Which clauses trip up Chinese-speaking buyers in a Japanese sale contract (deposit, loan condition, non-conformity)?

In short: what most trips up Chinese-speaking buyers in a Japanese sale contract is three things — (1) the earnest deposit plays a different role from China's "dingjin", (2) the loan condition (financing-use special clause) unwinds the contract unconditionally, and (3) the clock on non-conformity liability, exercised by "notifying within one year of learning of it". All can be prevented by reading the clauses first, in the contract and the important-matters explanation.

This is for the on-the-ground professionals in mainland China, Taiwan and Hong Kong who support Japanese property purchases, and for their buyer clients. It reads three clauses of a Japanese sale contract — the deposit, the loan condition and non-conformity liability — against the differences from Chinese commercial practice. We handle the Japan-side brokerage and information; the validity of clauses and disputes go to an attorney, transfer-of-ownership registration to a judicial scrivener, and tax and the tax-agent to a licensed tax accountant — each routed separately.

Is the earnest deposit the same as China's "dingjin", and until when can you cancel by deposit?

Not the same. Japan's deposit is in principle a "cancellation deposit" — consideration for cancelling the contract at will.

The deposit (tetsuke) the buyer gives the seller in a Japanese sale contract is governed by Article 557, paragraph 1 of the Civil Code (Act No. 89 of 1896): until one party begins performance of the contract, the buyer may forfeit the deposit, and the seller may actually tender double the amount, to cancel the contract. The amendment in force 1 April 2020 codified case law, changing "reimburse" to "actually tender". This is the decisive difference from China's "dingjin". China's dingjin functions strongly as security against non-performance — forfeited or returned double if there is a breach — whereas Japan's cancellation deposit is a mechanism for cancelling at will, even without a breach, before performance begins, by giving up the deposit (or paying double).

Point	Japan's deposit (cancellation deposit)	China's dingjin (general understanding)
Main nature	Consideration for cancelling at will	Security against non-performance
When the buyer exits	Forfeits the deposit (until performance begins)	Forfeited if there is a breach
When the seller exits	Actually tenders double (same)	Returned double if there is a breach
Deadline	Until the other party begins performance	Depends on performance / whether there is a breach

Where the seller is a real estate transaction operator, the deposit is capped at two-tenths (20%) of the price under Article 39 of the Building Lots and Buildings Transaction Business Act, and treated as a cancellation deposit whatever it is called. When "performance begins" is judged case by case, so the final call on validity is the province of an attorney. Read the sale contract with the same posture as for a lease, set out in Where to read a lease agreement.

When does the loan condition (financing-use special clause) unwind the contract?

When the housing loan or other financing the buyer planned is not approved by the date set in the clause. It can be cancelled unconditionally, and the deposit comes back.

The loan condition (financing-use special clause) is placed where the buyer buys on the premise of bank financing. The standard sale-contract form issued by the MLIT carries a specimen clause: if the financing specified in the clause is not approved, the buyer may cancel without a penalty or forfeiting the deposit, and the deposit received is returned to the buyer. That is what "unwinding the contract" means.

Item to check	Point to read
Whether there is a financing-use special clause	A cash purchase usually has none; a financed purchase must include it
Loan amount, bank, approval date	It bites when approval on the specified terms fails; past the date it cannot be used
Effect of cancellation	Return of the deposit, no penalty — is this consistent with the contract?
Suspensive-condition or resolutory-condition type	Which construction changes the steps (whether a notice of cancellation is needed) when the date falls

Miss the date by even a day and the clause can no longer be used, so work the loan application and screening schedule back from the clause's date. Non-residents find Japanese financing harder to obtain, and where it becomes a cash purchase the loan condition itself is often not placed. Gauging this is the starting point of the funding plan.

How far, and until when, can non-conformity liability be asserted after delivery?

Where the delivered property does not conform to the contract, the buyer can demand cure, price reduction, damages and cancellation. But non-conformity of kind or quality needs "notice within one year of learning of it".

The 2020 amended Civil Code renamed the old "defect-warranty liability" as non-conformity liability. Where the seller delivers an object that does not conform to the contract in kind, quality, quantity or right, the buyer can seek redress under Civil Code Article 562 (demand for cure), Article 563 (demand for price reduction) and Article 564 (damages under Art. 415, cancellation under Arts. 541 and 542).

