Discussing big companies, industry leaders, and the “city upon a hill” tends to be popular.

Discussing minor details, ends, and tails often carries an air of bad luck.

In the 1973 Chinese film Juelie (The Breaking Point), Professor Sun (played by Ge Cundong) of the Agricultural College teaches students about “the function of a horse’s tail,” provoking roars of laughter. This scene alluded to the policy direction at the time that advocated for standardized education and the cultivation of top-tier talent. The author and readers of this article are almost all beneficiaries of educational standardization — a story that began after 1978 when Deng Xiaoping, the chief architect of reform and opening up, personally promoted the resumption of the college entrance examination and called for the “spring of science.” Most of us have no direct impression of what was politically correct in China in 1973.

In 1973, on the other side of the Pacific, a major event came from the top — the U.S. Supreme Court — but concerned the periphery: Roe v. Wade, based on the “due process” clause of the 14th Amendment to the U.S. Constitution, determined that a woman’s right to choose abortion was a right protected by the federal government. Forty-nine years later, Roe v. Wade was overturned by the U.S. Supreme Court according to law. Breaking point, it seems, is not a distant historical topic.

Today, we intend to make a big deal out of a small thing and attempt to analyze the tail of a contract. This is truly an unrefined topic. Not only would no law school hold a seminar on this subject, but even lawyers and judges lack a conventional concept to refer to the so-called tail of a contract. Miscellaneous clauses? General clauses? Common clauses? Boilerplate clauses? Standard clauses? Template clauses? None of these are ideal, and some terms are even seriously misleading.

I

The Function of Tail Clauses

Since the tail contains great principles — such as the organizational behavior maxim “a tail too big to wag” (Zuo Zhuan, Duke Zhao, 11th Year: “If the end is too big, it must break; if the tail is too big, it cannot wag — this you know.”) — we might as well adopt “contract tail” as a conceptual name, referring to a group of clauses commonly found at the end of contracts. The following list may not be exhaustive:

Dispute Resolution (Jurisdiction and Applicable Law)

Entire Agreement

Severability

Assignment

Notice

Headings

Execution and Effectiveness

Counterparts

Language

Some argue that the “Dispute Resolution” clause involves very complex legal technical issues and is often the result of repeated negotiations between the parties at great length. This is clearly different from clauses with a high degree of standardized wording that are generally not haggled over between contract parties, and therefore should not be lumped together. Others point out that only foreign-related contracts have Language and Counterparts clauses, so these two lack representativeness.

The clause that firmly occupies the representative seat of ‘contract tail’ should be the ‘Notice’ clause.

Parties to a contract agree here on the methods, channels, and contact information (contact person, address, phone, and email, etc.) for sending and receiving notices between the parties during the performance of the contract. There is almost no legal factor here. Often during contract negotiations, this section remains blank until the contract negotiations conclude and the core text is finalized. Then the most junior member of the legal team calls or WeChat-messages their client to provide the contact person’s name, address, and other information, so as to fill in the notice clause’s information and generate a text ready for signing. In reality, it is common to find executed contracts with no notice clause, or with a notice clause but missing contact information.

The notice clause seems to combine a trivial legal function with a high degree of textual ceremony. The capital increase agreement of a limited liability company with 10 shareholders might have a notice clause spanning two pages. Contracts without a notice clause often also lack “Entire Agreement” and “Severability” clauses; contracts with a notice clause often have a relatively comprehensive set of tail clauses.

Beyond the ceremony of legal jargon, what substantive legal function do tail clauses actually serve?

The notice clause, seemingly simple and innocent, actually has the potential to leverage a small force to achieve a large effect, determining the success or failure of a breach of contract lawsuit. After all, the notice clause is not designed for the convenience of the parties sending invitations to the company’s bell-ringing ceremony. The breaching party sending a notice to the non-breaching party, requiring the breaching party to cure the breach within the contractually agreed period, is an important mechanism agreed upon in many contracts. This procedural mechanism is closely related to the non-breaching party’s claim of default, thereby exercising the contractual right of termination or claiming damages for breach. In other words, the notice clause is not an isolated feather on the tail but a component of the procedural mechanism for the contract subject to exercise substantive rights.

If tail clauses both enhance ceremony and have potential legal efficacy, then is more tail clauses always better?

Let’s still use the simplest notice clause for analysis. It is easy for legal or legal counsel to include a notice clause in the contract tail. However, proper compliance with the notice clause by the contract subject may not be easy. On one hand, changes to basic information such as contact persons, addresses, and emails during the contract term are common, but not all enterprises have a high level of contract management that enables such changes to be promptly implemented at the execution level through contract amendments. On the other hand, issuing a legally effective notice in a timely and appropriate manner according to the contract is itself a complex management decision. If legal counsel or external legal advisors cannot organically participate in the formation of this decision process, enterprise decision-makers often only realize during formal dispute resolution that their substantive rights can hardly be supported by the judge or arbitrator because the effective notice conditions were not satisfied.

Calling provisions like the notice clause ‘general clauses’ or ‘common clauses’ highlights their prevalence but ignores that the drafting and execution of these clauses require consideration of the specific contract and the actual circumstances of the contract subject. Otherwise, they may backfire and cause harm rather than benefit.

