the principal takes place, such as the events set forth in the items of Art 465-4 para (1) or the items of para (2) of that Article, up to the maximum amount, if the principal obligor fails to perform the obligation (if the person that will become a guarantor seeks to assume the obligation jointly and severally with the principal obligor, the intention to pay the entire amount of the obligation, regardless of whether the obligee has made a demand to the principal obligor, whether the principal obligor is able to perform the obligation, or whether the principal obligor has any other guarantor);

(ii) the notary takes dictation from the person that will become the guarantor, and reads this aloud to, or allows its inspection by, the person that will become the guarantor;

(iii) the person that will become a guarantor signs and seals the instrument after having approved the accuracy of the dictation taken by the notary; provided, however, that if the person that will become a guarantor is unable to sign, the notary may include a supplementary note giving the reason therefor in lieu of the signature of that person; and

(iv) the notary includes a supplementary note to the effect that the instrument has been prepared in compliance with the formalities set forth in items (i) thru (iii) and signs and seals the instrument.

(3)   The provisions of para (1) & (2) do not apply if the person that will become a guarantor is a corporation.

 

˜465-7@(Special Provisions for Formalities of Notarial Instrument on Guarantee)

(1) If a person that will become a guarantor of a guarantee contract or a contract for a revolving guarantee referred to in Art 465-6 para (1) is unable to speak, the person must make a statement in front of the notary of the particulars specified in para (1) item (i), (a) or (b) of that Article for the category of contract set forth therein, through an interpreter or by that person's own hand, in lieu of the oral instructions referred to in the same item. In such a case, to apply the provisions of para (1) item (ii), the term "oral instructions" in that item is deemed to be replaced with "statement through an interpreter or by that person's own hand".

(2) If a person that will become a guarantor of a guarantee contract or contract for revolving guarantee referred to in Art 465-6 para (1) is unable to hear, the notary may convey the content of the dictation taken as prescribed in para (2), item (ii) of that Article to the person that will become a guarantor, through an interpreter, in lieu of the reading it aloud as referred to in the same item.

(3) If a notary prepares a notarial instrument in compliance with the formalities prescribed in para (1) & (2), the notary must include a supplementary note to that effect on the instrument.

 

˜465-8@(Preparation of Notarial Instrument and Effect of Guarantee for Right to Reimbursement)

(1) The provisions of Art 465-6 para (1) & (2) and Art 465-7 apply mutatis mutandis to a guarantee contract under which the principal obligation is a loan obligation assumed for business or a guarantee contract under which the principal obligation is an obligation relating to the right to reimbursement held by a guarantor against the principal debtor under a revolving guarantee contract under which the scope of the principal obligation includes a loan obligation assumed for business. The same applies to a contract for revolving guarantee under which the scope of the principal obligation includes an obligation relating to that right to reimbursement.

(2) The provisions of para (1) do not apply if the person that will become a guarantor is a corporation.

 

˜465-9@(Exclusion from Application of Provisions Concerning Preparation of Notarial Instrument and Effect of Guarantee)

The provisions of Art 465-6 thru 465-8 do not apply to a guarantee contract under which the person that will become a guarantor is any of the following persons:

(i) corporation, its managing administrator, director, executive officer, or any person equivalent thereto; or

(ii) if the principal obligor is a corporation, any of the following persons:

(a) a person that holds the majority of voting rights of all shareholders (excluding voting rights in respect of shares that do not allow voting rights to be exercised for all matters that may be resolved at a shareholders meeting) of the principal obligor;

(b) if the majority of voting rights of all shareholders of the principal obligor is held by another stock company: a person that holds the majority of voting rights of all shareholders of that other stock company; or

(c) if the majority of voting rights of all shareholders of the principal obligor is held by another stock company and a person that holds the majority of voting rights of all shareholders of that other stock company: a person that holds the majority of voting rights of all shareholders of that other stock company;

(d) if the principal obligor is a corporation that is not a stock company: a person equivalent to the person set forth in (a), (b) or (c); or

(iii) a person that conducts business jointly with the principal obligor (excluding one that is a corporation) or the principal obligor's spouse who actually engages in the business conducted by the principal obligor.