There is a time limit. Article 566 provides that, for non-conformity of kind or quality, unless the buyer notifies the seller within one year of learning of the non-conformity, the buyer loses these rights (except where the seller knew, or did not know through gross negligence, at delivery). This Article 566 period does not apply to non-conformity of quantity or right.

Point	Content
What the buyer can seek	Cure (repair/replacement), price reduction, damages, cancellation
Period for kind/quality non-conformity	Notice within one year of learning of it (Civil Code Art. 566)
Special clause	Where the seller is a transaction operator, any clause worse for the buyer than one setting the notice period at "two years or more from delivery" is void (Act Art. 40)
Individual (non-operator) sales	A clause excluding or limiting non-conformity liability is often placed; check the scope in the contract

In a pre-owned home, how far the seller bears non-conformity liability is adjusted by clause — that is the practice. What clauses may be placed changes with whether the seller is an individual or a transaction operator. The final call on validity is the province of an attorney. Where to read the important-matters explanation is in The key points of the important-matters explanation to read before introducing a Japanese income property to a Chinese-speaking buyer; working with a local professional is in Working with a local professional to handle Japanese real estate.

In the important-matters explanation and the sale contract, what should a non-resident buyer check in particular?

Check the burdens and restrictions on the property in the important-matters explanation (Act Art. 35), and the three clauses — deposit, loan condition, non-conformity — in the contract document (Art. 37). A non-resident adds registration, tax and Foreign Exchange Act checks.

Article 35 of the Building Lots and Buildings Transaction Business Act (Act No. 176 of 1952) requires a licensed transaction specialist to deliver a document and explain the important matters before the contract is formed, and Article 37 sets the items of the document delivered after formation. A non-resident buyer additionally checks these.

Point	What to check	Who
Deposit / loan condition / non-conformity	Whether the Art. 37 document and contract clauses match the explanation	Transaction operator (explanation) / attorney (validity)
Transfer-of-ownership registration	Name-change registration and documents (signature certificate, affidavit, etc.)	Judicial scrivener
Tax / tax-agent	Tax on acquisition, holding and transfer; the tax-agent notification	Licensed tax accountant
Reporting under the Foreign Exchange Act	Whether a non-resident's acquisition of Japanese real estate is reportable (splits by purpose/manner)	Administrative scrivener / specialist

A buyer with no address in Japan differs from a resident in the registration attachments (a signature certificate in place of a seal certificate) and the settlement arrangements. Judging the validity of contract clauses themselves, and handling a dispute, is the work of an attorney, which we do not do. We handle the Japan-side property investigation, important-matters explanation, brokerage and contract, and support materials in Traditional and Simplified Chinese. The whole picture of investment and business property is gathered at investment and business property consultation.

For validity of clauses, disputes, registration and tax — who should you consult?

The Japan-side property investigation, important-matters explanation, brokerage and contract are ours; the rest is divided.

Investigation of the Japan-side property, the important-matters explanation, adjusting price and terms, brokerage and the sale contract are undertaken by Yotsuba Real Estate Co., Ltd. (licensed real estate agent, Tokyo Governor (1) No. 113304). The important-matters explanation is given by our licensed transaction specialist under Article 35. The local professional (in mainland China, Taiwan or Hong Kong) and we are each independent business entities. Where roles overlap, we make clear before the contract who does what, and you engage each separately.

Judging the validity of clauses and disputes are for an attorney; transfer-of-ownership registration for a judicial scrivener; tax on acquisition, holding and transfer and the tax-agent notification for a licensed tax accountant; reporting under the Foreign Exchange Act for an administrative scrivener or specialist — each engaged by you directly. We neither accept nor pay referral fees or introduction commissions. Consultation is free of charge.

Frequently asked questions

Q. Is a Japanese deposit forfeited or returned double like China's "dingjin"?
A. The nature differs. Japan's deposit is in principle a "cancellation deposit": under Civil Code Art. 557, until the other party begins performance, the buyer may forfeit it and the seller may actually tender double to cancel at will, even without a breach. This differs from the dingjin functioning as security against non-performance. Where the seller is a transaction operator, the deposit is capped at 20% of the price. Confirm individual application and the judgment of "beginning performance" with an attorney.

