The Commercial Code of Japan/Book 1

Derived from Art. 1 of the old German Commercial Code. The same provisions are also found in Art. 1 of the Hungarian Commercial Code, Art. 1 of the Italian Commercial Code, Art. 2 of the Spanish Commercial Code, and Art. 3 of the Portuguese Commercial Code.

There are no such provisions in the present German Commercial Code; but according to the Rules for the Operation of the Commercial Code of Germany, only the provisions of the Civil Code are applicable in the absence of any provision in the Commercial Code and in the said Rules.

A juristic person is a person or organization capable of being the subject of rights. A public juristic person is a juristic person constituting a part of the political institution of the state; for example, cities, towns, or public institutions such as the Board of Trade, the Institution for the Prevention of Flood, etc.

According to Art. 7 of the Italian Commercial Code and Art. 17 of the Portuguese Commercial Code, the State, Provinces and Communes are prohibited from acting as traders. However, the German Commercial Code recognizes that a public juristic person may be a trader within the meaning of the Code, but at the same time it provides that certain provisions applicable to an ordinary trader are not applicable to a public juristic person. Arts. 36 and 42 of that Code read as follows:—

“Art. 36. Any business undertaken by the Imperial Government, by a Federal State, or by a parochial body, need not be registered. If any registration has been made, it must be confined to a statement of the firm-name, the place of business, and the object of the undertaking.”

“Art. 42. The rights of the directorate of an undertaking of the Imperial Government, of a Federal State, or parochial body, to keep accounts in a way different to those enacted by Arts. 39 to 41, are in no way affected.”

Thus: if a student buys a book from a bookseller, the transaction on the part of the bookseller being a commercial transaction, the whole transaction is subject to the Commercial Code.

Both the old and the present German Commercial Code (Art. 345) have the same provisions. The French Commercial Code and those codes based on the French system have no such provisions.

¹ A commercial transaction is either absolute or relative. An absolute commercial transaction is a transaction which by its nature is commercial, irrespective of the person who carries it on. For instance, a man buys goods with the intention of selling them again for profit: this is an absolute commercial transaction. On the other hand, a transaction is a relative commercial transaction, not because of its nature, but because the person carrying it on is a trader. For instance, carriage of goods or passengers is a relative commercial transaction. If even a student buys books with the intention of selling them, the transaction is commercial, for such a transaction is an absolute commercial transaction; on the other hand, if a student, not a common carrier, carries goods even for the purpose of receiving a pecuniary reward, the transaction is not commercial, for the business of carriage is only a relative commercial transaction and the student in the illustration given is not in the business. See Arts. 263 and 264, infra.

² “In his own name” means that the trader is to enjoy the rights and perform the obligations arising from his business. Thus: if he appoints a manager to manage his business, he is no less a trader; but the manager is not a trader but an employee. In case a guardian carries on business for his ward, only the ward is the trader within the meaning of the Code.

³ The expression “as a business” means that the commercial transaction is one of a series of transactions successively carried on for the purpose of earning profit. Thus, a mutual insurance association is not a trader. Again, if a person, occasionally or even very often, goes to the market, buying goods which he again sells for a profit, he is not a trader, for he is not carrying on such transactions regularly.

​⁴ Derived from Art. 1 of the French Commercial Code and Art. 4 of the old German Commercial Code. On the other hand, Art. 1 of the present German Commercial Code provides that a trader within the meaning of the Code is a person who carries on a trade, and then enumerates nine kinds of trade, such as the buying and reselling of movable goods or valuables, etc. Thus, according to the German principle, the center of causa mercantilis is the trader himself, and not the commercial transaction; and consequently, the German Code does not recognize the existence of the absolute commercial transaction.

They must register their names and residences in the court. Special registers, such as the Register for Infants and the Register for Married Women, are kept in the court. See Arts. 140 and 149 of the Procedure in Non-actionable Matters.

The permission spoken of is granted to the infant by his parents or guardians: See Arts. 883 and 921 of the Civil Code: to the married woman, by her husband: See Art. 14 of the Civil Code.

¹ A special register called the Register for Guardians is kept in the court. See Art. 140 of the Procedure in Non-actionable Matters.

