Katsuhiro Iwayama, Attorney at Law

A common structure for outsourcing agreements is billing based on work hours (a performance-proportion type quasi-mandate agreement).

However, with the recent advancement of AI, it has become possible to perform tasks more quickly by leveraging AI. At the same time, this has led to a reduction in working hours, which in turn can result in decreased compensation under traditional time-based billing models. Many service providers also incur costs for paid AI tools, creating a contradiction where investing in efficiency and speed may actually reduce their revenue.

In this context, a structure that is particularly worth considering from the contractor’s perspective is a performance-based quasi-mandate agreement. This type of arrangement was explicitly recognized in the 2020 amendment to the Civil Code, although the concept itself is not new. For example, in legal practice, “success fees” have long existed, where compensation is paid based on achieving certain results. The amendment merely clarified this in statutory form.

In the context of system development outsourcing, the traditional waterfall model generally aligns well with a contract for work (contractor-type agreement). In contrast, agile development—where specifications evolve throughout the process—may be better suited to a performance-based quasi-mandate structure.

<Difference from a Contract for Work (Ukeoi)>

Since a performance-based quasi-mandate agreement also requires achieving some form of “result,” it is natural to question how it differs from a contract for work, which is aimed at completing a deliverable.

The key differences are as follows:

• Even in a performance-based structure, as long as it is a quasi-mandate agreement, there is no obligation to complete the work

• Under a mandate agreement, even if the deliverables do not fully meet expectations, the contractor is entitled to payment as long as they have fulfilled their duty of due care

• A contract for work imposes liability for non-conformity (defects), whereas a quasi-mandate agreement generally does not

In practice, however, relying entirely on a 100% performance-based fee structure can be risky. If the expected results are not achieved, the contractor may end up receiving no compensation at all. In addition, if payment is only made upon delivery of results, this can create cash flow challenges. For these reasons, many parties adopt a hybrid model that combines performance-based fees with time-based or progress-based compensation.

It is also important to note that the nature of a contract is not determined by its title alone. Simply labeling an agreement as a “services agreement” or “quasi-mandate” does not make it so. Instead, the actual substance of the agreement—how the rights and obligations are structured—will control.

For example, even if a contract expressly states that it is a quasi-mandate or services agreement, it may be treated in practice as a fixed-price or deliverable-based contract if it includes provisions such as mandatory acceptance testing, obligations to fix errors at no additional cost, or responsibility for defects in deliverables after completion. In such cases, the contract may effectively impose an obligation to complete the work, and therefore be characterized as a deliverable-based (fixed-price) agreement.


The contents of an agreement will vary depending on whether you are the client or the contractor, and will also differ from project to project. If you need assistance with a customized contract, please feel free to contact us.