Private Loan Dispute in Zhejiang: 85,000 Yuan Repayment Ordered with Guarantor Liability

A court in Zhejiang Province has ruled on a private lending dispute, ordering a borrower to repay 85,000 yuan with interest and holding two guarantors jointly liable. The case highlights the enforceability of loan agreements and the responsibilities of guarantors under Chinese law.

The dispute arose from a loan agreement dated May 9, 2009. The plaintiff, Ms. Xiang, lent 85,000 yuan to the first defendant, Mr. Jin, who was a farmer. The second and third defendants, also farmers, acted as guarantors. The parties signed a loan agreement specifying a monthly interest rate of 20 per thousand, a repayment period from May 9, 2009, to January 30, 2011, and a clause that the guarantors assumed joint and several liability for the principal, interest, and overdue charges. After the loan matured, Mr. Jin failed to repay the principal or interest.

On February 7, 2012, Ms. Xiang filed a lawsuit with the court, seeking repayment of the 85,000 yuan principal and interest at the agreed monthly rate from May 9, 2009. She also requested that the guarantors bear joint and several liability and that the defendants cover litigation costs. During the trial, Ms. Xiang voluntarily reduced the interest claim to an annual rate of 20 percent.

The court held a public hearing on March 22, 2012, with Judge Li Jinquan presiding. Mr. Jin appeared and admitted the facts, citing financial hardship as the reason for non-payment. The other defendants were properly served but did not attend the hearing, waiving their right to defend.

Ms. Xiang presented the loan agreement and a receipt as evidence. Mr. Jin did not object. The court reviewed the documents and found them authentic, lawful, and relevant, thus admitting them as evidence. Based on this, the court established the facts as alleged by Ms. Xiang.

In its findings, the court determined that the loan agreement reflected the true intentions of all parties. However, the agreed monthly interest rate of 20 per thousand, equivalent to an annual rate of 24 percent, exceeded the legal limit under Chinese law. The court noted that while this part was invalid, the rest of the contract remained enforceable. Since Ms. Xiang had provided the loan, Mr. Jin was obligated to repay it. His failure to do so constituted a breach of contract.

Under the Guarantee Law, the guarantors had voluntarily assumed joint and several liability. The court found them bound by their promise to repay the principal, interest, and overdue amounts. Ms. Xiang’s decision to reduce the interest claim did not harm the defendants’ rights, so the court approved it.

The court applied relevant provisions of the Contract Law, which govern loan contracts and default, and the Guarantee Law, which defines the scope of guarantor liability. It also cited the Civil Procedure Law regarding default judgments.

The court issued a judgment ordering Mr. Jin to repay the 85,000 yuan principal plus interest at an annual rate of 20 percent from May 9, 2009, until the payment deadline. The guarantors were ordered to bear joint and several liability for this amount. The court also required the defendants to pay the litigation costs.

This case illustrates the importance of clear loan terms and the role of guarantors in private lending. It confirms that courts will enforce valid parts of loan agreements even if interest rates are adjusted to comply with the law. Guarantors should be aware that signing as a surety creates binding obligations, and failure to repay can lead to joint liability.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Laws may vary by jurisdiction. For specific legal questions, consult a qualified attorney.