①Set-offs are effected through the manifestation of one party's intention to the other. In such a case, no condition or time limit may be added to the manifestation of intention.

②A manifestation of intention referred to in the preceding paragraph is effective retroactive to the time when the obligations of both parties became eligible to be set-off.

Set-offs may be effected even if the places of performance of both obligations are different. In that case, the party seeking to effect the set-off must compensate the counterparty for any damage suffered as result of that set-off.

If a claim extinguished by prescription was eligible for set-off before its extinguishment, the obligee may use that claim for the set-off.

The obligor of either of the following obligations may not duly assert a set-off against the obligee; provided, however, that this does not apply if the obligee acquires a claim corresponding to the relevant obligation from another person:

If any claim is exempt from seizure the obligor of that claim may not assert the set-off as defense against the obligee of that claim.

①A third party obligor of a claim which has been seized may not duly assert sett-off as defense with any claim acquired after the seizure against the attaching obligee, but may duly assert against the same a set-off based using a claim acquired before the seizure.

②Notwithstanding the provisions of the preceding paragraph, if a claim acquired after the seizure has arisen from a cause that existed before the seizure, the third party obligor may duly assert a set-off based on the claim against the attaching obligee; provided, however, that this does not apply if the third party obligor acquires the claim of another person after the seizure. duly assert against the assignee a set-off based on a claim against the assignor

①If an obligee manifests the intention to effect a set-off using one or more claims held by the obligee against the obligor against one or more obligations borne by the obligee to the obligor, the claims held and the obligations borne by the obligee are extinguished by a set-off at the corresponding amount, in the order of time when they become eligible for set-off, unless otherwise agreed upon by the parties.

②In the case referred to in the preceding paragraph, if the claims held by the obligee that seeks a set-off are insufficient to extinguish all of the obligations borne by the obligee, the following provisions apply, unless otherwise agreed upon by the parties:

③In the case referred to in paragraph (1), if the obligations held by the obligee that seeks a set-off are insufficient to extinguish all of the claims held by the obligee, the provisions of the preceding paragraph apply mutatis mutandis.

The provisions of the preceding Article apply mutatis mutandis to a set-off if the claims held by the obligee against the obligor include a claim for which more than one payment or delivery should be made as the performance of a single obligation. The same applies to a set-off if the obligations borne by the obligee to the obligor include an obligation for which more than one payment or delivery should be made as the performance of a single obligation.

If the parties conclude a contract which gives rise to a new obligation that falls under any of the following as a replacement of the previous obligation, the previous obligation is extinguished by novation:

①A novation by substitution of obligor may be effected by a contract concluded between the obligee and a person that becomes the obligor after the novation. In such a case, the novation becomes effective when the obligee notifies the obligor before the novation of the conclusion of the contract.

②The obligor after the novation by substitution of obligor does not acquire a right to reimbursement from the obligor before the novation.

①A novation by substitution of obligee may be effected by a contract concluded among the obligee before the novation, a person that becomes the obligee after the novation, and the obligor.

②A novation by substitution of obligee may not be duly asserted against a third party unless it is made using an instrument bearing a certified date.

①To the extent of the amount of the obligation before the novation, the obligee (in the case of a novation by substitution of obligee, the obligee before the novation) may transfer the pledge or mortgage created as the security of that obligation to the obligation in effect after the novation; provided, however, that if any third party created that security, the consent of the third party must be obtained.

②The transfer of the pledge or mortgage referred to in the preceding paragraph must be effected by manifesting the intention to the other party to the novation (in the case of a novation by substitution of obligee, the obligor) in advance or upon the transfer.

If an obligee manifests the intention to release an obligor from an obligation to that obligor, the obligee's claim is extinguished.

If a claim and obligation become vested in the same person, that claim is extinguished; provided, however, that this does not apply if such a claim is the subject of the right of a third party.