Party A in Shanghai and Party B in Qingdao sign a supply contract, with the customary agreement that disputes will be resolved at the people’s court with jurisdiction at the place of contract signing. From a textual perspective, such an agreement is unobjectionable. However, if Party A signs the contract in Shanghai and then sends two copies by courier to Party B in Qingdao, is the place of signing Shanghai or Qingdao? Originally, agreeing to resolve disputes at the court of the place of signing was meant to reduce jurisdictional disputes. But merely having a textual agreement without considering the actual behavior of contract signing, similar to the behavioral uncertainty in executing the notice clause, instead brings additional disputes to the dispute resolution process, defeating the original purpose of agreeing on the place of signing.

Legal counsel and lawyers who merely engage in calligraphic work are destined to remain trapped in the traditional literati’s weakness and powerlessness. The professional strength of legal counsel and lawyers comes from sensitivity to behavior and grasp of facts. So-called “boilerplate clauses,” “standard clauses,” and “template clauses” carry the routines and common experiences of a field, an industry, a product, or a type of transaction model. First comes experience, then the summary of common experience and written refinement. Because of the convenience of refined templates, ignoring or even overlooking fresh experiences and exceptions, these standard clauses, template clauses, and boilerplate clauses can become signposts leading to traps.

II

DIY of Template Clauses:

Taking the “Forced Labor Clause” as an Example

Most so-called contract tail clauses originate from English legal practice.

In fact, English has a conventional term: “boilerplate” refers to such clauses. In the era of traditional plate printing, large newspapers provided pre-made newsletter drafts to local small newspapers. The method of provision was obviously not modern electronic data transmission but rather delivering the set printing plate to local small newspapers for local printing and distribution. This set printing plate looked like the standardized metal sheet covering the exterior of a boiler, hence the metaphorical term “boilerplate.”

In the legal industry, ‘boilerplate’ has been further extended to metaphorically refer to clauses or expressions inherited from predecessors that are patterned and common.

As a latecomer to a rule-of-law-based market economy, China’s legal industry has accepted several boilerplate clauses from English contracts on a take-it-or-leave-it basis. This is a natural phenomenon of cross-cultural exchange. Just as China’s manufacturing industry has moved from learning and imitation to innovation, innovation in template clauses in China’s legal industry is bound to happen sooner or later.

Due to multiple structural factors, American manufacturing has gradually declined, losing the ability to efficiently manufacture various products domestically. However, the ability of the U.S. legal profession to “manufacture” template clauses seems undiminished. With the implementation of the U.S. “Uyghur Forced Labor Prevention Act,” American buyers’ lawyers are rolling out anti-forced labor clauses. Such clauses are typically expressed as promises and guarantees by export enterprises (sellers) outside the U.S. that their products under the contract do not contain raw materials or components from China’s Xinjiang region, and that the production process does not involve forced laborers from Xinjiang.

On emotional, legal, and rational grounds, and based on commercial negotiation leverage, Chinese export enterprises to the U.S. should not passively accept anti-forced labor clauses drafted by U.S. buyer lawyers, nor should they even negotiate based on the opposing party’s proposed text.

Chinese export enterprises should, based on international anti-forced labor treaties and practices, proactively propose anti-forced labor clauses that meet the reasonable interests of Chinese export enterprises as a starting point for negotiation. The “rebuttable presumption” established by the U.S. “Uyghur Forced Labor Prevention Act” is the U.S. government’s position. It does not necessarily mean that U.S. buyers, in commercial contract negotiations and at the textual level, have the moral standing or contractual right to impose such a rebuttable presumption on their counterparties in a specific transaction.

Just as President Biden believes that overturning Roe v. Wade sets America back 150 years, the U.S. “Uyghur Forced Labor Prevention Act” also has a sibling version from 150 years ago. In 1875, against the backdrop of rising racist violence after the U.S. Civil War, the U.S. Congress passed the first restrictive border control law, historically known as the Page Act (Page being the name of the bill’s proponent). The original intent and practical effect of this law were to restrict Chinese women from entering the United States. Its enforcement mechanism required Chinese women applying to come to the U.S. to go through layers of questioning and self-certification to obtain a certificate from the U.S. consul before they could legally board a ship to the U.S.; otherwise, they were presumed to be coming to the U.S. for improper purposes. The Page Act was merely an opening act. In 1882, the U.S. Congress officially passed the notorious Chinese Exclusion Act. That law lasted for six decades and was not repealed until 1943, two years after China and the U.S. established an alliance during World War II.

Just as overturning Roe v. Wade has nothing to do with so-called protecting fetal life, the U.S. Xinjiang-related Act has ulterior motives. One hopes that China and the U.S. will not need another six decades to transcend rifts, not for the temporary gains of geopolitical interests, but to truly rebuild friendly and cooperative relations based on equality. Until then, every negotiation between Chinese and American lawyers over “anti-forced labor clauses” is a step toward Sino-U.S. equality. The tail of a contract can squeeze out the “petty things under the fur robes” of congressmen.