Contract LawSupreme
Court Decision of October 25, 1994, 48 Minshu 7-1303. The Court allowed
consideration of a lessors payment of, and subsequent proposal to increase the
amount of, a "departure fee" to a lessee for the purposes of determining whether
the lessor was entitled to refuse to renew a lease of underlying property with a building
owner under Land Lease Law Article 4(1)(prior to revision of Land Lease Law in 1991). Land
Lease Law Article 4(1) prohibits a lessor of underlying property upon which the lessee has
built a building from refusing to renew the lease for the statutorily required thirty (30)
years absent an expression of the lessors own intention of using the land or
"other appropriate reason." The lessor had proposed the payment of a
"departure fee" while the parties were embroiled in litigation regarding the
lease, but before the conclusion of oral argument. Nonetheless, there being no opposition
to the "departure fee" by the lessee under Land Lease Law 6(2), the Court
allowed consideration of both the "departure fee" and the lessors proposal
to increase the amount of the "departure fee" in determining whether the
lessors refusal to renew was based on an "appropriate reason" under the
Land Lease Law Article 4(1), absent evidence that the lessor had intentionally delayed the
proposal.
Supreme Court Third Petty Bench Decision of December 6, 1994, 1519 Hanji
78, 872 Hanta 174, 1414 Kinho 28. The Court overturned the lower court in
holding that the maximum liability of a guarantor who had executed a guaranty agreement
and security agreement was the value of the property offered pursuant to the security
agreement and not the total amount of the debtor's obligation. The debtor had requested
that the guarantor, the debtor's ex-wife, act as a guarantor with respect to ongoing loans
of operating capital for the debtor's convenience store. The Court found that the
objective circumstances of the transaction indicated that both the guarantor and the
entity seeking the guaranty understood that the limit of the guarantor's liability was
value of the guarantor's home which had been offered as collateral for the guaranty.
Supreme Court Second Petty Bench Decision of January 20, 1995, 1520 Hanji
87, 873 Hanta 89. The Court reversed a lower court ruling and held that a close
reading of various provisions of a golf membership agreement prohibited the transfer of
rights of membership despite the fact that the membership was a "deposit" type
membership, and that, unlike other types of golf memberships, the transfer of
"deposit" type golf memberships is not expressly prohibited. The Court found
that the underlying meaning of the contract was to prohibit transfer of the rights of
membership.
Supreme Court First Petty Bench Decision of June 29, 1995, 1541 Hanji
92, 887 Hanta 174. The Court reversed a lower courts application of the Land
Lease Law (prior to its revision in 1991) to a lessors proposed termination of a
daycare center's lease of adjoining property. In 1961, the daycare center had entered into
a two year renewable lease for the use of adjoining property as a playground since
construction of an additional building on the daycare's property would eliminate the
original playground. The lower court had interpreted the lease as governed by the Land
Lease Law, which imposes specific lease terms and restrictions on termination to leases of
property "for the purpose of owning a structure" (Land Lease Law, Article 1).
Viewing the daycare centers lease of the adjoining property as indivisible from its
intention to own the additional building on its own property, the lower court had denied
the lessors proposed termination and imposed, pursuant to Land Lease Law Article
2(1) a lease term of thirty (30) years. The Court disagreed, indicating that the daycare
center's purpose was simply to use the adjoining property as a playground, and that, as a
result, neither the lease term nor the landlords termination was subject to the Land
Lease Law.
Supreme Court Third Petty Bench Decision of September 19, 1995, 49 Minshu
8-2805, 1551 Hanji 69, 896 Hanta 89. The Court ruled in favor of a
contractor who had entered into an agreement with the lessee of a building for the
performance of repair and improvement construction. The lessee had become insolvent after
completion of the contracted services, and the plaintiff contractor had commenced an
action against the owner of the building for restitution of the amount of unjust
enrichment. The Court allowed the claim for unjust enrichment based on the fact that
during the term of the lease, the owner had received the benefit of the contracted
services without consideration.
Supreme Court Third Petty Bench Decision of November 12, 1996, 50 Minshu
10-2673, 1585 Hanji 21, 925 Hanta 171. The Court reversed a lower court
determination regarding the cross termination of contracts. The defendant company, engaged
in the construction and sale of resort condominiums, also owned and operated a sports club
in the resort facility. As part of their purchase of condominiums under construction by
the defendant, each of the plaintiff purchasers was also required to enter into a
membership agreement for the resort sports club. The agreement provided for the
termination of the membership in the event of the plaintiffs transfer of interest in
the purchased condominium to a third party, making the club membership inextricably
related to ownership of the condominium. During negotiations and in its promotional
material, the defendant had listed an indoor pool among the amenities of the sports club,
which was projected to be completed approximately ten months after completion of the rest
of the resort facility. As, long after this projected date of completion, construction of
the pool had not begun, the plaintiffs notified the defendant of their intention to
rescind both the condominium sales agreement and the sports club membership agreement. The
trial court (Osaka District Court Decision of December 19, 1994) found in favor of
the plaintiffs, viewing the condominium sales agreement and the sports club membership
agreement "indivisible" insofar as the defendants obligation to provide an
indoor pool was an element of its obligations under both agreements. The Court of Appeals
(Osaka High Court Decision of January 31, 1996) found in favor of the defendants,
viewing the sports club membership agreement as only one component of the condominium
sales agreement. Reversing, the Court noted that even where the obligation of the parties
are memorialized in more than one agreement, where they have a mutual purpose and the
performance of a parties obligation under only one of the agreements would not accomplish
this purpose, exercise of rescission rights as a result of a partys failure to
perform under one agreement appropriately allows rescission of the other agreement.