Good Faith (Shingi Seijitsu) in Japanese Law

Introduction

The principle of good faith (shingi seijitsu) stands as one of the foundational general clauses in Japanese private law. Article 1(2) of the Civil Code provides: “The exercise of rights and performance of duties shall be made in good faith.” This provision, together with Article 1(3) (prohibition of abuse of rights), Article 90 (public order and good morals), and Article 709 (tort liability), forms the core of the general clauses through which Japanese courts have developed and adapted private law in response to changing social conditions.

Unlike specific legal rules that prescribe precise conduct, the good faith principle operates as an open-ended standard that permits judicial adaptation. Its function is both supplementary — filling gaps in contractual and statutory regimes — and corrective — preventing the rigid application of legal rules from producing inequitable outcomes.

Scope of the Principle

The good faith principle extends across virtually the entire domain of private law. It governs the exercise of rights (kenri no kōshi), the performance of obligations (gimu no ryōkō), and importantly, the pre-contractual phase of negotiations. Japanese courts have derived from Article 1(2) a duty of pre-contractual disclosure, requiring parties to disclose material facts that would affect the other party’s decision to contract. This duty is particularly robust in consumer transactions, where information asymmetry between businesses and consumers is acute.

During the performance of contracts, good faith imposes duties of cooperation, consideration, and loyalty between the parties. A party may not insist on strict contractual terms where to do so would defeat the reasonable expectations of the other party or exploit a position of advantage. Japanese courts have also derived from good faith a duty to mitigate damages — the injured party must take reasonable steps to minimise loss following a breach.

Good Faith and the Abuse of Rights

Article 1(2) and Article 1(3) (abuse of rights) are closely interconnected. The abuse of rights doctrine is often understood as the negative aspect of the good faith principle. Where the exercise of a right serves no legitimate interest and causes harm to another, it constitutes an abuse and is impermissible. The Nissan Automobile Case (Saiko Saibansho, 1975) illustrates this intersection: the court held that an employer’s exercise of its contractual right to dismiss an employee was abusive where the dismissal lacked objective合理性 and was not socially acceptable as a dismissal.

In the landowner context, Japanese courts have repeatedly held that an owner’s exercise of the right to exclude others from property may constitute an abuse where the owner’s conduct is motivated by malice or where the harm to the neighbour substantially outweighs any benefit to the owner.

The 2017 Civil Code Reform

The 2017 reform of the Civil Code (effective 2020) did not amend Article 1(2) but reinforced the operational significance of the good faith principle in several contexts. The reform codified judicial developments relating to the duty of pre-contractual disclosure in certain consumer transactions and clarified the standard of good faith in the performance of obligations. The reform also introduced new provisions on the duty to renegotiate contracts where circumstances have fundamentally changed, drawing on the good faith principle as the doctrinal foundation for the doctrine of change of circumstances (jijō henkō no gensoku).

Good Faith in Specialised Contexts

Corporate Law

In corporate law, the good faith principle informs the director’s duty of loyalty. The Companies Act (Kaishahō) imposes on directors a duty of care and a duty of loyalty, but courts have also drawn on the general good faith principle to assess director conduct in situations not expressly covered by the statute. Directors who cause their company to enter into transactions that benefit themselves or third parties at the company’s expense may be found to have violated the duty derived from good faith, even where the transaction is within the company’s capacity.

Administrative Law

In administrative law, the principle of legitimate expectations — derived from good faith — protects individuals who have relied on administrative guidance or representations made by public authorities. While Japanese administrative law does not recognise a general estoppel doctrine against the state, courts have in specific contexts prevented administrative agencies from resiling from representations on which citizens have reasonably relied, particularly where the agency’s conduct would otherwise produce a manifestly unjust result.

Comparative Perspective

The Japanese good faith principle is directly influenced by German law’s Treu und Glauben (Section 242 of the German Civil Code, BGB) and Swiss law’s Treu und Glauben (Article 2 of the Swiss Civil Code). Japanese scholars in the Meiji period, when the Civil Code was drafted, drew heavily on German pandectist scholarship. The post-war development of Japanese good faith doctrine has continued to engage with German and Swiss jurisprudence, though Japanese courts have developed distinctly Japanese approaches — particularly in the fields of employment law and consumer protection, where the good faith principle has been deployed with particular vigour to protect weaker parties.

Conclusion

The good faith principle in Japanese law is a dynamic and flexible instrument of judicial law-making. Through Article 1(2), Japanese courts have created a body of law that regulates not only the exercise of rights and performance of duties but also the negotiation, formation, and post-contractual phases of legal relationships. Its continuing expansion into new fields — from corporate governance to administrative law — demonstrates the principle’s centrality to the Japanese legal order.