Revisiting the boilerplate withholding tax clause via 1962 (and beyond)

In almost every contract there will be (or should be) a clause that says something like ‘payments shall be made free of withholding tax except as required by law.’ The need for this clause might not be immediately obvious: after all if withholding is required by law then of course the payer is going to withhold. However there is more to it than that: the clause is not just about giving permission to withhold it is about economic risk allocation. In a scenario where this boilerplate clause has been forgotten and a payment is subject to withholding tax what happens? The payment is made subject to withholding tax but who bears the burden of that withholding tax? Interestingly ...