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Key Points of the Civil Code Amendment Concerning Contracting – BUSINESS LAWYERS

*The legend for this article is as follows.

  • Revised Civil Code: Revised Civil Code based on the Act for Partial Revision of the Civil Code (Act No. 44 of 2017)
  • Former Civil Code: Civil Code before revision based on the Act for Partial Revision of the Civil Code (Act No. 44 of 2017)

Clarification of partial remuneration claim according to the proportion of profit received by the orderer

The former Civil Code only stipulates that remuneration in a contract shall be paid “at the same time as the delivery of the object of the work” (Article 633 of the former amended Civil Code). There was noHowever, even if the contract is canceled before the work is completed due to the contractor’s default, if the orderer receives a profit from the results of the work up to the point of cancellation, the contractor is entitled to the profit. was understood to have the right to claim proportionate compensation . In addition, it has been considered that the contractor has the right to claim compensation even if the contract is terminated without any cause attributable to the contractor.
Therefore, Article 634 of the revised Civil Code stipulates the above interpretation, and in the following two cases, when the orderer benefits from the payment of a divisible portion of the results of the work already done by the contractor stipulated that the part of the work was regarded as completion of the work, and that the contractor could claim remuneration from the orderer in proportion to the profit received by the orderer.

  1. When the work cannot be completed due to reasons that cannot be attributed to the ordering party
    (Revised Civil Code, Article 634, Item 1)
  2. When the contract is canceled before the work is completed (Article 634, Item 2 of the Amended Civil Code)

Of these, (1) is not only the case where the work cannot be completed due to reasons attributable to the contractor, but also the inability to complete the work due to reasons not attributable to both parties. is understood to apply even if .In addition, in the case of ①, when the contractor claims remuneration according to the performance ratio, it is understood that the contractor does not need to assert and prove that there is no reason attributable to the ordering party. increase .
On the other hand, (2) includes the case where the contract is terminated by mutual agreement of both parties, but according to the view of the legislature, when the contract is terminated, the contractual relationship itself is retroactively extinguished and the compensation is not claimed. If there is an agreement to the effect that Article 634 of the Amended Civil Code does not apply, it is interpreted that Article 634 of the Revised Civil Code does not apply. In any case, if there is non-minor non-conformity with the target product as a result of work, it cannot be said that “the orderer received a profit”, so the claim for remuneration under this article is not permitted. Be aware that there is a possibility

In addition to the above provisions, if the work cannot be completed due to reasons attributable to the orderer, the provisions of risk assumption (Article 536, Paragraph 2 of the Amended Civil Code) will be applied, and the contractor will , By asserting and proving that there is a reason attributable to the orderer, you can claim the full amount of remuneration, including the unfinished portion of the work.

The above can be roughly organized as shown in the table below.

If the work cannot be completed due to reasons attributable to the orderer Full remuneration can be claimed (Article 536, Paragraph 2 of the Amended Civil Code)
If the work cannot be completed due to reasons attributable to the contractor Remuneration can be claimed according to the profit ratio (Article 634, Item 1 of the Amended Civil Code)
If neither party is responsible for the inability to complete the work Remuneration can be claimed according to the profit ratio (Article 634, Item 1 of the Amended Civil Code)
If the contract is terminated before the work is completed Remuneration can be claimed according to the profit ratio (Article 634, Item 2 of the Amended Civil Code)

Amendments to warranty liability

Amendments to Claims for Remediation

Article 634, paragraph 1 of the former Civil Code states, “If there is a defect in the object of the work, the orderer may request the contractor to repair the defect within a reasonable period of time. However, this provision has been completely deleted.
Regarding the main text of Article 634, Paragraph 1 of the former Civil Code, the provisions of Article 562 of the Revised Civil Code, which allow requests for additional completion by repairing the target object in the case of sale, are also applied mutatis mutandis to the case of contract (Article 559 of the Revised Civil Code). However, there were no major changes in the content of the provisions other than changing the wording of “defect” to “not conforming to the content of the contract,” and the impact on practice is considered to be limited. .
On the other hand, with regard to the proviso of Article 634, Paragraph 1 of the former Civil Code, it is understood that if the defect is significant, the contractor cannot be exempted from the repair obligation even if the repair requires an excessive cost. Since the provision was strongly criticized as unreasonable in terms of being forced to do so, it was deleted in the revised Civil Code. According to the view of the legislative staff, under the revised Civil Code, if the repair requires excessive costs, the repair is impracticable in light of the social conventions for transactions, and Article 412-2 of the revised Civil Code regarding impossibility It is understood that the provisions of paragraph 1 apply, and the orderer cannot request repairs from the contractor, and will be resolved by canceling the contract or claiming damages.

