Court Orders Repayment of CNY 350,000 Loan with Interest
In this case, a dispute over a private loan of CNY 350,000 led to a court judgment ordering the borrowers and guarantors to repay the principal plus monthly interest at 2.5 percent. The court also required the defendants to cover the plaintiff’s legal costs of CNY 16,000. The judgment was entered after the defendants failed to appear at the hearing.
The plaintiff, Mr. Wu, claimed that on 25 August 2011, three borrowers — Mr. Liang, Mr. Zhang, and Zhejiang XX Machinery Co., Ltd. — received a cash loan of CNY 350,000 from him. The parties agreed on interest at 2.5 percent per month. Three additional parties — Mr. Yu, Mr. He, and the Eastern China City Village Committee — acted as guarantors for the debt. The loan agreement also stated that any costs incurred in enforcing the debt, including litigation expenses, would be borne by the borrowers and the guarantors. After the borrowers failed to repay and the guarantors did not fulfill their obligations, Mr. Wu filed a lawsuit seeking repayment of principal and interest, as well as enforcement costs.
The court held a public hearing on 12 March 2012. Mr. Wu appeared through his authorized representative, Mr. Liang. None of the six defendants attended the hearing, despite having been properly served with summons. The plaintiff presented three pieces of evidence: a promissory note dated 25 August 2011, a receipt signed by borrower Mr. Liang acknowledging receipt of the cash, and an invoice for CNY 16,000 representing the costs Mr. Wu incurred to enforce the debt. The court found the evidence to be legally sourced, truthful, and admissible, and therefore accepted it as proof of the facts alleged.
The court found that the loan agreement between Mr. Wu and the three borrowers constituted a lawful private lending arrangement. Because its terms did not violate any prohibitive laws or regulations, the agreement was valid and enforceable. The court further held that the guarantors had agreed to secure the debt, but the parties had not specified the type of guarantee. Under applicable law, when no guarantee type is stipulated, the guarantor is deemed to assume joint and several liability. Consequently, the court ruled that the borrowers must repay the principal with interest from the borrowing date until full payment, and that the guarantors must bear joint and several liability for both the debt and the enforcement costs.
According to relevant law, specifically Article 8, Article 206, and Article 211 of the Contract Law, a valid loan agreement creates a binding obligation to repay principal and pay agreed interest, provided the interest rate does not exceed the statutory cap. The court noted that the 2.5 percent monthly interest rate (30 percent annual) was within the permissible range for private lending at that time. Under Article 19 and Article 21 of the Guarantee Law, a guarantor without a specified guarantee type is jointly and severally liable. The court also relied on the Civil Procedure Law to proceed with a default judgment because the defendants, although lawfully summoned, failed to appear without just cause.
The judgment ordered the borrowers — Mr. Liang, Mr. Zhang, and Zhejiang XX Machinery Co., Ltd. — to repay the principal of CNY 350,000 plus interest at 2.5 percent per month from 25 August 2011 until the date of actual payment. They were also ordered to pay Mr. Wu’s enforcement costs of CNY 16,000. The guarantors — Mr. Yu, Mr. He, and the Eastern China City Village Committee — were held jointly and severally liable for the entire amount. The judgment further stated that if the defendants failed to pay within the prescribed ten-day period, they would be subject to double the interest for delayed payment. The court also allocated the litigation costs to the defendants. This case illustrates the importance of clear loan documentation and the consequences of default.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.