Incorporating terms of service as standard terms under Japanese law

1. Publishing terms is not the same as incorporating them

Putting terms of service on your website does not, by itself, make them part of the contract. The Japanese Civil Code treats a set of clauses prepared for standardised mass transactions as a teikei yakkan — standard terms — and deems the individual clauses to have been agreed only where certain requirements are met.

Miss this structure and you discover, at the point of dispute, that the limitation of liability and the dispute resolution clause you drafted are not available to you. This article works through three points in order: incorporation, unfair clauses and amendment.

2. Are your terms teikei yakkan?

Article 548-2(1) of the Civil Code sets two requirements.

• A standardised transaction: a transaction that a particular party conducts with an unspecified and large number of counterparties, where it is reasonable for both sides that all or part of the content is uniform
• A body of clauses prepared by that party for the purpose of forming the content of that transaction

Consumer-facing web service terms normally qualify. Terms used with business customers whose conditions are individually negotiated may not, even where a common form is used, because the requirement that uniformity be reasonable for both sides is not necessarily satisfied in B2B dealings.

3. Requirements for incorporation

For the individual clauses to be deemed agreed, one of the following is required.

1. The parties agreed that the standard terms would form the content of the contract
2. The party who prepared them displayed to the counterparty in advance that the standard terms would form the content of the contract

In practice this means stating "by placing an order you agree to the terms of service" next to the order button, with a link to the terms. A checkbox recording explicit consent makes the first route easier to prove.

Where the only link sits in the footer and nothing in the order flow refers to the terms, incorporation as standard terms is open to question. The contract itself does not fail; the problem is that you may be unable to rely on the individual clauses as contract content. The same applies to limitation of liability, governing law and jurisdiction clauses, absent a separate agreement.

Note also the obligation to disclose the content of the standard terms on request (Article 548-3).

4. Clauses that do not work even when written

Even where the terms are incorporated, a clause of the following kind is deemed not to have been agreed (Article 548-2(2)).

A clause that restricts the rights or aggravates the duties of the counterparty and that, in light of the manner and circumstances of the standardised transaction and of common commercial practice, unilaterally prejudices the interests of the counterparty in breach of the principle of good faith under Article 1(2)

Drafting a broader exclusion of liability does not make you safer. An excessive exclusion pushes the clause itself towards being unusable.

Where the counterparty is a consumer, the Consumer Contract Act applies in addition. Three provisions come up most often.

"The Company shall bear no liability whatsoever" is void under Article 8 as to the business's non-performance and certain torts. Where a partial limitation such as a liability cap is used, it cannot extend to the business's intent or gross negligence, and the clause must make clear on its face that it applies only to ordinary negligence.

5. Amending the terms

Running a service means amending the terms — for legislative changes, feature changes or pricing. Article 548-4 sets out when this can be done without individual consent.

• The amendment conforms to the general interest of the counterparty, or
• The amendment does not conflict with the purpose of the contract and is reasonable in light of the necessity for it, the appropriateness of the amended content, whether the terms provide for amendment and what they say, and other relevant circumstances

In addition, the party must fix the date on which the amendment takes effect, and give notice of the fact of amendment, the amended content and that effective date by internet or another appropriate method — and do so before the effective date arrives.

So a single line saying "the Company may amend these terms from time to time" does not make any amendment effective. As a matter of drafting, include three things in the terms themselves.

1. That amendments may be made, and in what circumstances
2. The method of notice (posting on the site, email to the registered address, and so on)
3. The notice period before the effective date (for example, one month)

Price increases, and reductions in service already purchased, call for closer scrutiny of reasonableness. Keeping a record of notice — when, by what method, and of what content — is what helps if the point is later contested.

6. Overlap with distance selling disclosure rules

For consumer services, the distance selling rules of the Act on Specified Commercial Transactions apply in parallel. The final confirmation screen must display the quantity, the price, the timing and method of payment, the timing of delivery or provision, the content of any applicable application period, and matters relating to withdrawal and cancellation. Displays likely to cause misunderstanding are prohibited, and the customer must be able to check and correct the content of the order easily.

Distance selling has no cooling-off right. However, where a sales contract carries no stated returns policy, the customer may in principle withdraw or cancel within eight days of receiving the goods, bearing the return shipping cost. If you do not accept returns, that has to be stated clearly.

Subscription offers have repeatedly been challenged where the introductory price is displayed prominently and the continuing conditions and total payable are not. Review the final confirmation screen by asking whether the contract period, each instalment, the total and the cancellation conditions are easy for the customer to see.

7. A review sequence

1. Where in the order flow the terms are referred to (incorporation)
2. Whether the liability and liquidated damages clauses are excessive against Articles 8, 9 and 10 of the Consumer Contract Act
3. Whether the amendment clause specifies the notice method and the effective date
4. Whether the final confirmation screen carries the items required by the Act on Specified Commercial Transactions
5. Whether the terms match the actual service operation and payment flow

Point 5 is easily missed. Tidy drafting achieves nothing if the implementation has not caught up; plan the amendment of the terms and the change to the screens together.

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This article is general information, not legal advice on any specific matter. For help designing or revising terms of service for the Japanese market, please use the contact form.