 

˜465-10@(Duty to Provide Information upon Conclusion of Contract)

(1) If the principal obligor requests a person to give guarantee for an obligation to be assumed for business as the principal obligation or give revolving guarantee for an obligation to be assumed for business that is included in the scope of the principal obligation, the principal obligor must provide the person so requested with information concerning the following particulars:

(i) the status of assets, and income and expenditure;

(ii) whether the principal obligor has any obligation other than the principal obligation, and the amount and status of performance thereof; and

(iii) if the principal obligor has provided or seeks to provide any other security for the principal obligation, an indication of this and the details of the security.

(2) If, because the principal obligor fails to provide information concerning the particulars set forth in para (1) items (i) thru (iii) or provides information that is factually inaccurate, the person requested to guarantee misunderstands these particulars and manifests the intention to offer or accept the offer of a guarantee contract based on the misunderstanding, the guarantor may rescind the guarantee contract if the obligee knew or could have known that the principal obligor failed to provide information concerning these particulars or provided information that was factually inaccurate.

(3) The provisions of para (1) & (2) do not apply if the person that gives guarantee is a corporation.

 

Section 4 Assignment of Claims

 

˜466@iAssignability of Claims)

(1) A claim may be assigned; provided, however, that this does not apply if its nature does not permit the assignment.

(2) Even if a party to a claim manifests the intention to prohibit or restrict the assignment of the claim ("manifestation of intention to restrict assignment"), the validity of the assignment of the claim is not impaired.

(3) In the case prescribed in para (2), the obligor may refuse to perform the obligation to a third party such as the assignee that knew or did not know due to gross negligence that the manifestation of intention to restrict assignment was made, and may duly assert against such third party any event that results in extinguishment of the obligation such as payment to the assignor.

(4) The provisions of para (3) do not apply if the obligor does not perform the obligation, and the third party prescribed in that paragraph makes a demand to the obligor for the performance to the assignor by specifying a reasonable period of time, but the obligor does not perform the obligation within that period.

 

˜466-2@(Deposit Made by Obligor for Claim Subject to Manifestation of Intention to Restrict Assignment)

(1) If a claim for payment of money subject to the manifestation of intention to restrict assignment is assigned to a third party, the obligor may deposit the amount of money equivalent to the full amount of the claim with an official depository having jurisdiction over the place of performance of the obligation (including the current domicile of the assignor if the place of performance of the obligation is determined on the basis of the current domicile of the obligee).

(2) An obligor that has made a deposit pursuant to the provisions of para (1)h must notify the assignor and the assignee of the deposit without delay.

(3) Only the assignee is entitled to request the refund of the money deposited pursuant to the provisions of

para (1).

 

˜466-3@(Deposit Made by Obligor for Claim Subject to Manifestation of Intention to Restrict Assignment)

In the case prescribed in Art 466-2 para (1), if an order commencing bankruptcy proceeding is issued with regard to the assignor, the assignee (limited to the one that has acquired the full amount of the claim referred to in that paragraph and that may duly assert the assignment of the claim against a third party such as the obligor) may have the obligor deposit the amount of money equivalent to the full amount of the claim with an official depository having jurisdiction over the place of performance of the obligation even if the assignee knew or did not know due to gross negligence that the manifestation of intention to restrict assignment was made. In such a case, the provisions of Art 466-2 para (2) & (3) apply mutatis mutandis.

 

˜466-4@(Attachment of Claim Subject to Manifestation of Intention to Restrict Assignment)

(1) The provisions of Art 466 para (3) do not apply to an attaching obligee that has enforced compulsory execution against a claim that is subject to the manifestation of intention to restrict assignment.

(2) Notwithstanding the provisions of para (1), if a third party such as the assignee knew or did not know due to gross negligence that the manifestation of intention to restrict assignment was made, and the obligee of the assignee or other third party enforces compulsory execution against the claim referred to in that paragraph, the obligor may refuse to perform the obligation and duly assert against an attaching obligee any event that results in extinguishing the obligation such as payment to the assignor.

 

˜466-5@(Effect of Manifestation of Intention to Restrict Assignment of Claim for Deposits)

(1) Notwithstanding the provisions of Art 466 para (2), the manifestation of intention to restrict assignment which is made by a party with regard to a claim for deposits in a deposit account ("claim for deposits") may be duly asserted against a third party such as the assignee that knew or did not know due to gross negligence that the manifestation of intention to restrict assignment was made.

(2) The provisions of para (1) do not apply to an attaching obligee that has commenced compulsory execution against a claim for deposits that is subject to the manifestation of intention to restrict assignment.

