Archaeological Research on the Origin of Contracts
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The history of Chinese ancient contract can be traced back to the Western Zhou Dynasty (B.C. 1045–771), and scholars in related fields have already made plenty of fundamental researches from the perspective of the origin, evolution and the name of contract. In this chapter, the previous researches will be used for references, and based on the sources of contract concept, this chapter attempts to explore the motivation, historical premise, function, and types of contract, so as to sketch out the general lineament.
The history of Chinese ancient contract can be traced back to the Western Zhou Dynasty (B.C. 1045–771), and scholars in related fields have already made plenty of fundamental researches from the perspective of the origin, evolution and the name of contract. In this chapter, the previous researches will be used for references, and based on the sources of contract concept, this chapter attempts to explore the motivation, historical premise, function, and types of contract, so as to sketch out the general lineament.
Names of Contract: “Agreement (契约)” to “Contract (合同)”
The name of “agreement” has some synonyms in a broad sense, such as covenant, indenture, deed, and contract, which all mean that both parties enter into the agreement with a meeting of minds upon certain subject, and with the stipulations of their rights and liabilities. In Chinese language, Qi Yue (契约, which means an agreement or a contract) are two separate characters yet sharing the same meaning, according to Interpretation Dictionary of Chinese Characters (≪说文解字≫), which was edited in Han Dynasty and dubbed as a most influential dictionary in Chinese history. “Qi is Yue”, so this word (Qi Yue) itself was a combination to demonstrate the idea of agreement. Qi refers to the behavior that both parties entering into the agreement, and Yue emphasizes the rights and liabilities. In The Book of Rites (≪礼记≫), a famous collection of treatises on the rules of propriety and ceremonial usages in ancient China, Qi Yue was also explained as “important agreement”. Shiren Ancient Epigraph (≪矢人盘铭≫) of Western Zhou Dynasty (B.C. 1045–771) has proved that the conception of Qi Yue had once inscribed in that period. Much other ancient Chinese classic literature could also reveal the trace of such word, such as in Legend of Spring and Autumn Century (≪左传≫) by Zuo Qiuming, according to which, there was a new policy promulgated in the sixth year of Wengong (631 B.C.) called “Youzhiyao (由质要)” which referred to the agreement between parties when disputes arose in civil cases. Also in The Analects of Confucius (≪论语≫), and He Yan’s Interpretation of Confucius Anthology (≪集解 ≫), they all mentioned the concepts of agreement in the form of Chinese characters “要 (Yao)” and “约 (Yue)”. Together with those terms, there was a term called “Panshu (判书), a judgment witnessing the processing of entering a contract)”. In Rites of Zhou which is considered as one of the classic Confucius works, it records a description of the putative organization of the government during the Western Zhou period. And the words “Panshu, a judgment witnessing the processing of entering a contract” was also written in different Chinese characters as “别” or “莂” or “傅辩”, which were in accordance with the same meaning explored in Liu Xi’s book—Expounding Names (≪释名≫). In the year of 1996, some wooden and bamboo manuscripts were unearthed in Zoumalou (走马楼) of Changsha city, Hunan province. Those relics are deemed as the proofs of the process of the establishment of an ancient contract, among which some of wooden and bamboo manuscripts were carved with the Chinese character “莂 (bie)”. This founding can also verify the theory proposed by Liu Xi.1 Wang Xianqian in Qing Dynasty wrote a book named Expounding Names—supplementary version (≪释名.疏证补≫), which revealed an anecdote that in the year of 284, “Bie (莂)” was survived in Shanyin of Zhejiang province. All these relics and textual researches can prove that the partial texts in ancient contracts are not isolated evidences.
From foregoing information, at least three levels of meanings in ancient contract can be revealed:
Firstly, judging from the carving of ancient contract, it is obvious that the characters such as “契 (Qi)” “券 (Quan)” “判 (Pan)” “别/莂 (Bie)” “剂 (Ji)” were carved on the golden or wooden manuscripts; that’s the reason why their Chinese affixes are “刀”, which refers to knife; meanwhile, those characters carved on bamboo, paper, and silk were named as “约 (Yue)” and “要 (Yao)”.
Secondly, judging from the behaviors of entering a contract, ancient people were prone to adopt practical and physical measures. They actually had preferential access to use knives to cut, and use silk and other materials to be cut because they were easily to tear into two or more. Consequently, these behaviors to cut things with contract contents on, with the help of knife and tearable material in the process of contract establishment, were conducted to give parties concerned for binding purpose in some ritual forms that were apart of people’s daily life.
Thirdly, symbolically speaking, the fact that ancient Chinese chose knife and silk as the Chinese affixes to form hieroglyphic characters demonstrates the initial contract concept. For those characters with knife as Chinese affix, simply shows that, in ancient China, the physical contract was cut into two pieces with a duplication to each party, or with one of the pieces kept by the creditor, the other by governmental division called Meng Fu (盟府) (this mostly was applied in the real estate transaction in Western Zhou Dynasty) for mutual trust. Thus the interpretation of the knife affix will stand for the meaning of mutual assent, and it will also serve the purpose of the good faith in the cutting form with determination of realizing the contents of contract. Besides the idea of good faith, it also can expand two more meanings of the knife affix used in contract from the angle of philology, One is multi-binding: the characters “约 (Yue)” “要 (Yao)” both bear the meaning of trussing, and tying, which directly shows the essence of a contract is its binding force. The other is no regretting once entered a contract: take “剂 (Ji)” as an example. In Interpretation Dictionary of Chinese Characters: “剂 (Ji) refers to 齐 (Qi), which stands for the meaning of being consistent.” And according to Duan Yu’s Notes for Interpretation Dictionary of Chinese Characters: “those characters with ‘knife’as their affix, bear the meaning of being as neat as cut by knife.” The connotation thus is: both parties engaged in the contract should be deemed to be decided and they shall not regret.
The mentioned three levels consist of the initial concept of ancient contract which could be concluded into three phrases—“with good faith”, “by mutual binding forces”, and “no regret after signing”. As these have been seldom discussed in previous works, the book will consequently place the findings in this chapter.
It took a long time for the name “agreement (Qi Yue)” evolving into “contract (He Tong 合同)”. As a matter of fact, the name of contract (He Tong) has been used for quite a long time. In The Book of Rites, the famous collection of treatises on the rules of propriety and ceremonial usages, the name of “合同” (He Tong, contract) had already appeared with the meaning different from that in today’s “contract”. From historical evidences and materials, the existing contract is deemed to be equal with the one written in late Wei Dynasty (220–265 A.D.). Wang Guowei’s Archeology Study of Drifting Sand has considerably detailed description and the rubbing documents, which can still be taken as references. Till Tang and Song Dynasty, “agreement” gradually became “contract (He tong 和同)” or “contract agreement (合同契)”, and in official documents like Law Code of Tang Dynasty, and Criminal Code of Song Dynasty, it was all written as “consensus (He tong)”, while in cases reviews it could be in the form of “contract agreement (合同契)” or “contract of agreement (合同文契)”. For instance, Law Reports of Southern Song Dynasty (1127–1279 A.D.) has recorded: “… the law provides, the behaviors of pawning real estate property shall be with contract; this shall be known by all as a common sense.”
For the name of “He tong (和同)” and “He tong (合同)”, it is worth to value whether they were the same in essence, or whether they were just in different names? This can be answered in an easy way. According to the historical evidences unearthed from Duanghuang and Turpan, nearly all kinds of contracts were using the form of “He tong” instead of “he tong”. There were a number of set phrases like “contract under consensus”, “equal stipulations by both parties face to face”, “equal stipulations”, and “both parties involved”, which all demonstrated the contract was deemed to be entered by both parties with free will and equal conversation. The word “He tong” bears two meanings: one is that this kind of contract has to be signed by both parties in person, which refers to other people cannot represent the party to enter it in accordance with legal provision, and the other meaning is that the both parties should have consensus in certain subject, thus the default shall not arise in future morally nor legally. Most importantly, the contract shall be entered with free will and under equal conditions without any threat, tempting, or deceiving. By observing contracts in Ming Dynasty and Qing Dynasty, there were many expressions as “such contract is entered of both parties’ accord”, which can be seen as a historical continuous evidence of “He tong”. The Chinese character “He (和)” stands for a meaning of both parties having face-to-face meeting, and with free will, while “Tong (同)” for consensus made by both parties.
As for the word “he tong”, form Song Dynasty and Yuan Dynasty to the present, this word has become the common usage in various transactions. Zhai Hao in Qing Dynasty wrote: “… nowadays, when people are engaging in real estate transaction, they always write a big character on the back of the agreement, then tear the agreement into two pieces. This is so called contract (which in Chinese was he tong), so you can see the fact that the term agreement which has been used for ages, has gradually been replaced by the term contract instead”.2 In the same time, Ping Buqing also provided a comment on contract: “… after signing the contract, the parties fold the contract and write the word of ‘he tong’ on it, then each of them takes a duplicate for further consideration. This form of contract can be traced back to the contracts of Xuanzong period in Song Dynasty (1100–1200s)”.3 With the two Qing Dynasty scholars’ theories together, it is obvious that in “he tong”, the Chinese character “he (合)” stands for the meaning of both parties having reached the agreement to enter into contract for transaction under certain conditions, and they adopted the historical forms to cut the contract into two which were left to both sides for future purposes, which actually was designed for dispute resolution. As for the concrete procedure for dispute resolution, according to Zhao Yi in Qing Dynasty, was that the parties put the duplicates together, on which the word “he tong” was wrote on both, then each party took one copy.4 Once dispute arose, the parties were supposed to reveal the one with the partial word in order to identify whether it was authentic. In early phase, it was only one character “tong” on it, and later on, the both characters of “he tong” were written on the contract.
