CNY 158,000 Loan Repayment Ordered with Guarantor Liability
A civil dispute over a private loan of 200,000 yuan has resulted in a court order requiring the borrower to repay the outstanding balance of 158,000 yuan plus interest and legal fees, with the guarantor held jointly liable. The case, heard in a court in Eastern China City, involved claims of partial repayment and questions over the validity of additional payments allegedly made by the borrower. The court ruled in favor of the lender after examining written agreements and bank records.
The plaintiff, Mr. Lin, filed a lawsuit against the borrower, Mr. Yu, and the guarantor, Mr. Chen, in December 2011. According to the complaint, on January 16, 2011, Mr. Yu borrowed 200,000 yuan from Mr. Lin with a monthly interest rate of 1.8 percent and a one-month repayment term. Mr. Chen signed the promissory note as a guarantor, agreeing to joint and several liability for one year after the loan matured. The borrower paid interest only until October 16, 2011, and the guarantor repaid 42,000 yuan on October 19, 2011, leaving a principal balance of 158,000 yuan. Mr. Lin sought repayment of the 158,000 yuan, interest of 2,844 yuan for the period from October 17 to November 16, 2011, and legal service fees of 6,500 yuan incurred to enforce the debt.
At the hearing on March 13, 2012, Mr. Lin presented three pieces of evidence: the original promissory note detailing the loan terms, interest rate, guarantee, and liability for collection costs; a bank transfer receipt proving the 200,000 yuan was delivered; and an invoice for 6,500 yuan in legal service fees. Mr. Yu appeared through his attorney and argued that he had repaid an additional 90,000 yuan, but he did not provide any supporting evidence. Mr. Chen, who was properly summoned, did not attend the hearing. The court admitted all of Mr. Lin’s evidence as authentic, lawful, and relevant.
The court found that the loan and guarantee contract was lawfully formed and valid. The agreed interest rate, at 1.8 percent per month, did not exceed the legal ceiling of four times the benchmark bank lending rate. Mr. Yu had failed to repay the principal as agreed and had only paid interest up to October 16, 2011. Mr. Chen had partially performed as guarantor by repaying 42,000 yuan but remained liable for the balance. The court dismissed Mr. Yu’s unsubstantiated claim of a 90,000 yuan repayment. It ordered Mr. Yu to pay Mr. Lin 158,000 yuan, plus 2,844 yuan in interest, and 6,500 yuan in legal service fees, all within seven days of the judgment. Mr. Chen was ordered to bear joint and several liability for these amounts and was granted the right to seek reimbursement from Mr. Yu after payment.
The court applied principles from the Contract Law and the Guarantee Law of China. It emphasized that a valid contract obligates all parties to perform their duties in full. Under the Guarantee Law, a joint and several guarantor may be sued directly by the creditor when the primary debtor defaults. The court also referenced the judicial interpretation on private lending, which permits interest rates up to four times the benchmark rate. Because the loan agreement explicitly covered legal fees as part of the collection costs, those expenses were recoverable. The borrower’s unsupported defense of additional repayment did not satisfy the burden of proof.
This ruling reinforces the enforceability of written loan agreements and guarantee clauses in Chinese private lending. Lenders should ensure that promissory notes clearly state the principal, interest rate, repayment term, and any cost-shifting provisions for legal fees. Guarantors should understand that joint and several liability exposes them to direct claims once the borrower defaults. The case also highlights the importance of documentary evidence; oral claims of partial repayment without proof will not prevail. Borrowers and guarantors alike are reminded to keep accurate records of all payments made.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.