Financial & Economic Blog

The decision of the Supreme Court regarding the dispute of money lending case overturned a lower court ruling on July 13, 2007. [1] One of the controversial issues in the case was the completeness of the document that the law demands to deliver to a borrower.

Correctness of contractual document

A money lender has to provide a contractual document which states the terms and condition fully and precisely at the contract, while the minimum elements of the document are described in each law. Moreover, the money lending business law requires a money lender to deliver receipts at every repayment time. The receipt have to be contained the details of allocation of repayment to capital and interest. Certainly, a money lender provides the repayment schedule sheet to a money borrower at the contract. And the document includes the description of allocation of each repayment. But actual repayment plan may be different to the prearranged repayment.

Claim

The money borrower insisted the incompleteness of the contract document and claimed the reimbursement of excessive repayment: although the contract document stated that the details of repayment was subject to the attached sheet, the sheet was not attached; some of the receipts were not complete; therefore the money lender could not claim the application of the law that allowed the money lender to receive legitimately the interest beyond the interest rate restriction Law.

Tokyo Appeal Court

The lower court dismissed the plaintiff claim except the claim that based on the incompleteness of the receipts, because although the money lender neglected attaching the sheet in question to the contractual document, the repayment at each time was described abstractly and the borrower could recognize it.

Top court

The top court overturned the lower court decision and approved the plaintiff claim completely. The ruling stressed the importance of correctness of a contractual document: the aim that the law asked making the contract to be written in document was to make the money lending business legitimate and to prevent the disputes in future.The ruling said that even if the amount of repayment was written in the contract document in general, the description was not always perfect: the amount of final repayment was usually different from the general description, and it was true in this case actually.

Comment

I suppose that the conclusion of the ruling of the top court is correct. However the attitude that the court asked a contract document to be perfect seems too rigid. It is apparent that the final repayment is different from other repayment and borrower can recognize it easily if he even calculates.Actually, the correctness of a contract document is important for a consumer to have right perception. Moreover the courts may found the value in the role of policy of the law: to prevent in future disputes and to make money lending business practice to make suitable and lawful.Our court decisions tend to seek strictly the contract document to be correct and perfect in consumer transaction in other consumer contract field.