From aforesaid evidences, it is not a coincidence that “He tong” has evolved into “he tong” solely for the same pronunciation. Actually, the focuses of the two words were not the same: “He” emphasized on the free wills of parties, while “he” paid more attention to the process of entering and examining the contract. In fact, “He” and “he” both could be analyzed with multiple meanings, which brings difficulty to fathom why they eventually fused together in the expression of the term to describe the name of contract. Howsoever, the answer now can be found in semantics sense and legal historical sense world widely. For instance, the word “pactum” in ancient Roman law means “the agreement reached by two or more parties on their interested issue through negotiation”, which is “the form presenting consent and agreement between parties”. Domitius Ulpianus has conducted a research on the origin of the definition of “pactum”, proving that it came from “pactio (agreement)” and “pax (peace)”.5
The Primary Form and Evolution of Contracts
The development of contract theory of ancient Rome processed gradually, and it experienced four phases.6 Meanwhile, the parallel period witnessed the contract of China equipped with considerable comprehensive theory, which mirrors its similar evolution process with that of ancient Rome’s. However, as a result of lacks of adequate historical records, it is impossible to compare ancient Roman contract law in exact Anno Domini years. This book will take the four development phases of Roman contract law as references to analyze the primary forms and evolution of China’s ancient contracts.
During the developing process of Roman contract law, oral contract was the first phase, which could be divided into nexum and stipulazione. Nexum, a symbolic transfer of rights that involved a set of scales, copper weights, and a formulaic oath, which required the parties together with five witnesses, took specific measures and terminology to demonstrate the agreement of transaction by both parties. Stipulazione, as the oldest form of contract, derived from religious and oath-making ceremonies. The offer of both parties constituted convention, without which, the relations of contract or obligatio could not be formed.7 The status of contract in Common Law system is named By Word of Mouth of simple contract.8 The condition in China was quite the same. In Zhou Gong King’s time (?–900B.C.), the inscriptions on Wusi Wei tripod, and on Nine-year Wei tripod which were letters on ancient cooking vessels, they all described the process of entering into the contract During such process, when it came to the exchange or transfer of real property, forest property and valuable hand-made property, both parties would first engage in oral offer and acceptance. Take real property exchange as an example. The parties should report the relevant subject to authorities and the King, and should get approval from the King. The following exchange was supposed to be witnessed by an authoritative governor, who often took the form by asking: “do you agree to exchange the land?” and the parties were supposed to answer: “yes, we do.” Then both parties would take oath on the mentioned subject. After these steps were done, the agreement was deemed to be effective.9
Though The By Word of Mouth agreement was simple to be implemented, it was difficult to ensure the stability of transaction. Litter is (written contract) thus appeared to replace the By Word of Mouth agreement. Gaius divided ancient Roman agreements into three categories, which were obligatio credit document, handwriting instrument and written agreement.10 In order to make a comparison with this, we shall discuss about China’s condition in Western Zhou Dynasty, when the agreements were also divided into three categories as Fubie (傅别), Shuqi (书契) and Zhi Ji (质剂) that were recorded on the surfaces of bronze containers (such as Zong Yi, and Dan Tu, those containers were for religious and other significant occasions). The recording was about the entire process of how the parties entered into the agreement, and consequently could be used as evidences in law suits if any disputes arose in the future.
Among the three categories in ancient China, Fubie, according to Rites of Zhou, was “the loan contract admissible in civil litigation”. Zheng Xuanzhu further explained by quoted Zheng Zhong’s argument that: “Fubie, one of the instruments, suggests there is a binding force in such document, and this instrument will be cut into two, one for each party.” In fact, in most occasions Fubie was used in borrow and loan contract, more specifically, in the occasion of the civil behavior concerned borrowing and loan with interest. Shuqi meant the civil behaviors as obtaining, accepting and donating. Zheng Xuan pointed out that “Shuqito the obtaining, accepting and donating behaviors was as an abstract to an article.” Meanwhile, Jia Gongyan had observed that Shuqi was used in government loans without interests, and also used to adjust the relations between people’s transaction and donating behaviors. In Sun Yirang (a scholar of Qing Dynasty)’s book Textual Criticism of Rites of Zhou, it wrote, “… those offers made by documents will be written on papers or tickets, or brochure, which are all called Shuqi.” The third category was Zhi Ji, which was used for the purpose of adjusting the contractual relationships concerning trading, security, and pawn. According to Interpretation Dictionary of Chinese Characters: “Zhi, is a deposit of personal property to a creditor.” It suggested that the function of Zhi was covered but not limited to the behaviors of security and pawn. However, Zhi was somehow also related to the behavior of trading. The Rites of Zhou recorded that there was a position called Zhi Ren, whose duty was to “take in charge of city’s goods, people, cows and horses, weaponry, and the precious. For those who were involved in trading, it’s necessary to sign Zhi Ji. “Big transaction” used Zhi, “small” one used Ji.” That’s to say, Zhi Ji was divided into bigger and smaller ones. Zheng Zhuyun wrote in his book Zhi Ren (≪质人≫): “Zhi Ji is an instrument that for parties to hold. ‘Big transaction’ is the transactions concerning people, cows and horses. To call it big is because the long ticket will be applied in such cases. Conversely ‘small transaction’ is the transaction concerning weaponry, the previous, and the name of ‘small’ is because short ticket will be applied accordingly.” In his other book Xiao Zai (≪小宰≫), Zheng addressed: “longer one is called Zhi, shorter one is called Ji.” In Wang Guowei’s archeological studies on bamboo manuscripts, he explored that there were different sizes of ancient manuscripts, which were 2.4 Chi (Chinese unit of length, equals 0.3 m), 1.2 Chi, 8 Cun (Chinese unit of length, equals 13 decimeters), and 6 Cun, all these manuscripts demonstrating the use of Zhi Ji. Collection of Mr. Wang Jing’an of Hai Ning, Vol. 26, Research on Written Manuscripts. The name of Zhi Ji existed in Han Dynasty, when it entered Tang Dynasty, becoming “Fenzhi Qi (分支契)”.
Briefly speaking, “Fubie”, “Zhi Ji” and “Shuqi”, though targeted on different adjusting objectives, still shared something in common, which was that they were all carved on metal, or written on silk or bamboo manuscripts. Rites of Zhou recorded that “the larger contract and Ji are craved on bronze containers, and the ones concerned with smaller amount, are carved or written on the silk or bamboos.” According to Zheng Xuan, “larger contract and Ji are the ones with respect to county and city, which are supposed to be supervised under gods, while smaller ones are relevant to people, which are the relationships between parties.” From those arguments, it’s obvious that the contracts and agreements were divided into at least two categories, larger one and smaller one. The former is between the government and people, and the latter is between people. The scholar Sun Yirang, in his Textual Criticism of Rites of Zhou, also stated that “Zong Yi, the bronze containers with letters; Dan Tu, the silk or bamboo manuscripts with letters, are all for the purpose of establishing a credit relationship.” Tts extent, the development of China’s ancient contract law was even more delicate than that of ancient Rome’s.
The real contract is the third phase in Ancient Rome’s four evolutionary phases. Real contracts targeted the subject matter as an important condition, and were divided into loan for consuming purpose, using loan, bailment, and pledge. All of the four were considered to be the primitive forms of agreement, yet as a result of its stability, the world has using it for years. The ancient China was no exception. To leave the condition of early Western Zhou Dynasty apart, the debit and credit relationships of parties were recorded in Rites of Zhou, and they were in a clear division thus debit or borrowing (借) and credit (贷) could be distinguished from the writing forms. In A Guide to Academics of Official Personnel in Yuan Dynasty, it made an effort to tell the difference of debit or borrowing and credit: “to borrow objects to others means debit or borrowing and to ask others for objects means credit”.11 Back in Western Zhou Dynasty, debit or borrowing and credit were distinguished into two types with different norms. The first type was debit or borrowing and credit with interest. In the Section of Quanfu in the Chapter of Diguan* of Rites of Zhou, it read “the behaviors of citizens engaging in loans from government shall be supervised by the relevant administrative officers and then be approved. The interest rate shall follow the national standards.” The supervision of relevant administrative officers is called “Bian (to differentiate)”. Zheng Xuan explained that it referred to the process of determining the value of the goods, and the interest rate of national standards referred to the tax being paid to government. Furthermore, Zheng explored the interest rate standards in that period: “the loan mode means the authority lend money to citizens. If the interest is too high, the citizens will benefit little. Therefore, the interest rate should be adjusted to the different conditions. For instance, if the silk is mainly produced in some region, the tax can be paid by silk there; if the kudzu cloth is mainly produced, likewise, the tax can be paid by it.” A very resembling example was Fubie as mentioned earlier. The other type was debit or borrowing and credit without interest, which was adjusted by Shu Qi. Also in Chapter of Diguan of Rites of Zhou, it recorded a position named “Lv Shi (旅师)”, who was in charge of providing loans and administrating the loans to citizens in accordance with the policy of “providing loans in the form of material matters in barren and infertile time, collecting loans in harvest time”. The scholar Jia-Gong Yanshu in Tang Dynasty made an effort in differentiate the terms of Fubie from Shu Qi. He said, “the debit or borrowing and credit with interest is for gaining the interest, while providing loans in the form of material matters is to give loans without profits. The authority helps the people, and the people in turn can live a better life, which is beneficial to the authority.” As for other security measures, pawn, and bailment, the development of which were quite advanced in ancient China with detailed documentary. In the mid-Western Zhou Dynasty, the royal family declined and economics expanded, accordingly the mortgage concerned of real estate was a common phenomenon at that moment, then the pledge, pawn, and contract emerged and developed.