Amendment regarding cancellation

Article 635 of the former Civil Code states, “If there is a defect in the object of the work and the purpose of the contract cannot be achieved due to this, the orderer may cancel the contract. However, this provision has been completely deleted.
Article 635 of the former Civil Code was considered to be a special provision that stipulated that the contract could be canceled regardless of whether or not there was a cause attributable to the contractor in a given case. However, in the amended Civil Code, an amendment was made to the effect that the cancellation of a contract in general does not require the obligor to be held liable (Articles 541 to 543 of the Amended Civil Code), and as the significance of this provision disappeared, it was deleted. became.
The provision of the proviso of Article 635 of the former Civil Code was established as an exception to the cancellation of the contract because the removal of the structure due to cancellation of the contract would cause a large social and economic loss and the contractor’s obligations would be excessive. rice field. However, even if it is possible to maintain a work piece that is not in conformity with the contract by restricting the cancellation, it has been criticized that the benefit to the orderer and the socio-economic benefit are small and unreasonable.In addition, court precedents also state that if the building that was the object of the contract has a serious defect and needs to be rebuilt, the orderer can claim compensation for damages equivalent to the cost of rebuilding, and it is premised on the removal of the structure. Some made the decision to . Therefore, it was not necessarily reasonable to restrict the cancellation in such cases, so this provision was also deleted at the same time as the text of the same article.

Due to the deletion of the above provisions of the former Civil Code, when canceling a contract, the general contract provisions of the revised Civil Code will be followed. (Article 542, Paragraph 1, Items 3 to 5 of the Amended Civil Code), and if the demand is to be canceled, a demand to the effect that the performance will be completed, and after a considerable period of time has passed since the demand, the content of the contract It is required that the degree of incompatibility with

Amendments to time limits

Article 637 of the former Civil Code stipulates that if there is a defect in the object of the work and the orderer requests repair of the defect, compensation for damages, or cancellation of the contract, the contract shall be canceled for one year from the time of delivery of the object or the completion of the work. It was stipulated that it must be done within a year.

This provision must be exercised within one year from the time of delivery of the subject matter or the completion of work, even if the orderer does not know or recognize the defect. The provision was strongly criticized for being too burdensome.
Therefore, under Article 637, Paragraph 1 of the revised Civil Code, if the orderer does not notify the non-conformance to the contract within one year from the time when he/she “knows”, he/she may be entitled to claim additional performance, reduce remuneration, claim damages, or cancel the contract. It was decided that it could not be done. According to the view of the legislative staff, the notice in this case is not sufficient to simply convey the fact that there is non-conformance with the contract in an abstract manner. It is understood that the type and extent of the nonconformity should be communicated to the extent possible.

In addition, since the period limit like this provision is originally a provision to protect the contractor’s expectation that the performance has been completed, if the contractor fails to conform to the contract at the time of delivery of the subject matter or at the end of the work However, if you knew or did not know due to gross negligence, the above time limit will not apply (Article 637, Paragraph 2 of the Amended Civil Code).
Furthermore, Article 638 of the former Civil Code states that, with regard to the liability of a contractor for a building or other land structure, it is generally considered that defects are often discovered after a long period of time has passed since delivery. Five years (10 years in the case of concrete construction, etc.) was set as the duration. However, as mentioned above, in the amended Civil Code, since the period limit was calculated after the orderer “knows” of non-conformity with the contract, the significance of the provision has diminished, so it was deleted in the amended Civil Code.
In line with this revision of the Civil Code, the construction work standard contract terms and conditions recommended by the Construction Business Act Also, the warranty period for non-conformity liability has been revised. Specifically, the period of collateral was previously limited to one year after delivery for wooden buildings and two years for concrete buildings. As a result of the unification of the terms of use, it was changed to two years after delivery in principle for construction objects and one year after delivery for facilities and equipment. Generally, in construction work, during the construction process, the orderer and the contractor carefully check the construction details, and the part that does not conform to the contract is repaired before the completion of the project before delivery. is done. Therefore, there is little practical benefit to setting a long-term collateral period, and it is cruel to put the contractor in an unstable position for a long period of time. stipulations are laid down.
It should be noted that the provisions of the Act on Promotion of Quality Assurance, etc. of Housing are separately applied to the period limit for housing defects.

Amendments regarding cancellation due to the orderer’s decision to commence bankruptcy proceedings

According to Article 633 of the old and revised Civil Code, in a contract, the payment of remuneration and the delivery of the target object are in a relationship of simultaneous performance, and it is understood that the completion of the work is performed before the payment of remuneration. . However, if the orderer receives a decision to commence bankruptcy proceedings, the possibility of not being able to pay the remuneration increases, but even in such a case, the contractor must complete the work and deliver the object at the same time. It is extremely disadvantageous for the Contractor to be unable to receive the payment of remuneration. Therefore, from the viewpoint of protecting the contractor, Article 642, paragraph 1 of the former Civil Code gives not only the bankruptcy trustee but also the contractor the right to cancel the contract when the orderer receives a decision to commence bankruptcy proceedings. I had stipulated that.

In this regard, if the contractor has already finished work and is only handing over the object at the time the orderer receives the decision to commence bankruptcy proceedings, there is no disadvantage even if the contractor is not given the right to cancel. It can be said that it does not occur. Therefore, the proviso to Article 642, Paragraph 1 of the revised Civil Code was amended to the effect that the contractor may not cancel the contract after the work is completed.
In addition, under the second half of Article 642, Paragraph 1 of the former Civil Code, if the orderer receives a decision to commence bankruptcy proceedings, the contractor may participate in the distribution of the bankruptcy estate regarding the remuneration for the work when the work was completed. This provision has been moved to Article 642, Paragraph 2 of the Revised Civil Code with the same content.

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