JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
6.22 Termination by a Third Party Leases cannot be terminated by any third par - ty, including central government or municipal authorities. 6.23 Remedies/Damages for Breach In principle, there are no specific regulations or laws that limit the damages a landlord may col - lect or remedies a landlord may pursue. How - ever, even if a lease agreement provides that the tenant will have to pay rent for the remaining lease term as a penalty in case of early termina - tion by the tenant without cause, the court may determine that the provision is against public order and morals and therefore void because it allows the landlord to obtain an excessive amount of damages. Upon the execution of a lease agreement, the tenant is usually required to pay a deposit in cash as security for the payment of rent and other tenant obligations, although there are rare cases where the landlord may allow the tenant to provide a letter of credit in lieu of a cash deposit. 7. Construction 7.1 Common Structures Used to Price Construction Projects The most typical construction price structure is the fixed price arrangement, whereby the par - ties agree on the price at the signing of the con - struction contract, taking the estimated costs and expenses as well as the contractor’s profit into account. For a large construction project, the price adjustment mechanism may be imple - mented to reflect fluctuating procurement prices of materials or services linked to the cost ele - ment of the construction price.
7.2 Assigning Responsibility for the Design and Construction of a Project Design and construction works are typically pro - vided under separate independent agreements, ie, the owner tends to enter into a design con - tract with a design company and a construc - tion contract with a construction company. Each contract’s terms and conditions are usually pre - pared and negotiated based on general terms and conditions made available as templates by the pertinent industry associations in Japan. 7.3 Management of Construction Risk The general terms and conditions of a typical construction contract that are made available jointly by the pertinent industry associations (the “Form Terms and Conditions for Construc - tion Contracts” ) provide for the construction contractor’s obligation to take out insurance and for defect liability. With respect to insurance, the Form Terms and Conditions for Construction Contracts require the contractor to purchase and maintain fire insurance or contractor’s all risk insurance for the completed portion of the work, materials and building equipment and other materials delivered to the construction site. The details of the insur - ance coverage are left to the parties to agree. With respect to defect liability, the Form Terms and Conditions for Construction Contracts pro - vide that the owner may demand that the con - tractor repairs the defect, reduces construction fees and/or pays damages. In principle, the contractor’s liability is subject to a time limita - tion of one to two years, depending on the con - struction materials (such as wood, stone, metal or concrete). However, in the case of a newly constructed residential building, the defect liabil - ity period for certain major structural works is mandatorily set at ten years after the delivery
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