7 Explicit Reasons for Implicit Contracts: The Legal Logic to the Japanese Main Bank System
J. Mark RamseyerIf the firm is a nexus of contracts, the stylized Japanese main bank system is a nexus of implicit contracts—or, as Aoki, Patrick and Sheard nicely put it in Chapter 1 , 'a nexus of relationships'. Of the many characteristics commentators often ascribe to it, take four:
|I The main bank monitors its debtors more intensively than the amount of its loans would suggest.|
|II It insures its clients against business failure.|
|III It lends its clients large sums, both long and short term.|
|IV Arrangements I and II it makes implicitly.
These characteristics raise two quite different inquiries. Characteristics I through III lead readers to ask why these phenomena occur; IV should lead them to ask whether I and II occur.
Implicit main bank contracts are not promises that chain-smoking CEOs make in ornate conference rooms. Neither are they promises they make in dimly lit Akasaka restaurants while sipping Scotch and flirting with hostesses. Instead, implicit contracts are promises they never made—for had they made them, they would not be implicit. Make no mistake. It may be a simple definitional matter, but it is a basic one. An agreement is not 'implicit' just because it may be unwritten or incomplete. Even if oral and incompletely specified, it will still be an explicit and (generally) court-enforceable contract. (Japanese law has no general requirement that contracts be written (Suekawa, 1975 , pp. 1-6).) Judges may prefer written and complete agreements, but they know how to handle swearing