A contract is formed if one party accepts an offer made by the other party. Probably, you know this. However, you may not know whether any formality (e.g. document, signature, seal) is required to make it a legally binding contract (i.e. enforceable in courts) inside Japan.
Must an agreement be made in writing to be an effective contract? The answer is no. An oral agreement is a legally binding contract in Japan. The law says:
“Formation of contracts does not require any method such as the preparation of a document except where special provisions exist in the law.” (Article 522(2) [*1] of the Civil Code [“CC”])
Therefore, if you breached an oral agreement, you could be sued by the other party (e.g. you borrowed ¥5,000 from your friend but you haven’t paid it back). The exception mentioned in the Article is that, for instance, a guarantee agreement must be made in writing under Article 446(2) of the CC.
If that is the case, why are most contracts made in writing? It is because we have to prove the contents of the contract if any dispute arises from a contract (e.g. you might deny the borrowing or you might argue that it is ¥500 rather than ¥5,000). If the breaching party denies a specific term or the contract itself, it is hard to prove the existence of the term and/or the contract if there is no written record.
Electronic documents (e.g. PDF file) are included in this context.
Therefore, the contents of most formal contracts are recorded on a document. Then, most readers will think that the parties should sign the document. Legally speaking, however, a signature is also not a requirement in the law. Again, the above-cited Article says “formation of contracts does not require any method…”.
However, the problem of proof arises again. Signature is not a requirement of concluding a contract but can be decisive evidence that both parties agree with the contents set out on the document. With only a document, we cannot prove that both parties agreed with the terms written on the document. Signatures are used to prove the intention of both parties to enter into an agreement.
3. Relationship between signatures and seals in Japan
In Japan, seals are often used as an alternative to signatures or with signatures. Similar to a signature, a quality seal has a unique imprint. Therefore, if the imprint of a seal is left in the right place on a contractual document, it is deemed that the seal holder agreed with the terms on the document. Further, in some cases, they specify a seal rather than a signature to conclude an agreement or the sign of confirmation. If you do not bring a seal, they often request you to put your thumbprint on the paper, say, at a municipal office.
Can signatures alternate seals in Japan from the legal point of view? Again, the law does not require any formality and therefore it is a matter of evidential means and value. Article 369(3) of the Companies Act says that “if the minutes are prepared in writing, the directors and company auditors present at the meeting shall sign or affix the names and seals to it.” It says that “sign or affix the names and seals to [the minutes]”, which means that if you sign, it is enough while you affix a seal you also have to name on it (names are normally printed at the outset). While this Article only applies to minutes prepared by companies, we see the same instructions in the execution parts on many legal documents. In the legal point of view, therefore, a signature is deemed as a means which can be an alternate to seals or even stronger evidence than seals in Japan.
Still, in practice, you will be required to stamp your registered seal (jitsu-in) when entering into an important agreement such as buying a house. As a business custom, seals have established an important status in Japan.
I will cover the types of seals, digital signatures etc. in the next article.
[*1] This provision itself takes effect on April 1, 2020. Nevertheless, it has been an established legal principle.
Disclaimer: While every effort has been made to ensure that the information on this article is accurate at the time of posting, it is not intended to provide legal advice as individual situations will differ. If you do require advice or wish to find out more about the information provided and related topics, please contact the author.