Requirements for set-off in Japanese law

The Japanese Civil Code (JCC) was enacted in 1896. Since then, the Law of Obligations of the JCC had not undergone any major amendments for a long time. It was in 2017 that a significant revision was undertaken. And this revision also included the provisions regarding set-off. This paper explains the various set-off requirements stipulated by Japanese current law. In Japan, the conditions under which the statutory requirements for set-off are satisfied are described as "eligibility for set-off" (Sousai-Tekijou), and the legal status of the parties in the set-off is called the right to set-off. Even if this eligibility for set-off arises, the parties may not exercise the right to set-off if there are circumstances that restrict the set-off. In addition, the Japanese Bankruptcy Act (JBA) modifies the requirements provided by the JCC to accommodate bankruptcy proceedings. In this paper, we will review in order the affirmative requirements for creating eligibility for set-off, the negative requirements for restricting the exercise of the right to set-off, and the requirements for set-off in bankruptcy proceedings. Please note that under Japanese law, when A intends to extinguish B's claim β against him by set-off against his claim α, A's claim α is referred to as an active claim (Jido-Saiken), and B's cross-claim β as a passive claim (Judo-Saiken). This paper will also be described based on this terminology .