When it came to the phase of consensual contract in ancient Roman period, it suggested that the set of contract theory in ancient Rome had already developed maturely and comprehensively. The premise of consensual contract was consideration between parties. In this sense, no set formality would be realized nor would the subject matter be paid to. In Gaius’s Institutes, there are four consensual contracts involved: purchase and sale, leasing, partnership, and entrusting (emptionibus et venditionibus, locationibus conductionibus, societatibus, mandatis). From historical materials of ancient China, the origin of China’s consensual contract began in an early time. Take partnership as an example. No later than in the Western Zhou Dynasty, the partnership concerned with property has been formed. According to The Rites of Zhou, there was a position called “Sikou (司寇)”, who was in charge of managing “the partnership of properties, and the people committing illegal behaviors shall be punished by law.” So, it demonstrates that if parties had reached an agreement to form partnership, they were supposed to comply with laws. Some observed that the business partnership in China began in Spring and Autumn and Warring States Period (770 B.C.–221 B.C.). Those unearthed relics reveal the fact that China’s complete contract was found no later than Han Dynasty. The wooden manuscripts with the name of “the contract of trans-marketing” recorded the information of investment, personnel, property management, liability of partners, and punishment in detail, which is deemed to be the earliest existing systematic partnership contract.12 Additionally, the contract of purchasing things on credit was a typical type of consensual contract, which can be found in The Rites of Zhou. As in the Chapter of Diguan (the official position to administrate the financial business), the position of Quanfu was in charge of wealth administration, who would also take charge in managing selling goods to people on credit. Still, the preliminary purchase contract was thought to be one of the consensual contracts. For instance, the Luoyang peony in Song Dynasty enjoyed high reputation back then, the merchants “enter into contract in the autumn, when the next spring comes, peony blooms, the value of peony can be realized”.13 Another example will be the litchi in Fuzhou City, which “was brought by merchants by signing the contract when they were in blossom”.14 These two examples illustrate the fact that preliminary purchase contract was considerably developed before Song Dynasty in China. Other types of contracts such as leasing and entrusting were parallelly developed in ancient China, which will be analyzed later.
To conclude, it’s undeniable that the contract evolution in both ancient China and Rome were pacing with the same speed in the past. In Zhou Dynasty, the division of ancient China’s contract has also made itself distinguished.15 From the nature of contracts, the ancient contracts can be categorized into “contract of god”, “contract on containers”, “sincere contract” “civil contract”, “real estate contract”, and “contract of rewarding”; the former three were dealing the cases concerning offering sacrifices to gods and ancestors, predicating the fortune, and etiquette; while “contract of rewarding” was the contract of providing rewards, “real estate contract” was the contractual document of land and territory, “civil contract” was for adjusting the residential register and taxes.
Contracts and Obligatio
The premise of contract is recognition of parties’ rights, based on the ensuring of each one’s profits. Both parties in contract make clear about their rights and duties, and such relationship is debt. Therefore, any contract in ancient Roman contracts would logically follow three aspects: one was “agreement” as an evidence of parties’ consent; the second was “debt” as shared by parties with the mutual rights and duties; third was some specific ceremony which posed the debt on the agreement to take the binding force into effect.16
The relationship between contract and obligatio can summarize that contract is the source of obligatio while obligatio is the measure to meet the needs of contract. In early Roman laws, assenting contractual behavior and property transaction behavior bore no legal meaning independently, only when these two components combined together, would the legal meaning be exist.17 An assenting agreement without obligatio legally attached to, would be merely a “naked/hollow brief agreement”, which is impossible to be the source for litigation. Thomas Hobbes in his Leviathan states that: “the contract without sword is no more than nothing because it’s powerless to protect man’s security”, and “if the binding force is not taken into consideration, the contract would be soft and vulnerable, which cannot provide any constraint to human’s ambition, greed and other passions.”18 Hobbes also observes that “the exchange of rights is the so-called contract”, “all contracts are the exchange or transfer of rights”. Meanwhile, the binding force of contract is not the origin from its nature but the concerns of parties who obviously don’t want to bear the consequences of breaches. Hence, if one party waives or transfers his rights, he will thus be responsible for not preventing the one accepts to enjoy the said rights.19 Kant to some extent agrees with Hobbes by holding the view that contract is the free minds of parties, so no matter from the point of view of methodology or historical thinking, the measures of constructing the contract poses no influence, since all the liabilities with binding force come voluntarily.20
To think in line with legal thoughts, Saint Thomas Aquinas believes that laws are the regulations and norms for people to allow or prohibit certain behaviors. “…because lex (law) is from ligare (restriction). So accordingly the nature of law is to bind.”21 Natural Law is about the obligation, such concept has become the philosophy basis of contract spirit. The theory that obligatio is originated from consent is the theoretical fundamental of Roman law. The wishes expressed in nutus can bring obligatio into being, which supports the theory that obligatio is originated from consent.22 In Domitius Ulpianus’ book Ad Edictum,a commentary on the Edict, Chap. 11 views that the contrahere (entering into a contract) was to build a relationship of obligatio, which was just the bilateral contracts referred by Greeks, and this type of contract was often used in purchase and sale, leasing and partnership occasions; while convetio (agreement), referred to all issues agreed between parties in order to reach a consensus or settlement.23
Contract produces obligatio, and obligatio in turn releases the rights in contract, which reflect the dialectical relation of contract and obligatio. As said by Kant and Hobbes, the reason why obligatio of contract bears enforcement power, or to put in another word, bearing legal power, is the consent of both parties. So, consensus is the media of contract and obligatio. Gaius believed that neither further expressions nor written forms were required for the mentioned contract during the process dealing with the obligatio in purchase and sale, leasing and partnership issues, as long as parties concerned had reached agreement.24 It is notable that Gaius holds the view that the production of obligatio was not only about money to be paid, but about the animus of obligation for payment or accepting payment.
Based on the Roman advanced theory, contract law in occidental world thus gained its lively energy for further development. Comparatively, China’s ancient contract theory relied much on the Confucius ethical philosophy sharpened since Western Zhou Dynasty, either from philosophy perspective or institutional-building perspective. Howsoever, this point is not enough to embarrass Chinese scholars. Despite it lacked deeply-rooted and systematic contract spirit in China, it has already set an effective “consent” device from contract system and custom laws to resolve some issues as misunderstanding, coercion, and taking advantages of other’s precarious position, which will be discussed later in this book.
On the enforcement of the implementing and completing of obligatio, China’s ancient contract system employed considerable fair measures to ensure the creditor’s rights. Judicial remedies were deemed to be the last option by public who would usually feel reluctant to resort to. Stipulations of contract always specifically stated the obligation and rights in hope of avoiding risks. In the meantime, there were also some methods such as complaint to the government, and ethical restrains to ensure the objective of realizing the obligation. When mentioned about the effectiveness of the stipulations, the rights transfer clauses, guarantee clauses, and breach clauses were the three most significant types among other clauses. The appearance of mediator and guarantor also accordingly ensured the implementing of realizing the obligation.
In the year of 171, at five to seven p.m on 28th of September, Sun Cheng has bought one Ding (ancient Chinese unit, approximate to one hundred square meters) from Zhang Boshi who is a male citizen of Luo Yang City. The price of this transaction is fifteen thousands and is paid in full at the same time. The range of the land is illustrated in the contract, so are the appendages on the land. Meanwhile, there are some witnesses and notaries presenting during the transaction process. After that, the buyer and seller will buy some wine from the market to ask people to celebrate.25
In this contract, it’s obvious that ancient Chinese people made it clear about the subject matter (the land), the range of it, the price, the appendage, and they were aware of finding people to witness and notarize. The behavior of buying wine to celebrate was a publicized proclamation of land purchase. To be mentioned, the transfer clause and annexed clause were set to avoid future disputes, of which the annexed clause specifically stipulated the appendages on the land, which still seems delicate in current standard. From then on, the clauses stipulating appendages in later time of ancient contracts can be found hence, and that kind of clause gained its own name of “Pi Zao”, which were recorded in other historical books as in The Sale Contract of Land by Zhou Wengui in Song Dynasty, and Contract of Horse Using Land in Jin Dynasty. The second example that will be illustrated is about the “Guo Ge Li Ye” system in ancient China. This system actually referred to two parts: one was to transfer the taxes, and the other was that the seller delivered his property to the buyer for managing. Altogether, these two parts are consisted the necessity of title change. In Law Reports of Southern Song Dynasty, it says: according to law, the transaction of land shall transfer owner’s taxes, and the authority shall change the name to collect the taxes of land.
It’s in the very progress that the guarantee system came into historical stage. The guarantee measures in ancient China were mainly about the guarantee for rights and for default of delivery. To categorize the guarantee measures by methods, ancient China could be classified into four types: (1) security by people, who mostly acted as witness, notary, and the mediators; (2) Using physical property to guarantee, which required the debtor provide some physical property, as in pledge and pawn; (3) The debtor offered his labor force to the creditor for guarantee; (4) Security of property, as in attachment of the debtor’s property to secure the payment to the creditor. Despite the difference of these measures, they all played important role in securing the rights of creditor, and imposing pressures on debtor both financially and morally.
