CNY 100,000 Loan Dispute Results in Judgment for Lender
The court entered a judgment in favor of a lender who sought repayment of a CNY 100,000 loan from two borrowers and their guarantor. The borrowers failed to repay the principal by the agreed deadline, and the lender sued for both the principal and interest. The court found the debt valid but declined to enforce the claimed oral interest rate of five percent per month due to insufficient evidence. Instead, the court ordered the borrowers to repay the principal plus interest at the bank lending rate from the day after the due date. The guarantor was held jointly liable.
The case arose when the two defendants, Mr. He and Ms. Hu, borrowed CNY 100,000 from plaintiff Mr. Wu on October 31, 2011. The written agreement set a repayment date of January 19, 2012 (the 26th day of the 12th lunar month). The third defendant, Mr. Chen, signed as a guarantor but did not specify the type of guarantee. At trial, Mr. Wu alleged that the parties had orally agreed to a monthly interest rate of five percent and presented a witness to support that claim. The defendants did not appear in court or submit any defense.
During the hearing, Mr. Wu submitted three pieces of evidence: copies of identification documents for all parties, a loan agreement and promissory note signed by Mr. He and Ms. Hu with Mr. Chen as guarantor, and testimony from a witness named Mr. Xu. The court admitted the identification documents and the loan agreement as valid evidence meeting all evidentiary requirements. However, the witness testimony was treated as an isolated statement because no other evidence corroborated the claimed oral interest rate. The court therefore refused to rely on that testimony.
The court found that the loan relationship between the parties was clear and lawful. Mr. He and Ms. Hu had received the money and promised to repay it by the specified date. Their failure to pay constituted a breach of contract. The court therefore ordered them to repay the full principal of CNY 100,000. Regarding interest, the court noted that the written agreement contained no provision for interest. Under applicable law, for a fixed-term loan without an interest clause, the lender is entitled to interest only from the date of default, calculated at the bank lending rate.
On the legal analysis, the court emphasized that the burden of proof rested on the plaintiff to establish any agreed interest rate. The plaintiff’s evidence of an oral agreement at five percent per month was insufficient because the witness statement stood alone without supporting documents or other proof. The court also addressed the guarantor’s liability. Since the guarantee contract did not specify whether the guarantee was general or joint, the law presumes a joint and several liability guarantee. Consequently, Mr. Chen was ordered to bear joint repayment responsibility for both principal and the court-ordered interest.
The ruling confirms that written loan agreements without interest terms will not support claims for high oral interest rates unless the lender provides corroborating evidence. The decision also reinforces that guarantors who do not specify their liability type will be held jointly liable for the full debt. Litigants should ensure that all material terms, especially interest rates, are clearly stated in writing and supported by credible documentation. This case serves as a reminder of the importance of formal loan documentation in civil disputes.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.