Q. If financing falls through, can I always unwind the contract?
A. Only if a loan condition (financing-use special clause) is in the contract and the financing it specifies is not approved by the date — then you can cancel unconditionally and the deposit comes back. It cannot be used for a cash purchase without the clause, or past the date. Check before signing that the specified bank, loan amount and date match your actual application and screening schedule.

Q. Can non-conformity liability be asserted any number of years after delivery?
A. No. Under Civil Code Art. 566, for non-conformity of kind or quality, unless the buyer notifies the seller within one year of learning of it, the rights to cure, price reduction, damages and cancellation are lost (except where the seller knew or was grossly negligent at delivery). Where the seller is a transaction operator, any clause worse for the buyer than a "two years or more from delivery" notice period is void (Act Art. 40). Individual sales often place an exclusion clause; check the scope in the contract.

Q. Can a non-resident receive the important-matters explanation and buy Japanese real estate?
A. Yes. A licensed transaction specialist explains under Art. 35, the document may be delivered by electromagnetic means with consent, and explanation by video conference is permitted under certain conditions. But the registration attachments (a signature certificate, etc.), settlement, tax (the tax-agent notification) and the Foreign Exchange Act report differ from a resident's arrangements. Consult a judicial scrivener for registration, a licensed tax accountant for tax, and an administrative scrivener or specialist for the Foreign Exchange Act — each directly.

Sources (primary)

• e-Gov "民法" (Civil Code) — Act No. 89 of 1896. Art. 557 (1) (deposit; until performance begins, the buyer forfeits and the seller actually tenders double to cancel; codified by the amendment in force 1 April 2020); Art. 562 (demand for cure); Art. 563 (price reduction); Art. 564 (damages/cancellation); Art. 566 (kind/quality non-conformity, notice within one year of learning of it). Accessed 31 August 2026.
• e-Gov "宅地建物取引業法" (Building Lots and Buildings Transaction Business Act) — Act No. 176 of 1952. Art. 35 (important-matters explanation); Art. 37 (document at contract conclusion); Art. 39 (limit on the deposit — up to two-tenths of the price where the operator is the seller, deemed a cancellation deposit); Art. 40 (limit on warranty-liability clauses — any clause worse for the buyer than "two years or more from delivery" is void). Accessed 31 August 2026.
• MLIT, "Forms and standard brokerage-agreement terms for real estate transactions" — the forms and idea of the important-matters explanation and document delivery; the financing-use special clause (loan condition) has a specimen in the standard sale-contract form. Accessed 31 August 2026.

Whether "performance began" for a deposit cancellation, the effect of the loan condition, and the validity of non-conformity clauses vary with the contract wording and the individual facts; this article asserts no validity of a specific clause (individual judgment is an attorney's work, treated as unverified). The nature of China's "dingjin" varies with the governing jurisdiction and the contract; this article shows a general difference from Japan's deposit and asserts no interpretation of Chinese law. Whether a non-resident's registration attachments, tax or Foreign Exchange Act report are required varies with classification and the purpose/manner of acquisition; no specific tax amount, rate or reporting applicability is asserted here. This article is general information and does not offer an individual legal or tax determination. Validity judgment and disputes are for an attorney, transfer-of-ownership registration for a judicial scrivener, tax for a licensed tax accountant, and Foreign Exchange Act reporting for an administrative scrivener or specialist. Investigation, important-matters explanation, brokerage and the sale contract on the Japan side are undertaken by Yotsuba Real Estate Co., Ltd. (licensed real estate agent), which works with local professionals as independent business entities engaged separately. There are no referral or introduction fees.

About the author

Joji Uramatsu — licensed real estate transaction specialist (Tokyo Governor registration No. 293544) and administrative scrivener (registration No. 25087022). Representative Director, Yotsuba Real Estate Co., Ltd. (licensed real estate agent, Tokyo Governor (1) No. 113304); principal, Yotsuba Administrative Scrivener Office. Kohinata, Bunkyo, Tokyo, about five minutes' walk from Myogadani station. Supporting materials in Traditional and Simplified Chinese, for Chinese-speaking buyers and their local professionals, mapping the sale-contract clauses to the statute. Full profile: author page.