On June 8 2018, the Act to Partially Amend the Consumer Contract Act (Amendment) was published by the Japanese Diet and is scheduled to come into force on June 15 2019. The Consumer Contract Act is intended to protect the interests of consumers, and address circumstances of disparity in the quantity and quality of information and bargaining power between consumers and business operators. The Amendment, among other things, sets forth the circumstances where a contract may be unilaterally cancelled or where unreasonable clauses may be considered invalid.
The effect of the Amendment can be summarised in four parts:
1. The following categories were added to the list of acts that can be used to form the basis to revoke a contract in situations where the consumer is confused and wishes to revoke the contract for this reason:
- conduct that unreasonably raises anxiety about certain matters (for example, employment, livelihood or physical characteristics) for consumers with limited social experience, such as young consumers;
- exploitation of a relationship based on feelings of love or similar;
- exploitation of impaired judgement due to ageing or similar;
- enticement based on superstitious belief (reikan-shouhou); and
- the commencement of obligations before the contract is concluded.
2. In addition to the existing unreasonable contract provisions that may be considered invalid, the following provisions were added under the Amendment:
- a clause that determines the operator's own responsibility (for example: 'The company will be liable for damages only if the company admits that the operator is negligent'); and
- any provision for rescission based solely on the grounds that a consumer has become a person with limited capacity to act.
3. The act of a business operator intentionally failing to disclose disadvantageous facts to a customer is a valid basis to revoke a contract. The Amendment extends this basis for revocation to include cases where a business operator has, through gross negligence, failed to disclose disadvantageous facts to a consumer.
4. Lastly, the Amendment places an obligation on business operators to make efforts with respect to the following two points:
- drafting the clauses in consumer contracts in a clear and simple manner so as not to cause any doubt over their interpretation or meaning; and
- providing all information necessary for a consumer to make an informed decision, taking into account the knowledge and experience of each individual consumer.
Although the Amendment does not impose an excessive burden on business operators, it is recommended that they review their business practices to ensure their explanations and contract provisions concerning individual business activities are appropriate for their consumers and in accordance with the purport of the Amendment.
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