Another progress in ancient contract will be the application of breach clause. In Western Zhou Dynasty, when arising disputes between parties became unsolvable by themselves, the creditor and debtor would resort to local government or public community for settlement. During such procedure, the remedies would be equivalent to the debt, though there might be some punishment at the same time, the scale were controlled considerably well by the local government or public community. From a historical point of view, not later than Northern and Southern Dynasties (420–589 A.D.), there were clauses stipulating the punishment of breach in contract, as in Luo Zhenyu’s book26: “… after the signing of contract, no parties shall breach. Those who breach the contract first shall be charged of five Pi (ancient Chinese unit, equals 33 m) of thin silk.” In a word, this system was no longer making damages according to its equivalent value, but also bearing sanction functions financially. Since Tang Dynasty, this kind of breach clause has existed widely in contracts, and approved by official authorities, consequently served the purpose of securing the rights of creditor.
The Historical Premise of Contracts
The relationship between contract and obligation can be deemed as the consent of parties, which suggests that only under the condition that debt is annexed to such consensus, can ensure the exchange of liability and rights. This section will discuss the historical premise of contract from a diachronic view.
The massive residual product is thus produced by the division of labor, and such residual product has to be led into the market to trade equivalent things to sustain a family (buying and selling). Therefore, the commodity economic axis begins to operate. That’s to say, the division of labor is the premise of buying and selling. According to the idea, Emile Durkheim holds the view that the connection means in human society is based on the division, which links the needs of all walks in a society, and accordingly fails to provide the context of self-sufficient and self-contained.
The development of currency serves as equivalent things. In Chap. 33 of Paulus’Ad Edicta, emptio (purchase and sale) originates from exchange. Because there was no nummus (currency) in the past, the method of exchange would be fulfilled in practical objects, thus with neither merx (commodity), nor pretium (price).27 The major difference between contract of purchase and sale and exchange is that, the former produces the relation of debt in the exchange process under the assent of parties engaged.28 As one of equivalence, currency has promoted the development of commercialization of commodities, essentially ushering the productive factors into commercialization or materialization. Since Tang Dynasty, China has witnessed plenty of currency related managerial organizations emerging, like golden and silver store, old-style private money house, private banks, exchange agencies, and remittance and conversion center, which altogether provided the drive for financial evolution in China.
The new class of living on business thus appeared. As a matter of fact, in Spring and Autumn and Warring States Period (770 B.C.–221 B.C.), there were a lot of people who conducted business activities for a living, yet as a result of Reforms of Shang Yang**, the sprout of business class was under smother for quite a long time in Chinese history. Not until the battle of Chu and Han (206–202 B.C.), had the business class rose again, some of whom became very affluent figures in that period. After Song Dynasty, business class has developed into a considerable scale with some family capital involved. In Qing Dynasty, there was a trading house called “DaShengkui (literally referred as big, prosperity, and primary)”, which employed 6000–7000 staff at its climax period. It also owned 16,000–20,000 camels, and partial estimate capital (just in Mongolia) reached ten million Liang (a Chinese unit of weight, equals 50 g) silver.29 Professor Zhuang Guotu of Xiamen University addressed that the oversea network of Chinese business class started around Song and Yuan Dynasty, and in fifteenth century, it has already formed, arriving its peak in seventeenth to eighteenth century. The Min-nan (Southern Fujian Province) business group was especially outstanding. Even till today, according to Forbes, the Min-nan (Southern Fujian Province) business group have occupied 25% ratio among all Forbes list, if Taiwan be taken into account, the ratio to be hitting 75%.30 The “Yong (甬, referred to Ningbo City)” business group enjoy high reputation in the modern time, as they have taken six seats in top nine banking and financial families in Shanghai. Their long-lasting influence has made a huge difference in modern financial and industrial fields.
The privatization of property and individual-owned title are the crucial factors of contract. Author Linton Corbin once said: “The term ‘legal relation’ should always be used with reference to two persons, neither more nor less … but not between person and property.”31 The privatization of property and individual-owned title developed synchronically, and with greater privatization, came more attention on legal rights of individual’s property. Contract, a legal text based on exchange of personal property, reflects the relation of owning and occupying, and also pushes forward the privatization and makes it more complex and regular. In the western history, the social ranking position and property have existed symbiotically, and once someone has obtained his position, he would naturally enjoy according property. Spartan citizens called themselves homoioi (equal people), which demonstrates they had equal citizenship, and with correspond property.32 The needs and interests of individual will be valued as the true drive for civil society’s appearing and developing. The civil society defined individual to be free and with ability to own his property who should also be a man of laisser-faire with free mind to pursue his own desires, but not a man with political wisdom and morality. Britain political philosopher Michael Oakeshott believes that, the modern civil society was not civil association any more. Instead, it’s the enterprise association. Meanwhile, in her book The Human Condition, Hannah Arendit pointed out that, till the modern times, the value of human life had turned to personal profits from public life and moral responsibility. Human, at the same time, turned into economic animal from political animal.33 The revolutionary change of position to contract in the west world has led the capitalism to expand in many aspects: social, economic, and political, consequently, and it successfully became the mainstream culture that many scholars are proud of. While some family enterprise and syndicate occurred in China, which may conceal the influence of individual blaze, but there still were some important influences of individual during the long lasting feudalism. First, the privatization level was rather high. Take land as an example. Fu Zhufu believes that the private land system was built in China since Warring States Period, when the land was seen as a commodity which could be bought and sold by currency. The private land being commodity and sold freely was the natural selection of market pattern. In Tang Dynasty, the central government promulgated a policy of land equalization, which means that the government would distribute a certain amount of land according to one’s domicile registration.34 Even in this very policy, scholars still found traces to prove that there were a lot of private lands in Tang Dynasty.35 Moreover, some discovered that the purchase and sale of land had become a regular thing in Tang Dynasty despite the policy, and finally the government chose to indulge.36 Secondly, the commodity level was high. Take the main consumption of foodstuff as an example. Wu Hui listed some data: Northern Song Dynasty’s commodity foodstuff ratio was 17%, which reduced in Mid-Ming Dynasty (16%), and when it came to Qing Dynasty, the ratio increased to 17.26%, and in late Qing Dynasty, it even to 20.7%. At the same time, the non-agricultural population in China was at 20–30%.37 These numbers successfully demonstrate the base for labor in commoditization. American scholar Zhang Gang’s research shows that, the labor market has been in China since the Warring States Period, and the relation between employer and employee should be thought of a nexus of purchase and sale rather than a feudal relation. In recent years, the scholars in mainland China also proved the massive labor relations in Spring and Autumn Period.38 As the labor became a commodity, the social division of labor would grow in a more diversified way, which could lay a foundation for the perfection and development of contract. Thirdly, the rights of personal ownership and disposal bore duality character. On one hand, the rights of personal ownership and disposal were constrained by family power and public-owned institution; on the other hand, the subject of which laws protected was the third party with good faith when the transaction regarding personal or non-personal ownership of family property in the forms of sale and pawn was made, only if the transaction was legit. In 1929, He’s Family in South Sea specifically stipulated that: “without a clan conference (family administration institution), those who engage in real estate transactions shall be reprimanded to hand in back to their lands and deprived for ten years’ profits and rights of electing and being elected.”39 That’s to say, when transaction concerning family owned organizations arose, it was not common to pursue the liability of the third party who was with good faith, but to reprimand the ones who sold the family property, this was for the purpose of securing the purchase and sale behavior.