 

˜466-6@(Assignability of Claim Yet to Arise)

(1) The assignment of a claim does not require the claim to have already arisen by the time of the manifestation of intention to assign it.

(2) If a claim is assigned, and the claim is yet to arise by the time of the manifestation of intention to assign it, the assignee by operation of law acquires the claim when it arises.

(3) In the case prescribed in para (2), if the assignor makes the manifestation of intention to restrict assignment by the time when the assignor gives notice under the provisions of Art 466-5 or the obligor gives consent under the provisions of that Article ("time of completion of perfection"), a third party such as the assignee is deemed to have known this, and the provisions of Art 466 para (3) (or Art 466-5 para (1) if the claim subject to the manifestation of intention to restrict assignment is a claim for deposits) apply thereto.

 

˜467@(Requirement for Perfection of Assignment of Claim)

(1) The assignment of a claim (including the assignment of a claim that is yet to arise) may not be duly asserted against the applicable obligor or any other third party, unless the assignor gives notice thereof to the obligor or the obligor has consented to the same.

(2) Notice or consent as referred to in para (1) may not be duly asserted against a third party other than the obligor unless the notice or the consent is made using an instrument bearing a certified date.

 

˜468@iDefense of Obligor upon Assignment of Claim)

(1) An obligor may duly assert against the assignee any event that has taken place with regard to the assignor by the time of completion of the perfection.

(2) For the purpose of the application of the provisions of para (1) in the case referred to in Art 466 para (4), the phrase "at the time of the completion of the perfection" in that paragraph is deemed to be replaced with "at the time when a reasonable period of time referred to in Art 466 para (4) has elapsed"; and to apply the provisions of that paragraph in the case referred to in Art 466-3, the phrase "at the time of the completion of the perfection" in that paragraph is deemed to be replaced with "at the time when the obligor receives a request from the assignee referred to in Art 466-3 to make a deposit with an official depository pursuant to the provisions of that Article".

 

˜469@(Right to Set-Off upon Assignment of Claim)

(1) An obligor may duly assert against the assignee a set-off based on a claim against the assignor that the obligor acquired before the time of satisfaction of the requirement for perfection.

(2) The para (1) also applies to a claim against the assignor that the obligor acquires after the time of the completion of the perfection if the claim is any of the following; provided, however, that this does not apply if the obligor acquires a claim of another person after the time of the completion of the perfection:

(i) a claim that has arisen from a cause that existed before the time of the completion of the perfection; or

(ii) beyond what is set forth in item (i), a claim that has arisen from a contract under which the claim acquired by the assignee has arisen.

(3) To apply the provisions of para (1) & (2) in the case referred to in Art 466 para (4), the phrase "at the time of the completion of the perfection" in these provisions is deemed to be replaced with "at the time when a reasonable period of time referred to in Article 466 para (4) has elapsed"; and to apply these provisions in the case referred to in Art 466-3, the phrase "at the time of the completion of the perfection" in these provisions is deemed to be replaced with "at the time when the obligor receives a request from the assignee referred to in Art 466-3 to make a deposit with an official depository pursuant to the provisions of that Article".

 

Section 5 Assumption of Obligation

Subsection 1 Assumption of Obligation Not Releasing Obligor

 

˜470@(Requirements for and Effect of Assumption of Obligation Not Releasing Obligor)

(1) An additional obligor resulting from the assumption of obligation not releasing an obligor assumes, jointly and severally with the initial obligor, an obligation of the same content as the obligation assumed by the initial obligor to the obligee.

(2) The assumption of obligation not releasing an obligor may be effected by a contract between the obligee and the person that becomes the additional obligor.

(3) The assumption of obligation not releasing an obligor may also be effected by a contract between the initial obligor and the person that becomes the additional obligor. In such a case, the assumption of obligation not releasing an obligor becomes effective when the obligee gives consent to the person that becomes the additional obligor.

(4) The assumption of obligation not releasing an obligor to be effected pursuant to the provisions of para (3) is governed by the provisions concerning a third party beneficiary contract.

 

˜471@(Defense by Additional Obligor in Assumption of Obligation Not Releasing Obligor)

(1) An additional obligor may duly assert against the obligee any defense that could have been asserted by the initial obligor at the time when the assumption of obligation not releasing an obligor became effective, with regard to the obligation that the additional obligor has assumed through the assumption of obligation not releasing the obligor.

