Construction Law and Practice in Japan

Construction law and practice in the United States and Japan is remarkably similar. One principal difference, rooted in Japanese societal mores, is that self-settlement of disputes is overwhelmingly preferred to third-party resolution through litigation. Japan has a three-tiered court system that includes trial courts, appellate courts, and a supreme court. There are no juries in Japan. The sources of Japanese law are principally the Japanese Constitution and statutes. To a lesser extent custom, reason, and precedent are also used. Trust and establishment of a long-term business relationship underlie most contract relationships. By law, construction contracts are required to be fair and just, based on a theory of basic equity. Disclaimers and exculpatory clauses are disfavored. Differing site condition clauses are common, but are interpreted as requiring a sharing of risk between owner and contractor rather than, as in the United States, requiring a shifting of all the risk from contractor to owner. Japanese practice regarding termination, damages, liquidated damages, and formal dispute resolution are similar to U.S. practice.