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Contract Ambiguity: Paying Versus Still Owing a Debt

posted by Jason Kilborn

I've been meaning for some time to tell this brain-candy story involving an amazing ambiguity in a Chinese debt-related contract. Now that my career-first research semester is drawing to a close and the holiday break is upon us, I thought now's the time to tell it.

To set up the story, the equivalent of the legal-cultural Latin phrase pacta sunt servanda (debts are to be paid) in Chinese is 欠债还钱 (qiàn zhài huán qián) [the phrase continues, but this is the key bit]. It means "If you owe a debt, return the money." Here's where the craziness comes in: Most Chinese characters have one and only one single-syllable pronunciation. That syllable might have many diverse meanings, but how that character sounds is consistent.

Not so with the key character in the above phrase. The character 还 can convey the sound huán, in which case it means "return," or more frequently, it carries the sound hái, which means "still" (that is, carrying on, as in "I still love him despite his sometimes beastly behavior").

So the story begins ... a creditor had lent 12,000 yuan to a debtor, recorded in a promissory note. Six months later, the debtor repaid part of the debt--but how much? The debtor insisted on placing a legend on the note indicating "还欠款10000元." The first character here is our Janus-faced gremlin that can mean "return" or "still," depending on the pronunciation of that character. So the phrase means either "returned the owed amount of 10,000 yuan" or "still owes the amount of 10,000 yuan" [verbs and nouns are often conveyed by the same character, too, so the second character 欠 can mean both "owing/owed" as as well "owes"] 

Predictably, the debtor claimed that the character read huán, indicating he had returned 10,000 yuan, and therefore still owed only 2000. The shocked creditor insisted that the word carried its more ordinary sound hái, indicating the debtor still owed 10,000 yuan, reflecting that he had repaid only 2000.

How to resolve this linguistic puzzle? The judging reported on this case here and here is Solomonic (to mix cultural metaphors): The judge made two crucial observations--not about linguistics as we so often see in US jurisprudence, but about real life. First, the remainder was to be repaid in two installments. Why would the small sum of 2000 yuan need to be repaid in two installments by a debtor who just paid 10,000? Second, the note was retained by the creditor. Ordinarily, someone repaying the large sum of 10,000 yuan would demand either a receipt or a reformation of the note to indicate a new amount owed of 2000, with the repaying debtor either destroying or receiving the original, full-amount note (with the legend indicating repayment of part of the debt). The debtor here had done neither. When the judge warned the debtor of the consequences for perjury, the debtor miraculously recalled the real intended meaning of the character, he still owed 10,000 yuan, it was all just a huge misunderstanding, and the parties settled.

And you thought English could be ambiguous! Enjoy this holiday Contracts/Bankruptcy story, and have a great New Year!

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