Trading Company and Director Held Jointly Liable for 380,000 Yuan Waste Paper Debt

A paper products manufacturer has recovered over 398,000 yuan in unpaid invoices from a trading company that disappeared after accumulating significant debt. The company director who personally guaranteed the obligation was held jointly liable for the full amount.

In November 2010, a paper products company in Ningbo entered into a waste paper supply agreement with a trading firm. Under the contract, the trading company would purchase waste paper from the manufacturer on monthly settlement terms. The contract included late payment penalties of 0.1 percent per business day.

By July 2011, the trading company acknowledged owing 380,313 yuan for accumulated waste paper purchases. At that time, the trading company’s director personally signed a payment commitment and guarantee, agreeing to bear joint liability for the outstanding debt.

When payment deadlines passed without any remittance, the manufacturer discovered that both the trading company and its director had become unreachable. After repeated collection attempts failed, the manufacturer filed suit seeking the principal amount plus late fees.

Neither the trading company nor the director responded to the lawsuit or appeared in proceedings.

The court examined the supply contract, account reconciliation documents, and the signed payment commitment. All documents were originals and corroborated each other. The guarantee clause clearly identified the director as a joint liability guarantor.

The court confirmed that the supply relationship was valid and enforceable. The buyer’s obligation to pay for delivered goods is fundamental under Chinese contract law. Since the parties had contractually agreed to a specific late payment penalty, the court applied the 0.1 percent daily rate for business days only, calculating 18,635 yuan in penalties through September 2011. The manufacturer’s claim for a slightly higher amount was reduced to match the precise calculation.

The court ordered the trading company to pay 380,313 yuan in principal and 18,635 yuan in accrued penalties, with ongoing penalties until full settlement. The director was held jointly liable for the entire amount and granted the right to seek reimbursement from the trading company after fulfilling the guarantee.

This case demonstrates that personal guarantees from company directors can provide meaningful protection for suppliers dealing with unreliable buyers. Suppliers should insist on written guarantees from company principals when extending credit terms to minimize collection risk.

Disclaimer: This article summarizes a court judgment for educational purposes only and does not constitute legal advice.