Defending a Loan Agreement: Eastern China City Court Orders Repayment of CNY 1.2
A couple in Eastern China City successfully recovered a loan of 1.25 million CNY from a colleague who failed to repay after multiple borrowing transactions. The court found the loan agreements valid and ordered the borrower to repay the principal plus interest at the statutory rate.
The plaintiffs, Mr. Ye and his wife Ms. Chen, were married at the time of the loans. Ms. Chen worked alongside the defendant, Mr. Yu. Between August 2010 and March 2011, Mr. Yu approached the couple for funds to support his cash flow needs. On three separate occasions, the couple lent a total of 1.25 million CNY. The first loan of 150,000 CNY was given in cash. The second loan of 950,000 CNY was transferred via bank by Mr. Ye through a third party. The third loan of 150,000 CNY was again transferred by bank directly from Mr. Ye to Mr. Yu. Each loan was documented with a handwritten IOU signed by the defendant. Despite repeated demands, Mr. Yu did not repay any amount, leading the couple to file a lawsuit in September 2011.
The court accepted the case and formed a panel to hear it. A public hearing was held in February 2012. The plaintiffs attended with their witness, Mr. Zhang, who confirmed handling the bank transfer for the 950,000 CNY loan. The defendant did not appear at the hearing and did not submit a defense, which the court treated as a waiver of his right to contest. The plaintiffs presented evidence including identification documents, marriage certificate, the defendant’s household registration record, the three original IOUs, bank transfer receipts, and the witness’s testimony. The court reviewed all evidence and found it consistent, relevant, and meeting the formal requirements for proof.
The court held that the private lending relationship between the parties was legal and valid, and thus protected by law. After receiving the total sum of 1.25 million CNY, the defendant failed to return the money upon demand, which constituted a clear breach of contract. The court therefore ordered the defendant to repay the full principal amount. Regarding interest, the court noted that the IOUs did not specify any interest rate. The plaintiffs requested interest at a daily rate of 0.03% from the date of filing. The court rejected this claim as lacking contractual basis, ruling instead that interest should be calculated from the date of filing at the benchmark lending rate set by the People’s Bank of China for the same period.
Under relevant contract law provisions, a valid loan agreement exists whether made orally or in writing, as long as the lender has delivered the funds and the borrower acknowledges the debt. In this case, the written IOUs and bank transfer records provided strong evidence of the loans. The absence of an agreed interest rate does not extinguish the lender’s right to statutory interest from the date of demand or lawsuit. The defendant’s failure to appear did not prevent the court from rendering a default judgment based on the plaintiffs’ credible evidence. The court also awarded the plaintiffs costs including case acceptance fees, property preservation fees, and publication fees, totaling 21,470 CNY, to be borne by the defendant.
This case highlights the importance of maintaining clear written records when lending money, especially for large sums. The plaintiffs’ use of bank transfers and a witness helped establish the facts despite the borrower’s absence. Borrowers should be aware that defaulting on a loan, even without a written interest clause, still exposes them to statutory interest and legal costs. Lenders should retain IOUs, transfer receipts, and any communication related to repayment demands to protect their rights in court.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.