² When a guardian carries on a commercial transaction for his ward, it is necessary for the guardian to get permission from the concilium domesticum, which is an organization recognized by the Civil Code, the members of which are chosen from the relatives of the family either by the court or by will. This organization has power to restrict the authority of the guardian.

“Acting in good faith,” means without notice.

If the capital of a trader is not above 500 yen (a yen equals about one half of an American dollar) he shall be treated as a petty trader. See Art. 7 of the Rules for the Operation of the Commercial Code and the Imperial Decree of the 32d year of Meiji, No. 271.

Art. 4 of the German Commercial Code provides that the enactments concerning trade names, trade books and procuration have no application to artisans or to persons whose business does not exceed the limits of a mere handicraft. In Japan, the scope of the petty trader is determined by the Imperial Decree; in Germany, each state is empowered to issue decrees determining in the most precise manner what a mere handicraft is, taking as a basis the manner in which it is taxed, or in the absence of any assessment, some other basis.

¹ There are ten kinds of registers, which are kept in the Court: (1) the Register for Trade Names, Arts. 19, 21, 24; (2) the Register for Infants, Art. 5; (3) the Register for Married Women, Art. 5; (4) the Register for Guardians, Art. 7; (5) the Register for Managers, Art. 21; (6) the Register for Société en nom collectif, Arts. 51–53, etc.; (7) the Register for Société en commandite, Arts. 105, 107; (8) the Register for Société anonyme, Arts. 141, 204, 217, etc.; (9) the Register for Société en commandite par actions, Arts. 242, 254; (10) the Register for Foreign Companies, Art. 255.

² The competent court in which such registration must be made is the Sub-district Court, or its branch office, at the place where the applicant’s seat of business is located. See Arts. 39, 149, etc., of the Procedure in Non-actionable Matters, and the Regulations of the Trade Register.

Art. 8 of the German Commercial Code provides that the trade register is to be kept by the court. Art. 12 provides that declarations relating to entries in the trade register, as well as the affixing of the prescribed signatures, the custody of which is imposed on the court, ought to be made there either in person or in a public and formal manner.

Art. 13, pars. 1 and 2, of the German Commercial Code reads as follows:—

“So far as is not otherwise laid down in this Code, entries in the trade-register and the declarations required for this purpose, as well as the affixing of signatures and the other ​depositions required to be made at the trade register, must be made at each court which keeps such a trade register, and within whose jurisdiction the proprietor of any firm has a branch establishment, and in the same manner as made at the court of the principal place of business.

“No entry can be made in the court of the branch establishment before it is shown that a proper entry has been made in that of the principal one.”

It is published in the official paper and also in a newspaper. The Sub-district Court, during the month of December every year, designates the newspaper in which all things registered will appear. See Arts. 144–146 of the Procedure in Non-actionable Matters.

The provisions of Arts. 10 and 11 of the German Commercial Code are substantially the same as those of the Procedure in Non-actionable Matters.

If a third party using ordinary care can discover the fact, he will not be protected if his ignorance is due to his own negligence. On the other hand, if he is ignorant without his own fault, he can defend himself on the ground of a reasonable cause. But in such case the burden of proof is upon the defendant.

Art. 15, pars. 1 and 2, of the German Commercial Code reads as follows:—

​“So long as a fact which ought to be inscribed in the trade register has not been so inscribed and published, it cannot be used to the prejudice of a third party by him whose duty it is to inscribe it, unless such third party has had knowledge of such fact.

“If a fact has been duly registered and published, a third person is obliged to admit its validity against himself, unless he either did not know or it could not be held that he ought to have known it.”

Art, 15, par. 3, of the German Commercial Code provides that, for commercial relations with a branch establishment inscribed in the trade register, the inscription and publication by the court in whose jurisdiction such branch establishment is situated is conclusive within the meaning of these enactments.

I.e., The party registering is not responsible for the negligence of the officer of the court or the editor of a newspaper.

Any mistakes or omissions of fact in the register can be corrected on the application of the party. If they have been made through the willful act or gross negligence of the officer of the court, the applicant or any party interested can claim damages. See Arts. 48 and 57 of the Procedure in Non-actionable Matters.

For instance, an infant may be prohibited from continuing in business by his parents or guardians, or a manager of a business may resign.

¹ A trader cannot, however, use the name of another as his trade name.