(2) If the initial obligor has a right to rescind or right to cancel against the obligee, the additional obligor may refuse to perform the obligation to the obligee to the extent that the initial obligor should have been released from the obligation by exercising either of these rights.

 

Subsection 2 Assumption of Obligation Releasing Old Obligor

 

˜472@(Requirements for and Effect of Assumption of Obligation Releasing Old Obligor)

(1) A new obligor resulting from the assumption of obligation releasing an old obligor assumes an obligation of the same content as the obligation of the initial obligor to the obligee, and the initial obligor is released from their own obligation.

(2) The assumption of obligation releasing an old obligor may be effected by a contract between the obligee and the person that becomes the replacing obligor. In such a case, the assumption of obligation releasing an old obligor becomes effective when the obligee notifies the initial obligor of the conclusion of that contract.

(3) The assumption of obligation releasing an old obligor may also be effected if the initial obligor and the person that becomes the replacing obligor conclude a contract and the obligee gives consent to the person that becomes the replacing obligor.

 

˜472-2@(Defense by New Obligor in Assumption of Obligation Releasing Old Obligor)

(1) A new obligor may duly assert against the obligee any defense that could have been asserted by the initial obligor at the time when the assumption of obligation releasing an obligor became effective, with regard to the obligation that the replacing obligor has assumed through the assumption of obligation releasing the obligor.

(2) If the old obligor has a right to rescind or right to cancel against the obligee, the new obligor may refuse to perform the obligation to the obligee to the extent that the initial obligor could have been released from the obligation by exercising either of these rights should the assumption of obligation releasing the obligor not be effected.

 

˜472-3@(Right to Reimbursement of New Obligor Resulting from Assumption of Obligation Releasing Old Obligor)

A new obligor resulting from the assumption of obligation releasing an old obligor does not acquire a right to reimbursement from the obligor.

 

˜472-4@(Transfer of Security Resulting from Assumption of Obligation Releasing Old Obligor)

(1) An obligee may transfer a security right that has been created as security for the obligation from which the initial obligor is released pursuant to the provisions of Art 472 para (1) to the obligation assumed by the replacing obligor; provided, however, that if a person other than the replacing obligor created the security right, the obligee must obtain consent from that person.

(2) The transfer of a security right under the provisions of para (1) must be effected by manifesting the intention to the replacing obligor in advance or upon the transfer.

(3) The provisions of para (1) & (2) apply mutatis mutandis if there is a person that gave guarantee for the obligation from which the initial obligor is released pursuant to the provisions of Art 472 para (1).

(4) In the case referred to in para (3), the consent referred to in para (1) as applied mutatis mutandis pursuant to para (3) does not become effective unless it is given in writing.

(5) If the consent referred to in para (4) is given by means of an electronic or magnetic record in which its content is recorded, the consent is deemed to have been given in writing, and the provisions of that paragraph apply thereto.

 

Section 6 Extinction of Claims

Subsection 1 Performance

Division i General Provisions

 

˜473@(Performance)

If the obligor performs an obligation to the obligee, the claim is extinguished.

 

˜474@iPerformance by Third Parties)

(1) A third party may also perform an obligation.

(2) A third party that has no legitimate interest in performing an obligation may not perform the obligation against the will of the obligor; provided, however, that this does not apply if the obligee did not know that the performance is against the will of the obligor.

(3) The third party prescribed in para (2) may not perform the obligation against the will of the obligee; provided, however, that this does not apply if the third party performs the obligation as requested by the obligor, and the obligee knew this.

(4) The provisions of para (1) thru (3) do not apply if the nature of an obligation does not permit the performance by a third party or if a party manifests the intention to prohibit or restrict the performance by a third party.

 

˜475@(Recovery of Thing Transferred in Performance of Obligation)

If a person effecting performance has delivered a thing owned by another person in performance of the obligation, the person so effecting performance may not recover that thing without effecting valid performance de novo.

 

˜476@(Effect of Performance If Thing Delivered in Performance of Obligation Is Consumed or Assigned)

In a case as referred to in Art 475, if an obligee in good faith consumes or assigns things received in performance of an obligation, that performance is valid. In such a case, if the obligee has received a claim for compensation from a third party, the obligee is not precluded from seeking reimbursement from the person performing the obligation.

