Japan Business Law Examination cheat sheet

Contract formation under Civil Code Arts. 521-522: offer becomes effective when notice reaches the offeree; acceptance effective on dispatch (arrival rule for offer, dispatch rule for acceptance).

Statute of limitations for ordinary claims is 5 years from when the creditor knew or could have known of the right and the debtor (Civil Code Art. 166); 10 years from the right's occurrence, 20 years absolute.

Tort liability requires intent or negligence, infringement of a protected interest, causation, and damage (Art. 709); employer liability for employees under Art. 715 unless the employer proves reasonable care in selection and supervision.

Seller's non-conforming performance: buyer may demand cure, price reduction, damages, or rescission; rescission requires demand for cure with a reasonable period and continued non-performance (Arts. 541-542).

Risk of loss in sales passes to the buyer on delivery of the object (Art. 567); in a sale by a third party, risk passes when the object is delivered by the third party.

Set-off requires both claims due and of the same kind; notice to the other party is effective on arrival (Arts. 505-506); set-off is prohibited for claims arising from intentional torts.

Standard terms are incorporated only if the party presents them and the other party agrees; clauses unfairly limiting the other party's rights may be void (Arts. 548-2 to 548-4).

Prescription is interrupted by demand (催告), filing suit, or acknowledgment; demand gives a provisional 6-month extension (Art. 150).

A Stock Company (株式会社) requires at least one director (Art. 326); a Board of Directors is mandatory for public companies and companies with a supervisory committee.

Directors owe a duty of care of a good manager and a duty of loyalty (Arts. 330, 355); breach triggers liability to the company under Art. 423(1).

Business judgment rule: courts defer where the director was informed, rationally deliberated, and had no conflict of interest (Tokyo High Court, 1989).

Shareholder derivative suit: a shareholder holding shares for 6 months may demand the company sue a director; if the company fails within 60 days, the shareholder may sue (Arts. 847, 847-3).

Shareholder approval for self-dealing requires disclosure of material facts and approval by a majority of disinterested shareholders (Art. 369(2)).

Dividends require a shareholders' resolution unless the articles delegate to the board; distributable amount is capped by the net assets test in Art. 461.

Mergers and company splits require shareholder approval by special resolution (two-thirds of voting rights present, Art. 309(2)); short-form mergers may skip the target's approval.

Directors' liability can be limited by articles or contract to 2× annual compensation for outside directors (Art. 427).

A shareholder may inspect accounting books with a stated purpose; the company may refuse only on statutory grounds such as improper purpose (Art. 433).

Labor Standards Act Art. 15: employer must clearly state wages, working hours, and other conditions in writing at hiring; violation is a criminal offense.

Working hours are capped at 8 per day and 40 per week (Art. 32); overtime requires a written labor-management agreement (36 agreement) filed with the Labor Standards Inspection Office.

Overtime premium: 25% for hours beyond 8/day or 40/week, 35% for work on statutory holidays, 25% for night work (10pm-5am) added on top.

Dismissal requires objective, reasonable grounds and social acceptability (Art. 16); a dismissal without 30 days' notice or dismissal allowance is invalid unless Art. 20 exceptions apply.

Labor Contract Act Art. 16: dismissal is void if it lacks objective reasonableness and is not socially acceptable; burden of proof is on the employer.

Fixed-term contracts: if renewed repeatedly, the employee may convert to an indefinite term after 5 years of total service (Labor Contract Act Art. 18).

Wage claims have a 3-year limitation (Labor Standards Act Art. 115); unpaid wages can be pursued via the Labor Standards Inspection Office or civil suit.

Equal pay for equal work: unreasonable differences in wages between regular and non-regular employees are prohibited (Labor Contract Act Art. 20).

Patent term is 20 years from filing (Patent Act Art. 67); a patent is granted for an invention with novelty, inventive step, and industrial applicability.

Prior art includes anything publicly known or used in Japan or abroad before filing; grace period of 12 months for disclosure by the applicant (Art. 30).

Trademark registration requires distinctiveness; the term is 10 years from registration and renewable indefinitely (Trademark Act Arts. 19, 21).

Copyright arises automatically on creation; protection lasts 70 years after the author's death (Copyright Act Art. 51); no registration is required.

Trade secrets are protected under the Unfair Competition Prevention Act Art. 2(6); requirements are secrecy, non-publicity, and reasonable protective measures.

Patent infringement: injunction (Art. 100) and damages; damages may be calculated as infringer's profit or a reasonable royalty (Art. 102).

Employee inventions belong to the employer if the articles or contract so provide, with the employee entitled to reasonable compensation (Patent Act Art. 35).

Trademark cancellation for non-use: registration may be cancelled if not used for 3 consecutive years (Trademark Act Art. 50).

Prohibited conduct: unreasonable restraint of trade (Art. 3), private monopolization (Art. 3), unfair trade practices (Art. 19), and certain mergers (Art. 15).

Cartels are unreasonable restraints of trade; surcharge rates are 10% of sales for manufacturers and 3% for retailers (Art. 7-2).

Leniency: the first applicant to report before investigation receives full immunity; second receives a 50% reduction, third a 30% reduction (Art. 7-2(10)).

Merger control: notification to the JFTC is required if combined domestic sales exceed ¥20 billion and the acquired company's exceed ¥5 billion (Art. 15-2).