² A trader is under no obligation to have a trade name. But Art. 18, par. 1, of the German Commercial Code, provides that a trader who carries on his business without a partner or with only a sleeping partner, must make use of his surname with at least one of his unabbreviated forenames as his trade name. Again, in Germany, a trader can sue or be sued in his trade name, but the Supreme Court of Japan has held that a trader must be sued in his own proper name, which in Japan means the name he bears in the official census.

This is an exception to Art. 16, because a business association being a juristic person has no census name and must have a trade name to identify itself.

However, this does not mean that these French words must be used. The Japanese words for these four companies are as follows:—

​1. Gomei Kaisha. (Société en nom collectif.)

2. Goshi Kaisha. (Société en commandite.)

3. Kabushiki Kaisha. (Société anonyme.)

4. Kabushiki Goshi Kaisha. (Société en commandite par actions.)

Arts. 19 and 20 of the German Commercial Code read as follows:—

“Art. 19. The firm name of an ordinary partnership (société en nom collectif) must include the name of at least one of the partners with an addition explanatory of the existence of partners or the names of all the partners.

“The firm name of a commandite company (société en commandite) must include the name of at least one of the partners personally responsible, with some addition explaining the existence of a company.

“No prefixing of forenames is necessary.

“The firm name of an ordinary partnership or a commandite company may not contain other names than those of the partners who are personally responsible.”

“Art. 20. As a general rule, the firm name of a limited liability company (société anonyme) as well as that of a commandite company divided into shares (société en commandite par actions) ought to be derived from the object of the undertaking. The former firm name ought in addition to include the words ‘limited liability company’ and the latter ‘commandite company divided into shares.’ ”

Art. 18, par. 2, of the German Commercial Code provides that no addition may be made to the firm name which shows the existence of an association or causes deception as to the nature and extent of the business. But in Japan, only the word showing the existence of an association, if such is not the fact, is prohibited. Other words having no connection with the business may be added, except that in the case of an insurance association no words other than “life insurance,” “fire insurance,” etc., are allowed to be added which might cause a deception as to the nature and extent of the business.

Art. 14 of the Rules for the Operation of the Commercial Code provides that a Shichoson denotes each Ku in Tokyo, Saikyo and Osaka, and that, in the places where the city system or Choson system has not been enforced, it denotes the pre-existing Choson, territorial administrative division or some section of the same land. Thus, Tokyo City is divided into several “ku.” If a trader has already registered his trade name in one “ku,” other persons cannot register the same trade name for the purpose of carrying on the same business in the same “ku.”

As to the administrative divisions of Japan, see Art. 22, note, infra.

Art. 158 of the Procedure in Non-actionable Matters provides that no registration shall be allowed unless the trade name can be clearly distinguished from the trade names already registered by others. Any registration in violation of this rule is void and therefore the party cannot acquire the right of using such trade name.

A Japanese trader acquires the right of using his trade name as soon as the trade name is registered. He has a right to register it, but is under no obligation to do so. On the other hand, according to Art. 29 of the German ​Commercial Code, every trader is bound to register his trade name and the address of his place of business in the court within whose jurisdiction it lies.

The registration of a trade name has a different object from the ordinary commercial registration, such as the registration of a manager, etc.; the latter is to warrant an existing right, the former to create a new right.

Art. 30 of the German Commercial Code provides that every trade name must be clearly distinguishable from those existing in the same locality or district and already registered in the trade register; and that if a merchant has the same forenames and surnames as another already registered in the trade register, and wishes to use such names as his trade name, he must add a note to distinguish his trade name from those already registered.

As the purpose of unfair competition is sometimes hard to prove, the law raises such a presumption in favor of the plaintiff. But if the same or a similar name is used for a different business, though in the same “shichoson,” or in a different “shichoson,” though for the same business, the burden of proof would not be on the defendant, but on the plaintiff.

Art. 37 of the German Commercial Code provides that any one who uses a trade name which is not his property may be prevented by the court from using it, and be liable ​to a fine. It also provides that any one finding himself injured by a third person unlawfully using a trade name may demand that he cease so to use it.

Such registration must be made by the transferee. See Art. 161 of the Procedure in Non-actionable Matters.

