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Captain Gars

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To prevent clans just giving up, or the Onin War to end at game start, the AI won't consider peace for until the war has run a couple of years.
 

Birken

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Well.. since agreeing to subjugation costs such a large chunk of Honor (often taking them below 25 Honor), then that's one reason they won't agree.

In the three separate cases I've experienced lately, their armies were completely eliminated and all their provinces were under siege, them being down to three or less still owned (& sieged). So their Honor situation had to be the case, as they would happyily agree to admit defeat and send a hostage, but refused to swear fealty. As you can see in my screenshot above, agreeing to subjugation would've likely taken Otomo just barely below 25 Honor and thus he says "no".

I will try to find a similar case in which the defeated and besieged enemy, with only a handful of provinces left, has enough honor to keep him above 25 when he agrees and see if that works.

Subjugation will never make a character drop below 25 in honor and will cost him at most 25 honor. The main reason for this is to make subjugated clans less likely to break free too quickly (especially as this can be easily exploited by the player).