Is A Mistake In A Labor Contract Legally Binding?

A few weeks ago, the General Union received an unusual query: the correction of one mistake in a labor contract had resulted in a new contract being issued.

However, the new contract had a different error of its own - one that put the employee's monthly salary at ¥50,000 higher than before.

Suffice to say, an extra ¥50,000 per month is quite an advantageous mistake!

Unfortunately, the mistake didn't make its way into the employee's bank account - the salary was the same as it had been in the original contract.

As both the employer and employee had signed the second contract with the extra ¥50,000 written into it, could the employee force the employer to honor that amount?

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WHEN IS A CONTRACT NOT A CONTRACT?

The general trope when it comes to the question of "is the contract legally binding?" is that if you signed it, it's legally binding.

You'll often see this banal reply whenever anyone decides (against their better judgement) to ask the general public for advice about their contractual woes.

"You signed it!", they'll say. "Tough luck!"

As we've mentioned before, things are never that clear cut - especially in Japan, where you can't sign your rights away just because you put your signature on something.

In the case of employment contracts, illegal clauses are never, for example, legally binding.

All contracts are subject to the laws of Japan.

In cases where signed contracts contain such illegal clauses, such clauses are considered null and void and revert to the wording of the law that supersede them.

What if the shoe is on the other foot, though?

What if, instead of the employee being disadvantaged by a contract mistake, it is the employer itself?

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WHEN EMPLOYERS MAKE MISTAKES

In our example case, an employee found that the dates written into their employment contract were incorrect.

The employee contacted their employer and made them aware of the mistake.

After apologizing for the error, the employer asked the employee to disregard the contract.

They would send a new, updated, pre-signed second contract that would not have the same error of the first, they said.

The second contract arrived but, while the date was now correct, the written monthly salary was now ¥300,000 instead of the original ¥250,000 - a difference of ¥50,000 in the employee's favor.

However, upon being paid at the end of the month, the employee found that only ¥250,000 had been deposited into their account.

Where was the extra ¥50,000 that the second contract promised?

Even if the ¥300,000 had been a mistake, both the employee and the employer had signed the contract, so the error was now legally binding, right?

The internet would seem to think so:

"I'm not a lawyer and judging by the amount of views but no responses, I think this is a bit of a grey area. If you've both signed the contract and you have started working as well, I would argue myself that this contract is binding, and therefore, they should honor the hours and pay the contract dictates."

"You both signed a contract. Based on those hours and amount stated they can't just say, "Oops! Our mistake! You're actually going be paid a lot less!" They should have re-read the contract before sending it to you."


However, things don't really work like that...

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WHY "GOTCHA!" ISN'T A GOOD LEGAL CASE

In the case of the employee, they wanted to know if they could sue to force the company to honor the erroneous figure of ¥300,000 instead of the original figure of ¥250,000.

We advised them not to.

While it is true that courts are fickle and that a judge may have ruled in favor of the employee, there would have been a lot of time and money riding on that "may have".

However, in our para-professional legal opinion, they would have been basing their lawsuit on the mistaken belief that just because both the employee and the employer signed a written document, the contents of that document were legally binding, which isn't the case at all.

We came to this opinion based on one important point: the original agreement between the employee and the employer was for ¥250,000 - not for ¥300,000.

Now, as stated, the employee could have taken the employer to court, and there is an outside chance they might even have won.

However, the question that the court would likely ask is: "What was the intent of the agreement?"

The answer? The intent was for the employee to receive a salary of ¥250,000.

The employer could easily prove that intent by providing evidence such as the original placement offer, the original contract that had the incorrect date on it, and a history of what the employer had been paying to other people in similar positions, among other things.

It would, therefore, be clear to see that the understanding between the employee and the employer was that the salary would be ¥250,000 and that there was not, prior to the second contract, any confusion or ambiguity about that point.

From there, the legal doctrine of reformation would likely apply, the amount of ¥300,000 identified as something that was not intended (and dismissed as a "scrivener's error"), and that would be the end of that.

The employee would be out of pocket for the legal fees - and perhaps out of employment, too.

(Note that this is different from a unilateral mistake in which a party simply misunderstands an agreement.)

It's understandable that the perception of an extra ¥50,000 due to a clerical error in an employee's favor is exciting (anyone would jump at the sight of more money on their contract), but - unfortunately - this wasn't the "gotcha!" moment that they hoped that it was.

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