After registration, though not published, the transfer is valid against third parties even acting in good faith and committing no fault. Thus, the rule is different from that relating to the trade register (see Art. 12, supra), but the same as that provided in the case of the registration of real property and in the case of the registration of the formation of a business association.

¹Art. 23 of the German Commercial Code provides that the trade name cannot be alienated separately from the business which it designates. But in Japan, the trade name may be transferred without transferring the business. However, a ​different rule exists in the case of a trade mark. Art. 6 of the Japanese Trade Mark Act provides that no trade mark may be transferred without the transfer of the business which it designates.

According to the decision of the Japanese Supreme Court, it is presumed that the transfer of a business includes the place of business, credits, good will, trade books, etc. The transferee also assumes the debts unless the agreement provides to the contrary.

² For administrative purposes Japan is divided into three Fu and forty-two Ken. Though the Fu is larger than the Ken, there is no difference in the organization; the distinction in name and extent of territory is purely historical. The administration of each Fu or Ken is under the direct supervision of the Minister of the Home Affairs. Each Fu or Ken is divisible in several Guns or Shis. A Shi is a local administration of a city. A Gun is subdivided into Chosons. The Choson is the rural local administration. The administration of the Choson is subject to the administration of the Gun and the administration of the Gun or the administration of the Shi is subject to the administration of the Fu or Ken in which it is situated. Only the Shi and the Choson have complete autonomy, but each administrative organization above described has its major assembly, councils, etc. The administrative organization is detailed in three statutes: namely, the Statute of Fu Ken System, the Statute of Gun System, and the Statute of Shichoson System.

³ Thus, if the transferor promises not to carry on the business through the whole country for thirty years, or not to carry it on for a longer period than thirty years in the same Fu or Ken, such a contract is void as in restraint of trade.

⁴ For instance, as far as this provision of the Code is concerned, the transferor may carry on the same business in a place near to the place in which his old business is carried on. In such case, however, the transferee still has a right to complain on the ground of unfair competition.

Art. 31 of the German Commercial Code provides that any alteration in the trade name or in the personnel of its proprietors, as well as any transfer of the place of business to another locality, is to be registered in the trade register; but it does not provide that a party interested in the business has a right to apply for the cancelation of the trade name.

¹ For instance, damages caused by fire, earthquake, etc., or any obligation arising from contract or tort, are to be recorded in the journal.

Identical with Art. 38, par. 1, of the German Commercial Code.

² There is no provision in the German Code for an account of the total monthly household expenses. According to the Law of Bankruptcy of Japan, a trader may become responsible for his negligence when he is adjudged bankrupt. If he has squandered his property or incurred an extraordinary debt through his prodigal expenses for his person or family, gambling, speculation, or improper mercenary spirit, he is guilty of negligent bankruptcy, and is punishable by imprisonment with hard labor from two months to four years.

Thus, in the Court of Bankruptcy, the account of the household expense will serve as an evidence as to whether the bankrupt is guilty of negligence or not.

The keeping of the inventory and balance sheet as well as the journal is said to be in the duty of a trader; but it does not follow that the trader who fails to keep them is necessarily liable to a punitive sanction, except in ease of bankruptcy. The party wilfully keeping a false record or negligently ​failing to keep his trade books is punishable for fraudulent or negligent bankruptcy. A different rule is applied to a business association. If the directors of a business association fail to keep the inventory or balance sheet in its principal or branch offices, do not record what they ought to record, or make a false record, they are punished by a fine of from five to five hundred yen.

In regard to the attitude of the law toward trade books, the French advocate the principle of interference, and the English are in favor of the laissez faire doctrine. The Germans take a middle course: that is, the trader is obliged to keep trade books, but they are not subject to governmental inspection. The Japanese Code entirely adopts the German system. See Art. 39 of the German Commercial Code.

¹ The heir of the trader has the same duty, but a transferee of the business is not under the obligation to preserve the trade books of his transferor.

² This article is identical with Art. 44 of the German Commercial Code.

Here the word, “manager” is the equivalent of the “prokurist” in the German Commercial Code. See Sect. 5 of the German Commercial Code.

¹ I.e., A manager has the right to represent his employer in all acts connected with the prosecution of the business, whether ordinary business transactions or the collection and defense of claims in court.

Identical with Art. 49, par. 1, of the German Commercial Code.

