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Washington Law Review

Abstract

The problems of risk of loss are defined somewhat more broadly in Japan than in the United States. The American lawyer looks at risk of loss as the problem of determining who shall bear the financial burden when some physical object is damaged or destroyed. While making this determination is also a risk of loss problem in Japan, the Japanese lawyer characterizes additional problems as being within the scope of risk of loss. In Japan risk of loss is an inherent problem in all bilateral contracts, not merely contracts involving the transfer of goods. This is because the common law requirement of consideration is not required for a valid contract in Japan. Thus, where the obligation of one party to a bilateral contract becomes extinguished by impossibility, what effect has the lapse of this obligation on the obligation of the other party? In the context of a sale, when the seller's obligation to deliver is excused by impossibility, what effect has this on the buyer's obligation to pay the purchase price? This is a risk of loss problem in Japan, covering also loss of profit in the bargain. In American law the risk of loss of profit in the bargain is generally overlooked, the usual result being that both performances are merely excused. Likewise in Japan contracts for services may raise risk of loss problems. The risk in these contexts is that one party to a bilateral contract may have to perform even though the performance of the other party has been excused. For the purposes of this article, however, risk of loss will relate to the question of who shall bear the burden when goods which are the object of a sales contract are damaged or destroyed.

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