 

˜477@(Performance by Payment into Account for Deposits)

Performance made by making payment into the obligee's account for deposits becomes effective when the obligee acquires a right to demand the refund of the amount paid, against the obligor of the claim to be paid from deposits.

 

˜478@(Performance to Person That Appears to Be Authorized to Accept)

Performance made to a person that does not constitute a person authorized to accept the performance (meaning the obligee or a third party authorized to accept performance based on the provisions of laws and regulations or the manifestation of intention of the parties) but that appears to be the person authorized to accept the performance in light of common sense in the transaction is effective only if the person effecting performance was acting in good faith and without negligence.

 

˜479@iPerformance to Person Other Than Person with Right to Performance)

Except as provided in Art 478, any performance made to a person other than the person with right to performance is effective only to the extent that the obligee is enriched as a result thereof.

 

˜481@(Performance by Third Party Obligor of Claim Attached)

(1) If a third party obligor of a claim that has been attached performs the obligation to that third party's own obligee, the attaching obligee is entitled to request the third party obligor to perform the obligation de novo to the extent of the damage sustained by the attaching obligee.

(2) The provisions of para (1) do not preclude the relevant third party obligor from exercising the right to reimbursement from the obligee.

 

˜482@iSubstitute Performance)(Accord and Satisfaction)

If a person that has right to perform an obligation ("performer") concludes a contract with the obligee to the effect that the person is to have the obligation extinguished by making, in lieu of the payment or delivery to be performed by the obligor, another type of payment or delivery, and the performer makes that other type of payment or delivery, the payment or delivery thus made has the same effect as that of the performance of the obligation.

 

˜483@iDelivery of Specific Thing on As-Is Basis)

If the subject matter of a claim is the delivery of a specific thing, and the quality of the thing may not be determined as of the time when the delivery is due in light of the cause from which the claim has arisen such as a contract and the common sense in the transaction, the person that performs the obligation must deliver the thing on an "as-is" basis as of the time when the delivery is due.

 

˜484@iPlace and Time of Performance)

(1) Unless a particular intention is manifested with respect to the place where the performance should take place, the delivery of a specific thing must be effected at the place where that thing was located when the relevant claim accrued, and the discharge of any other obligation must be effected at the current domicile of the obligee.

(2) If the trading hours are specified by laws and regulations or customs, performance may be made or demanded only within the trading hours.

 

˜485@iExpense of Performance)

Unless a particular intention is manifested with respect to the expenses of performance, those expenses are borne by the obligor; provided, however, that if the obligee caused the expenses of performance to increase by relocating the domicile thereof or taking any other act, the amount of increase due to this is borne by the obligee.

 

˜486@iRequest for Issuance of Receipt)

A person performing an obligation may request the person accepting the performance to issue a receipt.

 

˜487@iRequest for Return of Instrument Evidencing Claims)

If there is an instrument evidencing a claim and the person making the performance has made full performance, that person may demand the return of the instrument.

 

˜488@(Appropriation of One Payment or Delivery among Two or More Obligations Requiring the Same Kind of Payment or Delivery)

(1) If an obligor bears to a single obligee two or more obligations which require the same kind of payment or delivery, and the payment or delivery provided in performance of the obligations is not sufficient to extinguish all of these obligations (excluding the case prescribed in Art 489 para (1)), the person that makes the performance may, at the time of the payment or delivery, designate a particular obligation to which that performance should be appropriated before any others.

(2) If the person performing an obligation does not make the designation under the provisions of para (1), the person receiving the performance may, at the time of such receipt, designate a particular obligation to which such performance should be appropriated before any others; provided, however, that this does not apply if the person performing the obligation immediately raises an objection to that appropriation.

(3) The designation of the appropriation of the performance under para (1) & (2) is effected thru a manifestation of intention to the counterparty.

(4) Neither the person that makes the performance nor the person that accepts the performance makes designation under the provisions of para (1) or (2), the performance is appropriated pursuant to the provisions of the following items:

(i) if the obligations include those which are due and those which are not yet due, the performance is appropriated to those which are due;

(ii) if all obligations are due, or none of the obligations is due, the performance is appropriated in the order of the obligations which are to result in more benefit to the obligor when performed;

(iii) if all obligations would have equal benefit to the obligor when performed, the performance is appropriated in the order of the obligations which have, or should have, the earliest due date; or

(iv) the performance of obligations which are equal in terms of the particulars set forth in item (ii) & (iii) is appropriated in proportion to the amount of each obligation.