² Identical with Art. 60, par. 1, of the German Commercial Code.

Identical with Art. 53, pars. 1 and 4, of the German Commercial Code.

¹ The employer has a right of election by which he may either consider the transactions as done on his account in case the transactions are profitable, or sue for damages if they are not profitable.

² There are no such provisions in the German Commercial Code as in this article, except that Art. 60 provides that a clerk cannot, without the consent of his principal, either do any business on his own account or carry on a business similar to that of his principal for himself or a stranger, and in case a clerk infringes this regulation, the principal (Art. 61) has a right to consider the transaction as done on his account. On the other hand, a Japanese clerk is not subject to this rule.

The legal status of clerks differs from that of the manager in the following manner:—

1. The clerks are special agents.

2. They may be appointed either by the employer or by the manager.

​3. The appointment of clerks need not be registered.

4. Restrictions upon the authority of clerks can be set up as a defense against third parties even though they have no notice of the restrictions.

5. Clerks may do any commercial act for themselves or others without the consent of their employer.

¹ I.e., Apprentices.

² A juristic act is defined to be a manifestation of will, the purpose of which is to produce a legal effect of a private nature where the purpose is carried out by law according to the expectation of the party who manifests the will. Thus, if a man tells his servant to shut the door, this is a manifestation of will, but still not a juristic act; for the effect to be produced is the effect of fact, not the effect of law. Nor is the act of bringing an action in the court a juristic act; for procedure is a branch of public law and therefore the act of bringing a suit at law does not produce a legal effect of a private nature. Again, if a man sets fire to his own house with the expectation of acquiring an indemnity from an insurance company, the law will not enforce such an effect as he expects, and consequently his act is not a juristic act. But a juristic act is not necessarily, though generally, a contract. The act of one party alone without an aggregatio mentium is no less a juristic act. For examples, a donation, the making of a will, the ratification or rescission of a contract by an infant, etc., are juristic acts.

¹ The commercial agent being an independent trader, all previsions concerning the trade register, trade name and trade books are applicable to him.

² Those who act as agents for any trader who may apply to them are not commercial agents within the meaning of the present article. By acting for a definite trader, the commercial agent is different from a broker.

³ A representative within the meaning of this article is one authorized to do a juristic act as defined by Art. 643 of the Civil Code. By a middleman is meant one who is authorized ta do a non-juristic act within the meaning of Art. 656 of the Civil Code.

According to the principle of the Civil Code, an agent is only obliged to make a report on the principal’s demand, but in commercial transactions such demand is unnecessary. See Arts. 645 and 646 of the Civil Code.

Similar to Art. 84, par. 2, of the German Commercial Code.

Here the duty of a commercial agent is different from that of a manager. The latter is absolutely prohibited from doing any commercial transaction or becoming a member of any company in which he would be unlimitedly liable for the debts. The commercial agent, however, is only prohibited from carrying on a commercial transaction within the scope of the principal’s business or becoming a member of unlimited liability in a company doing the same business. See Art. 32, supra.

According to the rule of the Civil Law, whether an agent entrusted with the sale of goods has authority to receive such a notice entirely depends on the original contract between the principal and the agent, and consequently the vendee is obliged to examine the nature and extent of the contract. In order to prevent this inconvenience, the Commercial Law provides an exception to this rule, and gives the commercial agent authority to receive the notice. Thus, if the vendee discovers that the goods are defective, he may directly claim damages, or the termination of the contract, or the deduction of the price from the agent. Notice to the agent has the same effect as notice to the principal.

Derived from Art. 86, par. 2, of the German Commercial Code.

¹ What is an unavoidable necessity is a question of act which is to be decided by the court. For instance, if a commercial agent is called to serve in the army, in case of war, this would be an unavoidable necessity and terminate the contract of agency.

² This article is an exception to the rule of the Civil Code, under which each party to a contract of agency has a right to terminate if at any time. See Art. 651 of the Civil Code.

This article is identical with Art. 92 of the German Commercial Code except that in the latter the notice must be given six weeks before the termination of the contract.

This is an exception to the rule stated in Art. 295 of the Civil Code. According to that article, a person has a right to retain the property of another until any claim arising from the same property is satisfied, but he has no lien on property which has no connection with such claim.