The neutral position authorities stood was the external context for the emerging of contracts. Grotius of Natural law school believes that besides selfish instinct, human traits also had social instinct, which meant people loved to socialize, and were “eager to live an organized and peaceful life. Such wish helped with the maintenance of social orders, consequently formed the sources of nations and laws.” The core idea or principle of this theory was: “(people) don’t possess other person’s property, and are supposed to give back others’ property with profits; (people shall) fulfill their promises, (shall) make compensations for our damages, and (shall) be punished in accordance with their faults.”40 Kant presented a parallel theory that the anti-social trait of human actually built the human society, and he held the view that individual’s evil made the base for the integrate good in human society, further pushed the human history forward in their mutual confronts and conflicts. It’s obvious that Kant and Grotius shared the same idea that human’s selfish instinct and social instinct are the driven power for human society. To be exact, it is because of the pursuing of selfish instinct that human turn to the social instinct to prevent inappropriate selfish instinct to construct an ideal world. And Kant’s theory however, inspired Hegel in his dialectal theory of good and evil. Hegel said: “without the desires for glory, power, and wealth, human will live a life of the shepherd in Arcadia, harmoniously, mutual-caringly, in self-gratification, and will bury their potential gifts. Supposing people’s tempers were as even as sheep’s, they would fail to realize the value higher than their farming animals’.”41
Meanwhile, the theories of Kant and Grotius can be used in the research on origin of contract. There is a very significant issue lying in here: when the people have to obey some social norms and agreements, if the governors breached of those, then there must be some riots and chaos in order to form a new government, together with new social norms and agreements. That’s to say, violent revolution is the balancing weight on the scale to maintain social norms and agreements. As for contract between citizens, what is the balancing weight then? Consciousness and morality are psychological binding force in such case, yet they are too flexible. So additionally, people do need some device or measure to be imposed to the defaulters by the government power or regional customary laws. E. Durkheim once said: “when I am implementing a contract, … I am performing the liabilities and duties of laws and customs.” “liability and duty are not invented by contract involvers, but by education. Education provides the sense of liability and responsibility for involvers in effective contract, makes clear that the breach of a contract would bring about consequences and punishment, even more damages to bear. Hence it can establish a binding force both psychologically and socially.”42 Hobbes also stated that the nature and source of justice were the abidance of effective agreement, which relied on mandatory social power to keep people to obey. Only when the mandatory social power has established, will the effective agreement be implemented, and the owner title be maintained.43
When the justice concept of adherence to the contract has been accepted to the social logic, another issue came out: how should the public power intervene in the contract? Or in other words, to what extent and in what way should the public power gain its goal? The free will of parties entering the contract should not be intruded by the national public power, nor should the free rights to enter into a contract be limited by the public power. This concept was the core principle in contract liberalism era. To put the west contract evolution in a nutshell, one cannot deny the fact that the contract’s development depended so much on the market economics and democracy political entity. More importantly, many elites have done a lot thorough analyses from the perspectives of philosophy, economics, politics, and legal, in order to explore the nature of “freedom”.44 Humanity philosophy successfully liberated the status that human was affiliated to gods, making it possible that human could be a social subject with independent character and free will.45 Adam Smith, the master of liberal economic theory, provided his opinion for supports from the point of view of how economical rules worked: “Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest in his own way, and to bring both his industry and capital into competition with those of any other man, or order of men.”46 As long as Adam Smith concerned, the tasks for government and power should be in the direction of protecting the mentioned free competition. School of classic natural law actually put more weight on person per se, with person as the core, and advocated to emancipate the minds, to embrace free minds. John Locke stressed that the ultimate goal to implement laws was not to restrain nor abolish the freedom of human, but to protect and broaden freedom; Montesquieu put the individual’s freedom as one nation’s most urgent priority.47 Famous English jurist Sir Gorge Jessel also sequenced the contract freedom in front of public order: “adults and rational people are supposed to have adequate free power to enter into contracts, as long as their contracts are made according to their free will, they shall be deemed as sacred ones, and be enforced by courts mandatorily.”48 All these statements listed above illustrate the relation between contract freedom and neutral government standing point. To be more explicit, only when one party fails to fulfill his obligation of the contract, and jeopardizes the other party or the society at large, can the public power be engaged in such practice. The objective value of law is no more than providing a legitimate measure, procedure or enforcement power, and then creates a reasonable protective system.49 The role of courts, is supposed to be independent arbitrator or adjudicator, mainly performs the duty of supervising the rules of game be obeyed rather than be involved in the game.
Compared with the freedom tendency of west legal system, Chinese ancient official administrative level was higher, especially in the ranges of real estate, slaves, and transaction of properties. Take real estate as an example. The transfer and exchange of land would be done with length formalities in many trivial details. Not only did the debtor obtain the contract, but the national administrative authority would keep a copy for reference in case they’d be examined someday. The privatized level of land skyrocketed since Warring States Period, which could be seen in the frequent purchase and sale behaviors, and those behaviors of private contracts were under the national laissez-faire policy which did not just simply ignore the transactions of lands. On the contrary, the government distinguished the private contracts of land from authority contracts by naming them “white contract (private contract)” and “red contract (official contract)”, and resorted to uniformed contract format and tax system to administrate the purchase and sale of lands. Meanwhile, a new career came into the stage, people who did this new career called “Ya ren (牙人, the two characters literally refer to tooth man)”. Later the career gained its name as “Ya hang (牙行, the two characters literally mean the tooth career)”. This career took the task of administration and tax collection, and they actually played the role of media, who not only went between the parties in the contract, but also communicated with government officials. No matter “white contract (private contract)” or the “red contract (official contract)”, there was very modest effect in preventing the prevailing of private transactions, which can be demonstrated by the fact that since Song Dynasty, the “white contract (private contract)” had been developed incredibly fast. One reason for the prevailing of private contract might be that people wanted to escape from taxes. Another reason was that the effectiveness of private contract was no less than the official contract, and it was even more appealing to common people. Plus, as in some litigation circumstances with private contract, the court also deemed it as a powerful evidence in the case, which can be seen as an example for the laissez faire practice back in that time.
The emergence and development of market provided living space for contract. Market, on one hand, played a role as the physical platform for exchanging contracts, on the other hand, served as the measure of the government to manage contract. In western European countries of medieval time, fair broke the economy of monorail system, made the contractual relations marketizational and socialized, laid the foundation for the developing of contract. Still in western European countries of medieval, there was fair officer preforming his duty at fairs with the seal of the Duke, to signet every important contract in the fair. In the case of ancient China, villages and castles have be formed in early Xia Dynasty (twenty-first century-sixteenth century, B.C.), and when it came into Western Zhou Dynasty (1045–771 B.C.), towns and cities have be separated. Afterwards, the integrate city concept in the view of historical shape has be set, which offered possibility to build a national wide and complex market.50 German economist of historical school Karl Bucher analyzed: “the change of the extension of human economic activity scope and the relation between producing and consuming is from family economy to city economy, then to the country economy.”51 One necessary factor of such evolution would be the high level of development of market. The period from Western Zhou Dynasty to Tang Dynasty is that which scholars conclude as Classic Economy time, which bears distinguished feature of the combination of market administration and city-town administration.52 As a matter of fact, the market in Western Zhou Dynasty was with highly administrational tendency. The market could be only open in set place at set times. The central government arranged special officer to be in charge of the market, namely, Sishi (司市, market officer), whose duty was to manage, administrate, and make regulation regarding market issues. There were three types of markets in that time, big market, morning market and evening market.53 Besides, the “national roads” connected every courier station in the country, and in every fifty miles,54 there was a market in order to meet the needs of people to trade things. Till Han Dynasty, the city size has been escalated onto a new level, and the market thus expanded accordingly. Take Chang’an city as an example. There were nine markets designed in the city, among which six located in the western city, three in the eastern city. Each market covered area of six miles, with extensive citizen area of one hundred and sixty miles, and all the nine markets accounted for 18.5% of the total city area.55 In the Ode to the West Capitalof Ban Gu***, it says the city of Chang’an “sets nine markets for different kinds of commodities, and they are so congested that people can hardly turn around, nor can a horse walk; it seems that people could break the city wall as a result of congestion; the dust by people’s steps mixes together with the fog, which depicts the scene as a Chinese monochrome painting.” After mid-Tang Dynasty, with the development of commodity, modern market pattern has gradually set, free handicraft industry, business class came into the historical stage, together with Ya ren, they all playing very important roles in enhancing and pushing forward the commodity exchange and contract development. Till the time of Song Dynasty, the transaction of lands became even freer than before. “Internal” of market was also dominated by a free atmosphere, which led the system declined, a system used since Han and Tang Dynasty placing the authority as its core to set price and test quality. Instead, the free market took over the charge and stimulated quite a lot national markets. In Tang Dynasty, the government gathered the same industry in one place, called Hang (行). This tradition reached its peak in Song Dynasty, and in Ming and Qing Dynasty, the production element markets in China have all developed well, including real estates, financial, financial instrument, and labor market. Thus the market systematically functioned in very positive orders. Take Jiang Nan silk industry as an example. It formed a full system of producing, providing and selling, meanwhile, and the contract relations were gradually complete, such as the relations of deputizing, hiring, loaning, and contracting to finish certain project, which could all find their correspondent regulation and customs, and further be written down into related contracts.56
Good faith. Traditional Chinese moral standards emphasized much on good faith, while in Uniform Commercial Code of US today, it states that “good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing.” In Japan, there are also plenty of detailed and rational comments on this matter. Yoishimi Sinkei, HoshiNo Eilchi have made some valuable comments, and KanNo KouTakeshi further cut four categories of the functions of good faith: the function to specialize the laws; to balance the equity of laws (to make it possible that law enforcement would secure ethical norms); the function of modifying the laws; and the function of making new laws (to amend the loopholes in existing laws in accordance with time, and to solve new problems rising in contract relations). There were provisions of good faith in ancient Chinese official documents. Moreover, the good faith as a doctrine had been applied very comprehensively in transaction customs. In Spring and Autumn and Warring States Period (770 B.C.–221 B.C.), the vendors in Lu country fed sheep and goats in the morning, fed the cocks and hens in the evening in order to make the animals heavier when they were sold at the market. Some vendors encouraged people to buy their goods by exaggeratedly bragging. It’s said that when Master Confucius went to Lu country to take the position as Sikou, he made great effort to prevent such maleficence. Confucius ethical moral code has influenced Chinese commercial and contract a lot, which will be discussed in later chapters.
Against extravagance and amassing. Traditional Confucius ethic advocated the attitude against extravagance and amassing, to avoid the result of losing oneself. This attitude, as a national trend, could accumulate national property by not spending lavishly, which was correspondent to the concept in Protestantism, yet the anti-amassing concept actually yielded negative result in accumulating. There was an idea prevailing in Chinese commercial culture, which was, once something was gathered, it should be distributed in a certain way, or the owner would be followed by some curse. The variant for this idea in the traditional philosophy of “using treasure to fix jinx” actually urged people to make the commitment in charity and help the more vulnerable. These two aspects impacted traditional Chinese contract ethics, which showed more demands in filial duties and doing favors to others. Max Webber once said that Chinese local religions’ encouragement was an ethical moral for common people.58 Though this argument seemed a little extreme, it, however, suggested the distinguished feature of traditional Chinese culture. The filial duty and the wish and burden to offer favor to others indeed weigh more in Chinese culture, even when compared with interest and profit. In the year of 1686, there was a person named Zhang Deyu, who built a house in Huizhou City and then left his hometown. Twenty years later, he came back to his old house, and not until the clan entered a Filial Duty Contract with him, could he be admitted into his own house.59
To sum up, the task of comparison between China and west contract theories is completed briefly in the five aspects which cover commodity economics, privatization level, and neutral position of authorities, market system and commercial ethics. The ancient China’s contract came into being in the grounds of the blend of civil exchange, official administration, Confucius ethic, and the market economics as well.
