Court Orders Repayment of CNY 600,000 Loan with Interest
In a recent civil judgment, a court in Eastern China City ruled in favor of a plaintiff lender seeking repayment of a 600,000 CNY loan along with accrued interest. The court held that the borrower and guarantors were jointly liable, ordering the return of the principal plus interest at a monthly rate of 2% from July 9, 2011. The case involved multiple defendants, including two companies and three individual guarantors, and was decided after the defendants failed to appear at the hearing.
The dispute arose from a loan agreement dated October 15, 2010. The plaintiff, Mr. Li, lent 600,000 CNY to Mr. Ke, Eastern China City Natural Company, and Central China City Paper Factory, citing the borrowers’ cash flow difficulties. Two individuals, Mr. Yin and Mr. Chen, provided personal guarantees. The loan carried a monthly interest rate of 2%. Mr. Li delivered 60,000 CNY in cash on the same day, transferred 440,000 CNY to Mr. Ke’s bank account on October 16, 2010, and an additional 100,000 CNY on October 26, 2010. The borrowers paid interest until July 8, 2011. Thereafter, another defendant, Ms. Yu, issued a written commitment to repay the entire principal and interest within one month, but the borrowers did not honor that promise. Mr. Li filed the lawsuit on February 8, 2012, seeking repayment and enforcement of the guarantors’ obligations.
During the court hearing, Mr. Li presented four key pieces of evidence: a promissory note signed by all three borrowers and the two guarantors, a bank deposit slip showing the 440,000 CNY transfer, a bank deposit slip for the 100,000 CNY transfer, and a written commitment letter from Ms. Yu. The defendants—Mr. Ke (also the legal representative of the Natural Company), Ms. Yu (also the legal representative of the Paper Factory), Mr. Yin, and Mr. Chen—were properly served with summons but did not appear in court. As a result, the court deemed that they had waived their rights to challenge the evidence and present a defense. The court reviewed the documents and confirmed they met standards of authenticity and legality, thus accepting them as valid proof of the loan and guarantees.
The court found that a lawful civil loan relationship existed between the parties. Since the loan agreement did not specify a repayment date, the court determined that Mr. Li was entitled to demand repayment within a reasonable period. The court held that Mr. Ke, the Eastern China City Natural Company, and the Central China City Paper Factory were jointly obligated to return the principal of 600,000 CNY. Additionally, the court ordered these defendants to pay interest at the agreed monthly rate of 2% from July 9, 2011 until the date of full payment. The guarantors—Mr. Yin, Mr. Chen, and Ms. Yu—were found to bear joint and several liability for the entire debt. The court also ordered the guarantors to pay the litigation costs, which totaled 9,280 CNY, and granted them the right to seek reimbursement from the primary borrowers after satisfying the debt.
The legal basis for the decision rested on provisions of the Contract Law and the Guarantee Law of China. The court reasoned that the borrowers’ failure to repay the loan after demand constituted a breach of contract. Under the Guarantee Law, when a guarantee agreement does not specify the type of liability, the guarantor is presumed to bear joint and several liability. Here, the promissory note did not designate the guarantors’ role as sureties or co-debtors, so the court applied the default rule. Ms. Yu’s separate commitment letter further reinforced her personal liability. The court also noted that the guarantors, after performing their obligations, could pursue recourse against the primary borrowers. The judgment emphasized that all parties must adhere to their contractual promises, and that non-appearance in court does not prevent a fair ruling based on evidence.
This case serves as a reminder that written loan agreements with clear terms and personal guarantees are enforceable in Chinese courts. Borrowers and guarantors who ignore legal proceedings risk default judgments. Lenders should document all loan disbursements and any subsequent promises to repay, as such evidence is critical to proving the debt. The ruling also highlights that guarantors may be held jointly liable even if they do not participate in the trial. Parties facing financial difficulties should seek timely legal advice rather than avoiding court appearances. The judgment includes a standard provision allowing appeal within 15 days and warns that delayed payment incurs additional interest.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.