Court Orders Repayment of CNY 150,000 Loan with Guarantor Liability
In this case, a dispute arose over a personal loan of 150,000 Chinese Yuan (CNY) between friends. The plaintiff, Mr. Chen, claimed that the defendant, Mr. Zhou, failed to repay the loan principal and interest after the due date. Mr. Chen also sought to hold the guarantor, Mr. Ye, jointly liable. The court in Eastern China City ruled in favor of the plaintiff, ordering repayment and adjusting the interest rate to a lawful level.
The case background shows that Mr. Chen and Mr. Zhou were acquaintances. On 24 September 2009, Mr. Zhou borrowed 150,000 CNY from Mr. Chen due to a need for working capital. The parties signed a written loan agreement. The contract set the loan term from 24 September 2009 to 23 October 2009. It stipulated that if Mr. Zhou failed to repay on time, a penalty interest of 2 per thousand per day would apply. Mr. Ye signed the contract as a guarantor, agreeing to assume joint and several liability for the principal and interest. Mr. Chen transferred the full loan amount on the same day from his wife’s bank account to Mr. Zhou. After the due date, Mr. Zhou made no payment of principal or interest, prompting the lawsuit.
During the court hearing, Mr. Chen presented several pieces of evidence. These included copies of identity documents to establish the parties’ identities, the signed loan contract, and a bank transfer receipt. He also submitted a marriage certificate to show that the account used for the transfer belonged to his wife. The court examined the evidence in open session. Neither Mr. Zhou nor Mr. Ye appeared at the hearing, despite proper notice via public announcement. They also failed to file any written defense or submit evidence. The court therefore treated their absence as a waiver of the right to contest the evidence and accepted Mr. Chen’s submissions as authentic and relevant.
The court found that the loan contract was clear and represented the true intentions of all parties. According to relevant law, the contract was valid and legally enforceable. Mr. Chen had fulfilled his obligation to provide the loan, but Mr. Zhou failed to repay the principal on time, which constituted a breach of contract. The court held that Mr. Zhou was liable not only to return the principal but also to pay interest for the overdue period. However, the agreed penalty interest of 2 per thousand per day was excessively high. The court adjusted the interest rate to 1.5 percent per month, which it deemed reasonable under the circumstances. The guarantor, Mr. Ye, had signed the contract as a guarantor, and the terms explicitly imposed joint and several liability. The court found the guarantee valid and ruled that Mr. Ye must bear liability alongside Mr. Zhou.
The legal analysis relied primarily on the Contract Law and the Guarantee Law of China. The court noted that the loan contract satisfied all elements of a valid civil agreement: offer, acceptance, consideration, and lawful purpose. The interest adjustment was justified because the original daily rate of 0.2 percent far exceeded the legal ceiling for overdue interest, which under relevant judicial interpretations should not exceed four times the central bank’s benchmark loan rate. By reducing the rate to 1.5 percent per month, the court ensured the outcome complied with public policy against usury. The guarantor’s liability was established because Mr. Ye voluntarily signed the guarantee clause, and the law does not require a separate guarantee agreement in such cases. The defendants’ failure to appear did not affect the court’s authority to hear the case and issue a default judgment.
In its final decision, the court ordered Mr. Zhou to repay the full principal of 150,000 CNY plus interest calculated from 24 October 2009 to the date of actual payment at a monthly rate of 1.5 percent. Mr. Ye was ordered to bear joint and several liability for the entire amount. The court dismissed Mr. Chen’s claim for higher interest. Mr. Zhou and Mr. Ye were also ordered to pay the litigation costs of 4,772 CNY. The judgment must be performed within five days of its effective date. This case highlights the importance of clearly documenting loan terms and the risks that guarantors assume. It also shows that courts will adjust excessive interest rates to align with legal standards.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.