Functions of Contracts
A. L. Corbin once put: “The term ‘legal relation’ should always be used with reference to two persons, neither more nor less … but not between person and property.”60 This assertion tells people that all exchange nature is not about the material or thing, but about the owner’s rights. Further, the material or thing is just the tool of exchange, but the core still lies in the exchange of rights. To this extent, Hobbes believes that “the exchange of rights is the so-called contract” and “all contracts are about the exchange and transfer of rights”.61 The nature of the origin of contract is to transfer the right to different owner by a “promise”, according to which, the one who transfers is supposed to obtain interest or profit. On the surface, it seems that the original contract relations incline more to the exchange between physical subjects, but to explore deeper, it’s not that difficult to find the fact that the existence of exchange between physical subjects is due to the implied or expressed “promise”, which is the core of a contract. When the exchange between physical subjects began to fade in history, the relations bonded by “promise” finally caught its attention. People stopped solely exchanging subjects but to conduct transaction activities in order to gain what they wanted. This kind of promise not only limited in vows and oath, but evolved to a set of systematic symbols, which was the contract.62 In both China and west contract law histories, when taking the theory and system of contract into account, it’s important to realize that it is this very set of symbols which enable us to discuss further and more sensible about the functions of contract.
To establish a bond between different people and to create credit for people. M. E. Opler observes that, an implied or expressed basic hypothesis or value orientation usually controlled or stimulated human activities. His cultural themes theory paralleled the theory of philosopher’s value theory, anthropologist’s premise theory, Parsons’basic value attitude theory, and Linton’s ideal mood theory, finally completing the evolution from a theory to a norm adjusting human behaviors.63 The foundation for contract is based on similar theories, A believes B can fulfill his liability, thus A finishes his duty first and vice versa, which is the premise and value for entering a contract, and hence the most significant function aims at the establishment of the bond between A and B, to transfer the rights. In ancient China, the earliest way to establish a bond was to knot as a symbol for mutual consensus, then it developed into the form of written agreement and contract. Likewise, other cultures in this planet have also experienced similar evolution. As in historical record, the tribe of Yao did not have written letters in their culture, but they still figured out an own system for contracting, which was made “with the message of contrast carved on two blocks of woods and each party possessing one wood”.64 In The Travels of Marco Polo, it records that in Yunnan province, the parties of contract would carve information on a wooden stick, which would be cut into two for each party. Once the debtor had paid off, he could get back the half from the creditor, to complete the contract.65 The book in Qing Dynasty called Zi Bu Yu tells a story in Hainan province: just like in Yunnan province, the people in Hainan province also cut their contract into two pieces when concerning real estate transaction. Once the land was going to be re-sold, the new buyer would check both pieces to investigate the title of the ownership.66 Back to the position of Sishi (market officer), one of their duties was to supervise the purchase and sale conducted under the formality of contracting, in hope of reducing disputes and litigation. Actually, it would be ready to go on with the references here to demonstrate the first function also the premise of contract, which is to establish a bond between different people and to create credit for people. Yet there is still something notable that is worth to point out. The contract customs in Roman Law in fact appeared in the same time as Han Dynasty contract. According to Hugh T. Scogin Jr., an American scholar, the Roman contract rite was unilateral. To be more clearly, it was one side’s absolute power and the other side was supposed to accept the former’s offer; while Han Dynasty contract rite was entered and bond by moral relations, which demanded people to fulfill the liability as a result of morality. In such circumstance, the individual behavior was confined by social moral norms and rites.67 To fulfill the duty in a contract was not only an economical or legal behavior, but was also the level for someone concerning morality, which could be thought as a social ethic as well as a business ethic. In Huai Nanzi, a collection book of philosophy in Han Dynasty, it concludes the importance of morality, and advocates people to realize their promises. This long-haul pursue for morality and ethic in China has cultivated a deeply-rooted national thoughts in Chinese people, asking them to be Xin (faithful, keeping their promises) and Yi (giving the sincere honor to others), both of which were conveyed in contract.
To serve as a voucher and proof for rights and liability. Contracts, are not solely a proof to demand another party to fulfill his duty, more often, it is a proof for both parties of their rights and liability. The contract per se, normally was about real rights. In Zhou Dynasty, one of the necessary approaches to transfer the real property was to enter a contract with mutual consent clauses, and to carve the contract bronze container. Those symbols in fact replaced the real property. However, in the long time for Zhou Dynasty to Republic of China (since 1911), the focus has been on Usufruct rights rather than the ownership, which was further stated by a Japanese scholar, Hiroaki Tarada who specifically pointed out that “In China, it’s impossible to find even one existence of factual title or ownership of real property, there is just a system on paper in the form of contract to secure the purchase and sale of real property”. It would make more sense to see the subject as a “right of management” than the subject itself, for the transferring and possessing of real property has been always for the purpose of profits by managing. Plus, the system of owning land failed to establish itself as a national system.68 As a matter of fact, the real property right in ancient China was not quite true with Hiroaki Tarada’s observation. Howsoever, judging from economic and contractual historical documents, Tarada is right in saying that China paid more attention on the factual title or ownership of land and houses, which had laid the foundation for any other type of rights. Consequently, there are two questions stimulated by Tarada’s observation: one is that, why the contract, as the certification for real property, has captured so much attention in ancient China, while the factual title or ownership of land and houses were somehow ignored? Take Song Dynasty as an example. In Law Reports of Southern Song Dynasty, the quotation concerning legal provisions and customs all indicated great attention on law. In the Reports, there was a case regarding to the financial dispute between Zeng’s brothers. The relating documents said: “the law provides the behaviors of pawning real estate property shall be with contract, each party shall have one copy of aforesaid contract, and this shall be known by all as a common sense … now there is a case that one man pawns his clothes and loses his receipt under which he cannot redeem his clothes. You cannot do with clothes, let alone real estate property!” The second case in the Reports was regarding to Mo Ruhong’s suit upon property dispute, on which the magistrate wrote as followed: “the lawsuit will be decided on the basis of contract once a dispute arising.” The third case is the dispute between Yang and Huang on real property in which the county judge made the ruling by saying that “where a dispute arising on real property, contract is the sole evidence”. And the forth case is the judgment of Hu Shibi (or, Hu Shiying): “generally speaking, when a judge is considering a real property case, he will resort to contract to rule his findings of evidence and he will take legal provisions into consideration.”69 The other question stimulated by Tarada’s observation is that, since ancient China attaching so much attention on contracts, did they showed equal attitude on actual possession? That’s to say, did possession bear the force of real rights alternation? According to the current historical materials, as a symbol of real rights alternation, possession did have legal effect and force to some extent. Once the contract had come into force, the seller should hand out his property, and the buyer should take it in. This could be seen as the first step for contract of its effect which was based on the procedure of property transfer. Pursuant to the law in Song Dynasty: “…without a cl1ear stipulation in contract, or the possession time reaches twenty years, or the decease of the debtor, a lawsuit concerning real property shall not be filed.”70 Thus the possessor could enjoy the possession if there was no clear stipulation in real property contract, or under the circumstances that the possession over twenty years’ limitation, or the decease of the debtor. In this case, the assumption in law was made according to the possession time of twenty years to ascertain the title and ownership of the real property. As for the possession without any contract, because the lack of proof in current condition, it’s very hard to draw any conclusion.
To prohibit fraud and reduce disputes. In customs of common public, the contract was put on great emphasis to realize their rights. Among the authorities in ancient China, the emphasis was the same because the contract itself could prohibit fraud and reduce disputes, and moreover, it could maintain good transaction order and social harmony. No doubt the contract served as a tool for the authorities to regulate civil behaviors corresponding to customs and laws. When a dispute arose, the trial should be conducted on the basis of contract and to charge since the dispute day. According to Rites of Zhou: “the Fubie can be used in civil litigation for determining the liability”, “the Shuqican be used as the proof of selling and buying at trial”, “the Zhi Jican be used for the purpose of adjusting the contractual relationships concerning trading, security, and pawn”, and “the parties concerning property disputes” should provide the Fuor Yue Jias evidences so that “the decision shall be made according to evidences”.71 There was no specialized bureau in Zhou Dynasty of ancient China to administrate the contracts, so “(there were six positions) to collect all the copies of the contract parallels today’s notary system. If any changes happened in contracts, the officers in the previous six positions shall alternate accordingly.”72 Jia Yanshu in Tang Dynasty observed: “those six positions were so busy to fulfill their duties of collecting contracts, then they formed a rule to make a copy to Dali (the highest rank among the six positions) for references.” In the research of Kong Qingming, a jurist on jurisprudence and history of law, it records that “the contract in Zhou Dynasty was divided into left and right parts, of which the right part was the main one held by the parties concerned for the proof of rights of debt and property, while the left part was the counterpart stored in the government branches for the proof of justice.”73 The Rites of Zhou also made a recording: the two parts of a contract were designed to guarantee the rights of parties, who were supposed to pay for the fees in advance, and after three days the trial would be conducted; both of the parties should appear in the court to prevent the injustice, the trial should begin after they paid all fees. Zheng Xuan made a further explanation: the lawsuit concerning property should ensure the rights of both parties to present at court to give their own grounds, and each party’s payment could serve as deposits (Shushi). Under such circumstance, the absence in court or in deposit should be deemed as a lack of justifiable reasons. From the above, the way of charging fees can be easily seen that only after the payment was done, the trial would begin. However, the charge of fees was not to raise the burden of the parties, but to regulate the mechanism of lawsuit in order to prevent the lawsuit among citizens, and promote a spirit of realizing the contract provisions. Plus, in the Rites of Zhou, the party who was not in his good faith would be punished in Mo sentence****; if the circumstances are serious, the punishment could introduce the death penalty after ascertaining the documents collected by the six positions. It’s safe to say that all those devices and punishment concerning contract disputes were based on the contract itself, and this mechanism didn’t find its way out of the historical stage from Zhou Dynasty to Republic of China.