Assignment of a negotiable instrument payable to order does not become effective unless the instrument is indorsed and delivered to the assignee.

With regard to assignment of a negotiable instrument payable to order, the provisions concerning the method of indorsement in the Negotiable Instrument Act (Act No. 20 of 1932) apply mutatis mutandis depending on the nature of the negotiable instrument payable to order.

If the holder of a negotiable instrument payable to order proves that holder's rights by means of an uninterrupted series of indorsements, the holder is presumed to lawfully hold rights embodied on the instrument.

If a person, for any reason, loses possession of a negotiable instrument payable to order, and the holder of the instrument proves the holder's rights pursuant to the provisions of the preceding Article, the holder is not obligated to return the instrument; provided, however, that this does not apply if the holder has acquired the instrument in bad faith or due to gross negligence.

The obligor of a negotiable instrument payable to order may not duly assert against an assignee in good faith any grounds which could have been duly asserted against the obligee before the assignment of the instrument, except for the particulars written on the instrument or any result which necessarily arises from the nature of the instrument.

The provisions of Article 520-2 through the preceding Article apply mutatis mutandis to the creation of a pledge on a negotiable instrument payable to order.

Payment of a negotiable instrument payable to order must be made at the current domicile of the obligor.

Even if a due date is specified for the performance of an obligation of a negotiable instrument payable to order, the obligor of the instrument is responsible for the delay on and after the time the holder of the instrument presents it and requests its performance after the due date has arrived.

The obligor of a negotiable instrument payable to order has the right, but not the duty, to examine the identity of the holder of the instrument and the signature and seal affixed thereon; provided, however, that the payment of the obligation is invalid if the obligor is acting in bad faith or is grossly negligent.

A negotiable instrument payable to order may be made invalid through the public notification proceedings prescribed in Article 100 of the Non-Contentious Case Procedures Act (Act No. 51 of 2011).

If the holder of a negotiable instrument payable to order for the delivery of things such as money or of negotiable instruments of value loses the negotiable instrument payable to order, and files a petition for public notification prescribed in Article 114 of the Non-Contentious Case Procedures Act, the holder may have the obligor deposit the subject matter of the obligation or have the same perform the obligation in line with the purport of the negotiable instrument payable to order by providing reasonable security.

Assignment of a registered negotiable instrument payable to holder (meaning a negotiable instrument on which the name of the obligee is written with a supplementary note that payment should be made to its holder; the same applies below) does not become effective unless the instrument is delivered to the assignee.

The holder of a registered negotiable instrument payable to holder is presumed to lawfully hold rights embodied on the instrument.

If a person, for any reason, loses possession of a registered negotiable instrument payable to holder, and the holder of the instrument proves that holder's rights pursuant to the provisions of the preceding Article, the holder is not obligated to return the instrument; provided, however, that this does not apply if the holder has acquired the instrument in bad faith or due to gross negligence.

The obligor of a registered negotiable instrument payable to holder may not duly assert against an assignee in good faith any grounds which could have been duly asserted against the obligee before the assignment of the instrument, except for the particulars written on the instrument or any result which necessarily arises from the nature of the instrument.

The provisions of Article 520-13 through the preceding Article apply mutatis mutandis to the creation of a pledge on a registered negotiable instrument payable to holder.

The provisions of Articles 520-8 through 520-12 apply mutatis mutandis to registered negotiable instruments payable to holder.

①Negotiable instruments on which the name of the obligee is written, other than negotiable instruments payable to order and registered negotiable instruments payable to holder, may be assigned or made the subject of a pledge only in compliance with the formalities concerning the assignment of claims or the creation of a pledge for this purpose, and only with the effect of the assignment or the creation.

②The provisions of Articles 520-11 and 520-12 apply mutatis mutandis to the negotiable instruments referred to in the preceding paragraph.

The provisions of Subsection 2 (Registered Negotiable Instruments Payable to Holder) apply mutatis mutandis to bearer instruments.