 

˜489@(Appropriation to Principal, Interest and Expenses Payable)

(1) If the obligor is liable to pay interest and expenses in addition to principal with respect to one or more obligations (if the obligor bears two or more obligations, limited to when the obligor bears these obligations requiring the same kind of payment or delivery to the same obligee), and the person that performs the obligations makes payment or delivery which is not sufficient to extinguish the obligation in its entirety must be appropriated first to expenses, and then to interest and principal, in this order.

(2) The provisions of Art 488 apply mutatis mutandis in the case referred to in para (1) in which the person makes payment or delivery which is not sufficient to extinguish any of expenses, interest or principal in whole.

 

˜490@(Appropriation of Performance by Agreement)

Notwithstanding the provisions of Art 488 & 489, if the person that makes performance and the person that accepts performance agree on the order of appropriation of performance, the performance is appropriated according to the agreed-upon order.

 

˜491@(Appropriation in Cases More Than One Performance Should Be Tendered)

If more than one performance should be tendered to discharge a single obligation, if the person that must perform tenders any performance which is not sufficient to extinguish such obligation in its entirety, the provisions of Art 488 thru 490 apply mutatis mutandis.

 

˜492@iEffect of Tender of Performances)

Upon tendering the performance, the obligor is relieved from any and all responsibilities which may arise from the non-performance of the obligation.

 

˜493@iMethod of Tender of Performances)

The tender of the performance must be made actually consistent with the main purport of the obligation; provided, however, that if the obligee refuses to accept that performance in advance or if any act is required on the part of the obligee with respect to the performance of the obligation, it is sufficient for the obligor to request the acceptance thereof by giving a notice that the tender of the performance has been prepared.

 

Division ii Deposit of Subject-Matter of Performance

 

˜494@iDeposit)

In the following cases, a performer may deposit the subject matter of the performance with an official depository for the benefit of the obligee. In such a case, the claim is extinguished when the performer makes the deposit:

(i) the performer tenders the performance, and the obligee refuses to accept it; or

(ii) the obligee is unable to accept the performance.

(2) The para (1) also applies if the performer is unable to ascertain the obligee; provided, however, that this does not apply if the performer is negligent in this respect.

 

˜495@iMethod of Deposit)

(1) The deposit under the provisions of Art 494 must be made with the official depository having jurisdiction over the place where the relevant obligation is performed.

(2) If there is no specific provision in laws and regulations with respect to the official depository, the court, at the request of the performer, must designate the depository and appoint a custodian of the thing to be deposited.

(3) A person that has effected a deposit pursuant to the provisions of Art 494 must notify the obligee of the deposit without delay.

 

˜496@iRecovery of Deposited Thing)

(1) As long as the obligee does not accept the deposit, or the judgment which pronounces that the deposit is effective does not become final and binding, the performer may recover the deposited thing. In such case, it is deemed that no deposit has been effected.

(2) The provisions of para (1) do not apply in cases any pledge or mortgage has been extinguished due to the deposit.

 

˜497@iThing Not Suitable for Deposit)

In the following cases, the performer may, with the permission of the court, sell the thing that is the subject matter of performance at public auction and deposit the proceeds of such sales with an official depository:

(i) the thing is not suitable for deposit;

(ii) the price of the thing is likely to decline due to causes such as loss and damage;

(iii) excessive expenses are required for the preservation of the thing; or

(iv) beyond the cases set forth in item (i) thru (iii), there are circumstances that make it difficult to deposit the thing.

 

˜498@(Demand for Return of Deposited Thing)

(1) If the property that is the subject matter of performance or the proceeds referred to in Art 497 are deposited, the obligee may demand the return of the deposited thing.

(2) If the obligor is to effect performance in exchange for payment or delivery by the obligee, the obligee may not receive deposited thing without making that payment or delivery.

 

Division iii Subrogation by Performance

 

˜499@(Requirements for Subrogation by Performance)

A person that has performed the obligation for the benefit of the obligor is subrogated to the claim of the obligee.

 

˜500@(Requirements for Subrogation by Performance)

The provisions of Art 467 apply mutatis mutandis in the case referred to in Art 499 (unless a person with a legitimate interest in making performance is subrogated to the claim of the obligee).