Unfair trade practices include unjust low-price sales, resale price maintenance, and abuse of superior bargaining position (Art. 2(9)).

Holding companies are prohibited in principle (Art. 9); large companies must report share acquisitions above thresholds (Art. 10).

Private damages: injured parties may sue for damages under Art. 25 or Civil Code Art. 709; the JFTC's findings are not binding on courts.

Subcontract Act: parent companies must pay subcontractors within 60 days and must not reduce agreed prices unilaterally.

Product Liability Act (PL Act): manufacturer liable for damage caused by a defect in a product, regardless of fault (Art. 3).

Defect means lack of safety the product should ordinarily provide, considering its nature, foreseeable use, and time of delivery (Art. 2(2)).

Defenses: the manufacturer is not liable if the defect could not have been discovered given the state of scientific knowledge at delivery (Art. 4(1)).

Consumer Contract Act: unfair clauses are void, including clauses exempting the business from liability for intentional or grossly negligent conduct (Art. 8).

Cooling-off: consumers may cancel certain contracts within 8 days of receiving documents (Consumer Contract Act Art. 4).

Door-to-door sales and telemarketing are regulated by the Specified Commercial Transactions Act; improper solicitation allows cancellation.

Product liability limitation period: 3 years from knowledge of damage and manufacturer, or 10 years from delivery (PL Act Art. 5).

Consumer Affairs Agency administers the Consumer Safety Act and can order recalls for serious product hazards.

Jurisdiction: a defendant is generally sued at its domicile (Code of Civil Procedure Art. 4); tort claims may be brought where the tort occurred (Art. 5).

A complaint must state the parties, the claim, and the cause of action; the court serves it and the defendant has 2 weeks to answer (Art. 138).

Statute of limitations is interrupted by filing suit; a provisional demand (催告) extends by 6 months (Civil Code Art. 150).

Burden of proof rests on the party asserting the fact; documentary evidence and witness examination are the main means of proof.

Settlement in court (和解) has the same effect as a final judgment (Art. 267); it can be enforced without further proceedings.

Appeal to the high court must be filed within 2 weeks of service of the judgment (Art. 285); further appeal to the Supreme Court is discretionary.

Provisional attachment (仮差押え) and provisional disposition (仮処分) are available to preserve rights pending judgment (Civil Preservation Act).

Small claims procedure applies to claims up to ¥600,000, decided in a single hearing (Art. 368).

The Act on Promotion of Use of Alternative Dispute Resolution (ADR Act) provides for certification of ADR providers and a 30-day suspension of limitation during ADR (Art. 5).

Arbitration in Japan is governed by the Arbitration Act (Law No. 138 of 2003), modeled on the UNCITRAL Model Law.

An arbitral award is final and binding; enforcement requires a court execution decision (Arbitration Act Art. 46).

The Japan Commercial Arbitration Association (JCAA) administers commercial arbitration; parties may choose seat, language, and arbitrators.

Labor disputes: the Labor Tribunal (労働審判) resolves individual labor disputes in up to 3 sessions, with a panel of one judge and two lay members.

Mediation (調停) is available in family and civil matters; a settlement reached has the same effect as a court settlement.

New York Convention: Japan is a party, so foreign arbitral awards are enforceable in Japan subject to limited grounds for refusal.

Online dispute resolution (ODR) is promoted under the ADR Act amendments; certified providers may conduct proceedings online.

Civil rehabilitation (民事再生) aims to rehabilitate a debtor; secured creditors are not bound by the plan but may be stayed during proceedings (Civil Rehabilitation Act Art. 27).

Corporate reorganization (会社更生) applies to stock companies and binds secured creditors; a trustee manages the company (Corporate Reorganization Act Art. 1).

Bankruptcy (破産) liquidates assets; the debtor loses management authority and a trustee is appointed (Bankruptcy Act Art. 2).

Avoidance (否認権): the trustee may void transactions made within 6 months before insolvency that prejudice creditors (Bankruptcy Act Art. 160).

DIP financing: in civil rehabilitation, the debtor may obtain priority financing with court permission (Civil Rehabilitation Act Art. 41).

Out-of-court workout: the Turnaround ADR procedure under the ADR Act provides a framework for creditor negotiation.

Directors' liability for insolvent trading: directors may be liable for damages if they continue trading after insolvency is foreseeable.

Claims priority: bankruptcy proceedings rank secured claims, then general priority claims (wages, taxes), then ordinary unsecured claims.

Corporate tax rate: 23.2% on taxable income for large companies; SMEs may use the reduced rate of 15% on the first ¥8 million (Tax Special Measures Act).

Consumption tax rate is 10% (8% for food and newspapers); the invoice system (qualified invoice) started October 2023.

Taxable income = revenue − deductible expenses; entertainment expenses are generally deductible up to ¥8 million for SMEs (Tax Special Measures Act Art. 61-4).

Transfer pricing: transactions with foreign related parties must be at arm's length (Special Taxation Measures Act Art. 66-4).

Accounting: financial statements must follow GAAP; the Companies Act requires annual financial statements and an audit for large companies (Art. 436).

Depreciation: fixed assets are depreciated over statutory useful lives; small assets under ¥100,000 may be expensed.

Withholding tax: 20.42% on interest and dividends for residents; 15.315% on listed dividends.

Tax appeals: a taxpayer may request a reinvestigation within 2 months of a correction notice, then file suit in the district court.