Court Orders Repayment of CNY 300,000 Loan in Guarantee Dispute
A court in Eastern China City has ruled in favor of a rural credit cooperative seeking repayment of a 300,000 CNY loan plus interest from a borrower and three guarantors. The case involved a guarantee loan contract signed in 2009. The borrower failed to repay the principal and interest on time. The guarantors also did not fulfill their obligations under the guarantee agreements. The court found the loan and guarantee contracts legally valid. It ordered the borrower to repay the full amount and the guarantors to bear joint and several liability.
In this case, the plaintiff, a rural credit cooperative based in Eastern China City, entered into a guarantee loan contract on November 20, 2009, with Mr. Zhang (the borrower) and two guarantors, Mr. Wang and Mr. Li. The contract provided for a loan of 300,000 CNY with a term from November 20, 2009, to November 19, 2010. Mr. Wang and Mr. Li agreed to provide joint and several liability guarantees. Separately, on the same day, another guarantor, Mr. Liu, signed a guarantee contract with the cooperative, also providing a joint and several guarantee for the same loan principal and interest. The cooperative disbursed the loan as agreed. However, Mr. Zhang did not repay the principal or interest when due. Mr. Wang, Mr. Li, and Mr. Liu also failed to perform their guarantee obligations. The cooperative then sued, seeking repayment of the principal of 300,000 CNY plus interest calculated at 90,107.27 CNY as of November 23, 2011, with further interest to accrue until the date of actual payment.
During the court hearing, the cooperative presented evidence including the guarantee loan contract, a loan receipt, an interest statement, and the separate guarantee contract. All documents were verified as consistent with the originals. The court noted that the defendants, Mr. Zhang, Mr. Wang, Mr. Li, and Mr. Liu, did not appear at trial or submit any defense. The court treated their absence as a waiver of the right to cross-examine the evidence. Accordingly, the court accepted the cooperative’s evidence as credible. The cooperative also withdrew its claim against a fifth defendant, Mr. Chen, which the court permitted.
The court held that the guarantee loan contract between the cooperative and Mr. Zhang, Mr. Wang, and Mr. Li was legally valid. Similarly, the separate guarantee contract with Mr. Liu was also valid. The cooperative had fulfilled its obligation by disbursing the loan. Mr. Zhang, as the borrower, was required to repay the principal and interest on schedule. His failure to do so constituted a breach of contract. The court further found that Mr. Wang, Mr. Li, and Mr. Liu, as guarantors, were jointly and severally liable for the loan principal and interest. The cooperative’s claims were lawful and justified.
Under relevant Chinese law, including provisions of the Contract Law and the Guarantee Law, the court reasoned that a valid loan contract imposes a duty on the borrower to repay. Guarantors who sign a joint and several guarantee are obligated to pay when the borrower defaults. The court also noted that after fulfilling their guarantee obligations, the guarantors have the right to seek reimbursement from the borrower. The judgment ordered Mr. Zhang to repay the principal of 300,000 CNY and all interest calculated from January 19, 2010, at the contractual rate until the date of actual payment. Mr. Wang, Mr. Li, and Mr. Liu were ordered to bear joint and several liability for that amount. The court also imposed court costs on the defendants.
This case illustrates the enforceability of standard guarantee loan agreements in Eastern China City. Borrowers who fail to repay risk court orders for full principal and accrued interest. Guarantors should understand that signing a joint and several guarantee creates direct financial exposure. The court’s decision reaffirms that lenders can recover debts from both primary borrowers and guarantors in a single action. For lenders and borrowers alike, accurate contract documentation and timely performance are essential to avoid litigation.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.