Guarantor Held Liable for 48,000 RMB Debt in Construction Material Supply Dispute

Guarantor Held Liable for 48,000 RMB Debt in Construction Material Supply Dispute

Case Overview
A guarantor was ordered to pay 48,000 RMB plus interest after a construction company failed to settle its debt for purchased cement pipes. The court in Eastern China found that the guarantor, Mr. Zhou, had failed to prove he paid the outstanding amount. The ruling reinforces the legal principle that a guarantor must honor obligations when the primary debtor defaults, especially when the guarantee is not clearly defined as a limited form of suretyship.

Case Background and Facts
During October to December 2007, a project department of a construction company purchased 67 cement pipes from a supplier, a company referred to as Tongda Company. The total purchase price was 68,220 RMB. The construction company made partial payments totaling 20,000 RMB, leaving a balance of 48,220 RMB. On February 11, 2010, an additional payment of 10,000 RMB was made, reducing the remaining debt to 48,000 RMB. Mr. Zhou, an individual associated with the construction company’s project department, signed a settlement statement as a guarantor for this remaining amount. Despite the guarantee, the construction company failed to pay the balance, and Mr. Zhou did not fulfill his guarantor duties.

Court Proceedings and Evidence
Tongda Company filed a lawsuit on January 6, 2011, seeking payment of the guaranteed amount of 48,000 RMB plus interest from February 11, 2010, to January 11, 2011, calculated at a daily rate of 0.021 percent. Mr. Zhou argued that he had already paid the 48,000 RMB. The court examined two key pieces of evidence. Tongda Company presented a settlement statement dated August 5, 2010, signed by Mr. Zhou, which stated that the balance remained unpaid. Mr. Zhou provided a payment voucher dated August 2, 2010, which he claimed showed he had paid the amount. The court noted that Mr. Zhou acknowledged the authenticity of his signature on the August 5 settlement statement. The court found a direct contradiction between the payment voucher and the later settlement statement, and Mr. Zhou could not provide a reasonable explanation for this inconsistency.

Court Findings and Judgment
The court held that a valid guarantee contract existed between Tongda Company and Mr. Zhou, reflecting the genuine intentions of both parties and complying with legal requirements. Since the parties did not specify the type of guarantee, the court applied the rule that the guarantor assumes joint and several liability. The court rejected Mr. Zhou’s defense that he had paid the debt, finding his evidence unreliable due to the contradiction with his own signed acknowledgment of the unpaid balance. The court ordered Mr. Zhou to pay Tongda Company 48,000 RMB plus interest calculated from February 11, 2010, until the date of actual payment, based on the benchmark loan interest rate of the People’s Bank of China for the same period. The court also ruled that Mr. Zhou could seek reimbursement from the construction company after making the payment. The case filing fee of 542 RMB was assessed against Mr. Zhou.

Key Legal Principles
The court applied the principle that when a guarantee contract does not specify the form of guarantee, the guarantor is deemed to assume joint and several liability. Under this principle, the creditor can demand payment directly from the guarantor without first pursuing the primary debtor. The scope of the guarantee includes both the principal debt and any interest or damages resulting from late payment. The court also reaffirmed that a guarantor who performs the obligation has the right of recourse against the primary debtor.

Practical Insights
This case demonstrates the importance of maintaining consistent documentation in debt and guarantee matters. A guarantor who signs a document acknowledging an unpaid balance will find it difficult to later claim payment was made, especially if the evidence is contradictory. Parties should clearly specify the type of guarantee in writing to avoid automatic application of joint and several liability. For creditors, retaining signed settlement statements and payment records is crucial for enforcing guarantees.

Legal References
Guarantee Law of the People’s Republic of China, Article 18, Paragraph 2 (joint and several liability guarantee).
Guarantee Law of the People’s Republic of China, Article 19 (determination of guarantee method when not agreed upon).
Guarantee Law of the People’s Republic of China, Article 21 (scope of guarantee).
Guarantee Law of the People’s Republic of China, Article 31 (guarantor’s right of recourse).

Disclaimer
This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for specific legal matters.