Service address clauses prevent future difficulties

In contract negotiations, notice clauses get little regard compared to other contract terms – e.g., price, liability for breach of contract and other such terms – to the point that most contracts do not even contain such notice clauses. However, when a dispute arises, the difficulty of effecting service is often the first difficulty that a creditor faces. When the other party goes into evasion mode, or absconds, the path for the creditor to assert his rights and toll the limitation of action becomes arduous and expensive. Even if he or she institutes legal action or arbitration proceedings, the entire process will likewise be prolonged due to such issues as “this person not found”, “unable to effect service”, etc. If the parties can specify the service address for collection letters and process documents in the notice clause, then numerous difficulties in effecting service can easily be resolved.

TOLLING LIMITATION OF ACTIONS

The fourth paragraph of article 10 of the Provisions on Several Issues Concerning the Application of the System of Limitation of Actions in the Trial of Civil Cases, issued by the Supreme People’s Court (SPC) specifies that where the whereabouts of the debtor are unknown, the only way open to the creditor to toll the limitation of actions is to assert his claim through publication of a collection announcement in influential national media, or influential provincial-level media, of the place where the debtor’s domicile is located.

Pursuant to the provisions, for a creditor to toll the limitation of actions when the whereabouts of the debtor is unknown, the creditor must complete the following two statutory steps in order: (1) demonstrate that the whereabouts of the debtor are unknown, e.g., with a mailed collection letter returned due to the person or address being untraceable; and (2) publication of a collection announcement in the statutory publication or media.

Efar Zhou is an associate at Martin Hu & Partners