Key Points for Modifying B2B Cloud Service Terms of Use in Accordance with the Civil Code Amendment on Standard Contract Rules

The revised Civil Code (Japanese Civil Code) was implemented on April 1, 2020. In this revision, the rules regarding contracts have been significantly changed. Many IT companies create terms of service for their own services in transactions with customers, and new rules have been established in the revised Civil Code for such terms of service as “standard contract clauses”.

In the traditional Civil Code, there were no clear rules for things like terms of service that companies providing services uniformly apply to an unspecified number of users, and their validity was left to interpretation. Now that new rules have been established in the Civil Code for standard contract clauses, many companies that had been creating terms of service are being forced to review them in accordance with the rules of the revised Civil Code.

Therefore, in response to the revised Civil Code, which has newly established provisions for standard contract clauses, we will explain the points to check when revising the terms of service for BtoB services.

Which Terms of Use Qualify as Standard Contract Clauses

Under the revised Japanese Civil Code, if the terms of use fall under the category of “standard contract clauses”, new rules regarding unilateral changes to these clauses will apply. Until now, there has been debate over whether changes to standard contract clauses could be made without individual consent from users.

With the recent revision, rules for making unilateral changes have been clearly defined. Therefore, there is a benefit for many businesses to create terms of use that qualify as “standard contract clauses”, as this eliminates doubts about their validity.

Two Requirements for Standard Contract Clauses Under the Revised Civil Code

The revised Japanese Civil Code defines terms of use that meet both of the following two requirements as “standard transactions”:

• Transactions conducted by a specific party with an unspecified number of other parties
• The entirety or part of the content is uniform and is reasonable for both parties

Furthermore, it defines the collective clauses prepared by the specific party for the purpose of forming the content of the contract in “standard transactions” as “standard contract clauses” (Article 548-2, Paragraph 1 of the revised Japanese Civil Code). Therefore, whether or not the terms of use qualify as standard contract clauses depends on whether they meet the two requirements of standard transactions.

Basically, if the service targeted by the terms of use is intended to conduct uniform transactions with a large number of users without considering the individuality of the users, that is, if it is not planned to change the terms of use according to the user, the terms of use meet the above requirements and qualify as “standard contract clauses”.

Is a Template for Business-to-Business Contracts Considered a Standard Form Contract in Japan

Whether the terms of use created by a business qualify as “standard contract clauses” does not depend on whether the service targeted by the terms of use is a BtoB or BtoC transaction. However, it is important to note that standard contract templates often used in business-to-business (BtoB) transactions, such as basic transaction contracts, do not qualify as “standard contract clauses”.

In such business-to-business contract transactions, one party often presents a contract template that is signed without significant modifications. At first glance, it may seem to meet the requirements of “standard contract clauses”. However, depending on the power relationship with the trading partner, other templates may be presented from the trading partner, or there is a non-zero possibility that modifications to the contract content may be requested.

Therefore, as long as modifications to the contract content are assumed, the contract template cannot be said to be reasonable for both parties to be uniform in all or part of its content, and it is considered that it does not meet the requirements of “standard transactions”.

Unilateral Changes to Standard Contract Terms

Prior to the revision of the Japanese Civil Code (effective as of April 1, 2020), there was debate about the procedures for changing the terms of use unilaterally set by businesses. In many cases, when changes were made to the terms of use, businesses would notify the users who were subject to these terms. However, considering that the terms of use are a type of contract, there was a debate about whether it was valid to change the terms of use without individual consent from the users.

The revised Japanese Civil Code has clearly defined the rules for unilateral changes to standard contract terms to be valid. Basically, it endorses the conventional industry practices and does not impose a significant burden on businesses. Businesses should review whether their terms of use comply with the rules of the revised Japanese Civil Code.

Rules in the Revised Japanese Civil Code

The revised Japanese Civil Code has established provisions regarding changes to standard contract terms. Specifically, in order to change the standard contract terms, it is necessary to satisfy both substantive and formal requirements.

If these requirements are met, it is possible to change the terms without obtaining individual consent from the users. Of course, if individual consent is obtained from the users, the changes are valid even if these requirements are not met.