Synchronically, the functions of contract focused on the enforcing aspect which demonstrated that when two parties enter into a contract, they are supposed to obey the stipulations they made and not to breach them. Diachronically, the functions of contract are mainly embodied in the way that the authorities regulated the parties to abide by the law and customs in methods of punishment, correction and encouragement so as to maintain a stable transaction order of the national market.
Types and Forms of Contracts
Compared with the well-developed contract theory in the western countries, the ancient Chinese obviously paid more attention on the pragmatic aspect such as construction of contract’s system and the forms. To be pointed out, they highlighted the contract’s system of national statute law and civil customs, which was designed for balancing the economic and social function of the country in an impartial and just measure. As a matter of fact, the just and impartial spirit lied beneath the emphasis of the system in ancient China, yet regrettably it failed to draw the comprehensive notice among the academics.
Bilateral and Unilateral Contracts
In this type, the focus was on the fact that whether the parties placed the consideration as a premise for their rights and liabilities. If the both parties enjoyed their rights and bore the burden of liabilities, it would be a bilateral contract. Conversely, if one party only enjoyed the rights without liability, it would be called a unilateral contract. The bilateral contract in ancient China was more common than unilateral contract. The bilateral contract in ancient China would demand both parties to sign the contract in order to confirm their liabilities. Plus, the both parties would hold one copy of the contract for future purpose. In southern part of China, Hainan Province, the Li’s adhered to a local custom to carve the bamboo when concerning the transaction of real estate, which meant that the contract of transaction would be carved on the bamboo slip, and the buyer and seller would hold a piece of the bamboo. For example, the real property contract in the year of 180874 (13th year of Jiaqing Emperor) stimulated the time, names of parties, location, specific considerations in the contract, and in the end of which, it clarified that in order to make a proof, such contract was carved and divided into three pieces, for both parties and the mediator to hold. This kind of contract was a little different from those used in other parts of ancient China, yet with even higher credit.
Consensual Contracts and Real Contracts
Both China and the western world’s contractual evolution share a resemblance, which is that they all place the delivery of the subject matter as an important condition because the behavior of delivery and payment can be used as proof of consensus. Conventionally, common people believed in the principle as “cash on delivery”, which demonstrated that the both parties put the other side’s delivery as the premise of the transaction. This could parallel the real contract, a initial form of contract still used in many summary procedures in transactions. However, there were some inconveniences in real contract, and to clean up those inconvenient obstacles, the consensual contract would come into use. Scholars found that in Law of Twelve Tables (451 B.C.–450 B.C.), the theory of consensual contract has already been founded and differed from real contract.76 In China, consensual contract could find its solid cultural basis and comprehensive conventional room. The principle as “cash on delivery” and the practice of bartering had being used for quite a long time in history. As for the transaction of real estate, the deed was deemed as the proof of a real property, and its function was served as an important part in payment: the seller received the payment and then he would hand out the deed, which became the premise of a real property contract. Zhejiang Province published a governmental document in the year of 1773 (Qianlong 38th year), in which the authority permitted the customs among common people: “the (financial) practice among civilians are based on the deed, in which it will stipulate and record the amount of money, and that will be the same as used in cash. In practice, people all obey the rule that exchange the deeds and the money, then enter into contract … thus, deed means the ownership of a land—no deed, no land.”77 Also, in the pawning system in ancient China, the person himself could be a subject matter in a contract for amount of money, and only the person paid off the debt, he could be free again. In such contracts, the premise remained the procedure of delivery, which meant that, the subject matter—the person, should go to the creditor’s house first, then the creditor would pay. The Kuimao Contract of Wu Qingshun unearthed in Dunhuang records that “the three brothers of Wu Qingshun were in deep debt, and now Qingshun will be sold to the family of Suoseng in Longxing Temple. In return, Qingshun will be paid some wheat, jute, and maize. Once the payment is accepted, the person will work without any salary, and he will work under any order of the creditor till the day he pays off the debt.”78 This example shows that the practice of pawn of people is the same as other subjects, which all concentrate on the delivery of the subject matter on the occasion of purchase and sale. Plus, it demonstrates the real contract plays an energetic role in people’s daily life in the history of ancient China. As a matter of fact, to pawn a person for debt was so common that even during the time of Republic of China (since 1912), it was still used in the nation around Zhejiang and Jiangsu Provinces.
It’s very difficult to determine the exact original time of consensual contract in ancient China, but the scholars all agree that the time would be no later than Song Dynasty, when the consensual contract in China was well developed and gained the approval of the authorities. The typical consensual contracts in that time were purchase-in-advance contract, and purchase on credit contract. In Song Dynasty, Pengzhou city in Sichuan Province abounded in teas, which attracted the tea dealers to conduct business there, where the most popular way of purchase was to pay in advance. According to historical research: “the production of tea from farmers raised from hundreds to tens of thousands Jin (unit of weight, equals to a half kilo). The buyers will pay in advance before the tea is made according to its previous output. In the next spring, the buyers will prepare for money and food to hire workers to pick off the teas. Then the buyers will sort the teas in different categories by the quality, so that the tea can be sold. In this way, the tea merchants can depend on themselves in this industry, some of whom will make it as a family business to keep on.”79 This kind of purchase-in-advance gradually became the reservation system, which meant that the merchant would deposit the down payment to the tea farmers to set certain restrain. Another example was Fujian Province, where the Jianyang paper was very famous. The Jianyang paper was usually sold to Jiangsu buyers, who “pays the front money for reservation and forbids the producer to sell to other people.”80
Onerous Contracts and Gratuitous Contracts
To distinguish onerous contract and gratuitous contract is to exam whether a contract will gain a profit or not. In the evolution of contract history, onerous contract has occupied a prominent role during the whole process. The essence of a contract is to establish mutual benefits or exchange mutual rights. And in this sense, a contract without considering benefits has been in a very limited portion. In ancient China, the gratuitous contract usually took the form of unilateral contract, while other contracts such as in purchase and sold, loan, pawn, and lease, all involved with benefits and profits. Taking debita and credit relations as an example, within which, to borrow money would cause no extra interest, while to loan would result in interest. In Tang Dynasty, the laws did not attempt to protect the debts with interest, which demonstrated the fact that the debtors could only resort to their private methods for remedies. In the provision of Tang Dynasty: “to borrow and loan money to other people, despite the presence of any contract, the authority shall treat those contracts as personal behaviors, and shall not accept any case based on those evidences”.83 So, in Tang Dynasty, the debita and credit relations were considered as a private behavior without any legal protection. As long as the interest was within a reasonable level, the authorities would leave the parties to resolve disputes on their own. In the year of 867 (Xiantong Year of Yi Emperor of Tang Dynasty), the government provided that “to charge compound interest is prohibited”.84 In pawn industry, the doctrine was to provide money to those who need it and was able to pawn something equally worthy, which in fact played the role of adjusting financial market, and a method for traditional poor class of getting through financial shortage. Thus, the pawn began its formative stage in Southern & Northern Dynasty (around the year 220–589, A.D.), and today it still thrives as it used to be. In Qing Dynasty, the sixth year of Tiancong (天聪, 1632 A.D.), the emperor Abahai, (AKA Huang Taiji, 皇太极) prohibited the pawn in his regime. Under such circumstance, a high ranking minster, Hu Gongming dedicated to the emperor, saying: “The poor often need to go the pawnshop to resolve cash-flow problems. Now if Your Majesty decide to put restriction on operating pawnshops, the poor will be out of options, and in a possible scenario, they may begin to steal necessary things to live on … In my opinion, we should keep the pawnshops running so long as the shop owner will not conduct anything unethical and set the interest too high … In this way, the poor people can have an option when they are really short of cash, and further to stabilize the society in the most convenient way.” There were a lot of social celebrities who held the same opinion as this minister, one of whom was Gao Shijun, who was a literature scholar in authority bureau, and said: the pawn industry “helps the rich and the poor in the same time, enables them exchange the goods and cash”. To both the people and the government, it was a “win–win situation”, so all the government needed to consider was how to regulate the formalities and decrees to administrate the market.85 There was a system called “Xiao Ya ( literally speaking, the two words themselves mean that ‘pawn for a short time’)” whose rule was that the pawn would take a period of three months; the cash paid by the pawnshop would be 90% of the total pawn value, and the monthly interest would be at 30% of the total pawn value. Such system in that time was a very heavy load for the poor.86 Thus, in the war time of Qing Dynasty, the officials of the central government advocated to “open pawnshop to help the poor in need”, and they did arrange state financial resources to open pawnshop to fight against the pawnshops adopting the system of “Xiao Ya (literally speaking, the two words themselves mean that ‘pawn for a short time’)”.87
Format Contracts and Informal Contracts
In format contract, the word “format” refers to the fact that the formative form or procedure to perform is its condition. The traditional Chinese society has been adopting format contract as major form, while informal contract as supplementary form. Professor Kong Qingming has observed the civil relations in the Rites of Zhou, and then concluded that the exchange of real property has already used the form of civil legal procedure by contracts.90 To be specific, when two parties entered into a contract to exchange of a land, it did not end after the signing. Instead, the parties should put on file to the government, who would conduct an investigation of the land to determine the range, and then carve the detailed information on the Dan Tu (a bronze container). Furtherly, the government would make a record in specific division. Meanwhile, there was another necessary procedure, say, a fine treatment of dinner to the guests to publicize the transaction. About the treatment of dinner, Professor Kong Qingming sees it as a “tradition of Chinese people, as they can always feel sincerely happy when someone obtained a piece of land”.91 To throw a dinner has been always a tradition in China concerning of contracts, and the core meaning is just like today’s notion of “acknowledgment and publicity” in Property Law. It’s very easy to find out the expressions of treatment dinner and banquet in the contracts of Han Dynasty, which coincided with the meaning in the Rites of Zhou. In Song Dynasty, the formalities of contracts had been simplified a lot, yet to put on a file to the government authority was still one of the necessities to follow. Moreover, in order to obtain the approval and notary of the government authority, it required some set formalities. Taking agricultural land purchase and sold contract as an example. A valid contract should bear the following formats: (1) The object in the purchase and sold contract shall be in accordance with legal provisions, which means that, the name of parties in the contract, the range of agricultural land, the quality of the land, the location, the margins, the origin, the reason for purchase and sold, the security measure to guarantee the transaction, and the breach clause are all need to be covered in the contract. In the provision of Song Dynasty: “if any person is trading land without a contract stimulating the range, four margins, neighbor guarantor, and written agreement, he or she will break the law and the land concerned will be confiscated.” In the tenth year of Shaoxing (1140 A.D.), the provisions went even stricter: “where the real property contract is entered into without appropriate format, nor the guarantor with signature, its validity will lose and the involving parties shall be pursued corresponding legal duty.”92 (2) Again, the provision further put some rules that after three days of the establishment of the contract, “the government will summon a conference participating by the parties, guarantors, neighbors, and drafter of contract.” (3) When the previous procedures have done, the government authority will then complete the registration format and confer the proof of payment to the party. (4) When all the formalities have been confirmed, the government authority will seal on the contract endowing its legal effective force, and all the procedures now are finished. So, from these four procedures, we today can drive a conclusion that in the Tang and Song Dynasty, the governmental registration system has been developed into a full shape.