˜501@iEffect of Subrogation by Performance)

(1) A person that is subrogated to the claim of the obligee pursuant to the provisions of Art499 & 500 may exercise any and all rights possessed by the obligee as the effect of, and as a security for, the claim held by the obligee.

(2) The exercise of rights under the provisions of para (1) is allowed only to the extent that the person that is subrogated to the claim of the obligee is entitled to seek reimbursement from the obligor based on the person's own rights (if one of the guarantors is subrogated to the claim of the obligee in relation to other guarantors, only to the extent that the guarantor is entitled to seek reimbursement from the other guarantors based on that guarantor's own rights).

(3) In the case referred to in para (1), the following provisions apply in addition to the provisions of para (2):

(i) a third party acquirer (meaning a person that has acquired from the obligor the property that is the subject of security) is not subrogated to the claim of the obligee in relation to any guarantors or third-party collateral providers;

(ii) one of the third party acquirers is subrogated to the claim of the obligee in relation to other third party acquirers in proportion to the price of each property;

(iii) the provisions of item (ii) apply mutatis mutandis if one of the third-party collateral providers is subrogated to the claim of the obligee in relation to other third-party collateral providers;

(iv) between a guarantor and a third-party collateral provider, the subrogation to the claim of the obligee is effected depending on the number of these persons involved; provided, however, that if there are two or more third-party collateral providers, they are subrogated to the claim of the obligee in proportion to the price of each property with respect to the amount which remains after deduction of the share of the guarantor; and

(v) a person that has acquired from a third party acquirer the property that is the subject of security is deemed to be a third party acquirer, and the provisions of item (i) & (ii) apply thereto; and a person that has acquired from a third-party collateral provider the property that is the subject of security is deemed to be a third-party collateral provider, and the provisions of item (i), (iii) and (iv) apply thereto.

 

˜502@iSubrogation by Partial Performance)

(1) If performance by subrogation occurs with respect to one part of a claim, the subrogee, with the consent of the obligee, may exercise the rights of the subrogee together with the obligee in proportion to the value of the subrogee's performance.

(2) Even in a case as referred to in para (1), the obligee may exercise the obligee's right independently.

(3) The right to be exercised by the obligee in the case referred to in para (1) & (2) prevails over the right to be exercised by the subrogee with regard to money to be obtained as a result of the exercise of the rights such as the proceeds from the sale of the property that is the subject of security for the claim of the obligee.

(4) In the case referred to in para (1), the cancellation of a contract based on the failure to perform the obligation may be effected only by the obligee. In such a case, the obligee must reimburse to the subrogee the value of the performance that the subrogee effected plus interest.

 

˜503@iDelivery of Instrument Evidencing Claims by Obligee)

(1) An obligee that has received full performance by way of subrogation must deliver to the subrogee the instruments regarding the claim and any collateral that the obligee possesses.

(2) If performance by subrogation occurs with respect to a part of a claim, the obligee must enter the particulars of that subrogation in the instruments regarding the claim and allow the subrogee to supervise the custody of the collateral that the obligee possesses.

 

˜504@iLoss of Security by Obligee)

(1) If there is a person that has legitimate interest in performing an obligation ("person entitled to subrogation"), and the obligee causes the security thereof to be lost or diminished intentionally or negligently, the person entitled to subrogation is relieved from responsibility to the extent that that person can no longer seek the reimbursement due to the loss or diminution in the security available upon subrogation. If the person entitled to subrogation is a third-party collateral provider, the same applies to a third party that has acquired from the person entitled to subrogation the property that is the subject of security and to the specific successor thereof.

(2) The provisions of para (1) do not apply if the obligee is found to have reasonable grounds in light of the common sense in the transaction for causing the security to be lost or diminished.

 

Subsection 2 Set-offs

 

˜505@iRequirements for Set-offs)

(1) If two persons bear an obligation to each other that has the same kind of purpose and if both obligations are due, each obligor may be relieved from the obligation by setting off the value of that obligation against the corresponding amount of the obligation of the other obligor; provided, however, that this does not apply if the nature of the obligation does not permit such a set-off.

(2) Notwithstanding the provisions of para (1), if a party manifests the intention to prohibit or restrict a set-off, that manifestation of the intention may be duly asserted against a third party only if the third party knew or did not know due to gross negligence it.

 

˜506