Court Orders Repayment of CNY 68,736.82 in Loan Dispute
A court in Eastern China City has ruled that a borrower must repay outstanding loan principal and interest totaling CNY 68,736.82 to a bank, along with additional interest from the date of lawsuit until full repayment. The court also held that two guarantors are jointly and severally liable for the debt. The decision came after the borrower defaulted on a small loan agreement and the bank filed a civil action to recover the amounts due.
The dispute arose from a loan agreement signed on October 3, 2009, between the bank and the borrower, Mr. Li. Under the contract, the bank lent Mr. Li CNY 80,000 at an annual interest rate of 13.5 percent for a term of 12 months, ending in October 2010. The loan was guaranteed by Mr. Wang and Mr. Yao, who provided joint and several liability for the principal, interest, default penalties, and collection costs. The borrower made some repayments but eventually stopped. By November 11, 2010, Mr. Li had repaid principal of CNY 29,102.13 and interest of CNY 7,128.93. As of December 18, 2011, the outstanding principal stood at CNY 50,897.87 and unpaid interest at CNY 17,838.95, totaling CNY 68,736.82. The bank repeatedly demanded payment but received no response.
During the court hearing, the bank presented several pieces of evidence, including the signed loan and guarantee contract, a personal loan receipt, a loan disbursement slip, and a prior court order showing that the bank had previously sued but withdrawn the case after mediation. The three defendants argued that they had never received the CNY 80,000 loan and therefore should not be held liable. However, the defendants did not submit any evidence to support their claim. The court allowed both sides to present oral arguments, and all parties attended the hearing.
The court found that the loan and guarantee contract did not violate any mandatory provisions of Chinese law or administrative regulations. The bank had performed its obligation by disbursing the full loan amount of CNY 80,000 to the borrower’s account as specified in the contract. The borrower, Mr. Li, failed to repay the remaining principal and interest in accordance with the agreed schedule. The court also determined that Mr. Wang and Mr. Yao, as sureties, had signed the contract and thus assumed joint and several liability for the entire debt. The court rejected the defendants’ denial of receipt because no evidence was offered to contradict the documentary proof provided by the bank.
The legal basis for the decision rested on Article 107 of the Contract Law, which holds that a party that fails to perform its contractual obligations must bear liability for breach. The court also cited Article 18 of the Guarantee Law, which provides that a guarantor who signs a joint and several guarantee is liable to pay the full amount when the principal debtor defaults. The court noted that the loan agreement specified the interest rate and repayment method, and the interest calculation from the date of lawsuit onward was to follow the contractual rate. The defendants did not present any valid defense or counter-evidence.
This case illustrates the enforceability of written loan and guarantee contracts in China. The court emphasized that once a lender proves it has disbursed the loan and the borrower fails to repay, the borrower and any guarantors are bound by the agreement. The ruling also shows that unsupported denials of receipt are unlikely to succeed when the lender provides clear documentary evidence. For lenders, maintaining accurate loan records and contracts is essential. For borrowers and guarantors, signing a guarantee carries serious financial consequences. The court ordered Mr. Li to pay within ten days, with Mr. Wang and Mr. Yao jointly liable, and also imposed court costs of CNY 1,320 on the borrower.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.