From the viewpoint of daily practice, the types and forms of contracts can be divided into contracts of exchanging, trading, purchase and sold, lease, loaning, pawning, contracting, employing, partnership, and identity confirmation (such as to confirm the inheritor in a will, marriage certificate, a man married to a woman and became a member of her clan*****, concubine issues). This division is in the scope of contract system and theory, which is mentioned in several related books. This book will not choose it as the main focus.
As for the forms of contracts, the “Pan Shu (a judgment witnessing the processing of entering a contract)” and “Bie (a contractual instrument, meaning to cut the contract into two, each party would get one with equal effect)” were the earliest forms of contracts in ancient China since Zhou Dynasty (1045–771 B.C.). And from Jin Dynasty, contracts and attached tax certificate have been integrated into one, named “Wen Quan (文券)”. When it came to Tang Dynasty, contracts and attached tax certificate separated again, and they were given a name of “Shi Quan (市券)”. Then in Song Dynasty, the tax certificate was designed to glue to the contract, and this format has been adhered till Republic of China (1912–1949 A.D.)
In addition, there was a form of contracts called “Xia Shoushu (literally speaking, the words meaning a document with hand prints on)”, which was a device that with the contract carved on two woods with the same contents the parties concerned and the guarantors would press their hand/finger prints on each wood. Then it evolved into “Hua Zhiqi (a contract with fingerprints on)” in Tang Dynasty, which we will go further in this chapter.
According to the original and duplicate copies, the contracts can be divided into lateral and unilateral contracts, the former usually bears both the original and duplicate copies, and the latter usually applies in the selling situation for the buyer to prove the transaction,93 which is detailed in Professor Zhuang Chuanxi’s Research on Qin and Han Dynasty that can be used as references.
Hu and Song .
Ulpianus, Ad Edictum, a commentary on the Edict, in Ding Mei translated version of Sandro Schipani, Obligatio, Obligatio in Agreement, 1992, pp. 72, 74; origination version D.Z. 14, 1.2, D.50, 12, 3, Pr.
Ulpianus, Ad Edictum, A commentary on the Edict, in Ding Mei translated version of Sandro Schipani, Obligatio, Obligatio in Agreement, 1992, D188.8.131.52, and D184.108.40.206.
Kong and Hu .
*Translator’s annotation: Quanfu: a division of wealth reserves; Diguan: the official position to administrate the financial business.
Cultural Relics, Vol. 6 of 1974, graphic demonstration 2.
On Peonies of Luoyang (Ancient Chinese lyric).
Cai Xiang, Charting of Litchi.
See Footnote 7, pp. 57–58.
George and Liu .
Thomas , pp. 99,100, 102.
See Footnote 19, pp. 487–488.
See Footnote 7, pp. 6, 7, D.220.127.116.11, and D.18.104.22.168-10.
ibid, pp. 8, 9, D.50.16.19, and D.2.14.13.
ibid, p. 12, D.47.2Pr, and D.22.214.171.124.
Luo Zhenyu, Historical Events in Artemisia ≪ 蒿里遗珍 ≫ , Original text: 建宁四年(171年)九月戊午朔廿八日乙酉, 左骏厩官大奴孙成从洛阳男子张伯始买所名有广德亭部冢百田一町, 贾钱万五千, 钱即日毕。田东比张长卿, 南比许仲异, 西尽大道, 北比张伯始。根生土著毛物, 皆属孙成。… 田东西南北以大石为界。时旁人樊永、张义、孙龙、异姓、樊元祖皆知券约, 沽酒各半.
Luo Zhenyu, Analysis on Real Estate Instrument.
See Footnote 7, p. 61, D.126.96.36.199.
See Footnote 7, p. 59, D.18.1.1Pr.
**Translator’s annotation: began in 356 B.C., Shang Yang made a series of reforms targeting from the title of land, the rewarding of war-time credit, the new political system in his time, to the most influential topic—the restrain of commercial and encouragement of agriculture, in order to maintain the governance of the authority.
He’s Family Regulations of Hexi County, Southern Sea, 1929.
Thomas , pp. 108–109.
See Furson .
Address on Traditional Market and Market Economy, China Economy History Research, 1994, Vol. 4.
Rites of Zhou, Di Guan, Judiciary II, Sishi.
ibid, Yi Ren.
***Translator’s annotation: 32–92 B.C., a well-known Chinese historian in Han Dynasty.
See Footnote 32.
Thomas , pp. 100–102.
Thomas , p. 13, see Footnote 2.
Zhou Qufei, Ling Wai Culture, Vol. 10, Wooden Contract.
The Travels of Marco Polo, Vol. 2, Jinzhou County.
Yuan Mei, Zi Bu Yu, Vols. 1–2, Bamboo Slip.
Law Reports of Southern Song Dynasty, Southwest Institution of Political Science and Law published, 1985, pp.79, 81, 102, 116.
ibid, p. 50.
Rites of Zhou, Shishi, Zhaoshi.
Rites of Zhou, Dali, original text: 凡邦国都鄙及万民之有约剂者藏焉,以贰六官,六官之所登.
Kong and Hu .
****Translator’s annotation: Mo means ink, this punishment was to tattoo the criminal’s face or forehead.
Files of Dunhuang (1st Edition).1961. Zhonghua Book Company, p. 376.
The Regulations of Administrating Zhejiang, vol. 1, quoted in Yang Guozhen’s The Report on the Contracts and Deeds in Ming and Qing Dynasty, People’s Press. 1988.
The Research Report on Civil Customs, 2000, edited by the former Judicial Department of Nanjing Government of the Republic of China, proof read by Hu Xusheng, Xia Xinhua, Li Jiaofa, China University of Political Science and Law Press, p. 383.
Jing De Collection, Vol. 1, Purchase and Transaction of Tea.
Guo Bocang, Records of Fujian Province, Vol. 1.
Gauis, Edicts of Magistrates, part X, D.18.1.35Pr.
Provisions in Tang Dynasty, quoted in The Criminal Theory Collection of Song Dynasty, Vol. 26.
Legal Provisions in Tang Dynasty: Government Administration, Vol. 6.
Luo Zhenyu, Dedicating form Ministers in Tiancong Year, p. 7.
ibid, pp. 443–445.
Collection of Industrial and Commercial History of Suzhou in Ming and Qing Dynasty, Jiangsu People’s Press, 1981, p. 327.
Kong and Hu .
Brief Historical Collection in Song Dynasty, Vol. 61, pp. 65–66.
ibid, p. 26.
*****Translator’s notes: a man married to a woman and became a member of her clan, it may sound normal nowadays, yet in ancient China, and most scenarios were opposite: a woman married to a man and became a member of his clan. So when a man became a clan member of his wife, it meant that he would be no longer a member of his own family, in Chinese, the phrase is called “Ru Zhui”.
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