Substantive Requirements for Changing Standard Contract Terms

The substantive requirements for the validity of changes to standard contract terms are related to the content of the changes. Specifically, one of the following two points must be met:

• The content of the change is in the general interest of the users
• The content of the change does not contradict the purpose of the contract and is reasonable

Formal Requirements for Changing Standard Contract Terms

The formal requirements for validly changing standard contract terms are related to the change procedures. Specifically, both of the following two points must be met:

• Specify the time when the change takes effect
• Publicize the fact of the change, the content after the change, and the time when the change takes effect by appropriate methods such as the Internet

Below, we will examine what needs to be revised in the typical clauses regarding changes that are usually stipulated in the terms of use created by businesses.

Changes to the Content of the Terms of Use

Article X
1. We may change the content of these terms without obtaining the consent of the contractee. We will notify the contractee only when we judge that there is a substantial change.
2. Even if this notice does not actually reach the contractee, the changed contract terms will apply to all contractees.

This clause is about the unilateral change of the terms, and it is a typical provision seen before the revision of the Japanese Civil Code. However, assuming the revised Japanese Civil Code, this clause needs to be revised. Specifically, it contradicts the formal requirements explained above.

As one of the formal requirements, it was necessary to “specify the time when the change takes effect.” Therefore, for the above clause, it is necessary to revise it to something like “If the contractee continues to use this service even after the implementation period has passed, the contractee is deemed to have agreed to the change.”

Also, as the second formal requirement, it was necessary to “publicize the fact of the change, the content after the change, and the time when the change takes effect by appropriate methods such as the Internet.” Therefore, in the above clause, it is necessary to include wording that corresponds to the requirements, such as “When we change these terms, we will publicize the implementation time and content of the changed terms by posting on our website or other appropriate methods, or notify the contractee.”

Summarizing the above, the clause proposal that corresponds to the revised Japanese Civil Code is as follows:

Article X
1. When we change these terms, we will publicize the implementation time and content of the changed terms by posting on our website or other appropriate methods, or notify the contractee.
2. If the contractee continues to use this service even after the implementation period has passed, the contractee is deemed to have agreed to the change.

Changes to the Content of the Service

Article X
We may change the content of this service as necessary without obtaining the consent of the contractee, and we will notify the contractee of the change on our website or by any method we deem appropriate.

When the content of the service subject to the terms of use is changed, it is not a change of the “standard contract terms” itself. Therefore, it is considered that there is no need to change it according to the revised Japanese Civil Code, and the clause will not be invalid as it is.

Changes in Usage Fees Due to Changes in Contract Content

Article X
When there is a change in the contract content that involves a change in the usage fee, the change in the usage fee will be applied from the change application date stated in the change application form.

There are cases where the terms of use stipulate that the usage fee will change if the contract content changes. In this case, the above clause example assumes that a change application form will be obtained from the contractee. If so, you will be changing the usage fee with the individual consent of the user, so it is valid regardless of whether it falls under “standard contract terms.” Therefore, there is no need to revise the above clause example according to the revised Japanese Civil Code.

Terms of Use for Web Advertising, etc.

Regarding the terms and conditions for web advertising (such as listing ads) and SEO services, even if the budget and media outlets change, the service of “managing web advertising on behalf of clients” remains the same. In such cases, can the terms of use for “managing web advertising on behalf of clients” be considered as “standard terms and conditions” under the revised Japanese Civil Code?

As there is virtually no demand for changes to these terms of use for each user, it could be considered as “standard terms and conditions”. However, it cannot be denied that some users may negotiate on the budget and media outlets.

Therefore, it cannot be definitively stated that these terms are uniformly applied to an unspecified number of users, and there is room to judge that they do not fall under the “standard terms and conditions” of the revised Japanese Civil Code. For this reason, when changing such terms of use, it would be advisable to obtain the consent of the users just in case they are interpreted as not falling under the “standard terms and conditions”.

Summary: Consult Lawyers for Updating B2B Cloud Service Terms of Use in Accordance with the Civil Code Amendment

There has been significant attention drawn to the standard contract clauses, as rules for them have been established in the Civil Code for the first time. Essentially, the amendment is aimed at making it easier for businesses to utilize terms and conditions that are unilaterally applied. Therefore, it is important to create terms of use that fall under the category of ‘standard contract clauses’ in the future. We recommend consulting with professionals such as lawyers for compliance with the revised Civil Code.

Contract Creation and Review Services by Our Firm

At Monolith Law Office, as a legal firm with strengths in IT, Internet, and business, we offer a variety of services such as the creation and review of various contracts, not limited to the terms of use for BtoB services, to our advisory and client companies.