Guarantor Held Jointly Liable for 32,400 Yuan Personal Loan

A guarantor in Guangxi Province has been held jointly and severally liable for a 32,400 yuan personal loan after both the borrower and guarantor failed to appear in court. The case clarifies how Chinese law treats guarantee arrangements when the guarantee type is not explicitly specified.

The loan was made on April 8, 2011, when a borrower received 32,400 yuan from a lender and signed an IOU. The document specified that 2,400 yuan should be repaid in monthly installments by the 7th of each month, and the remaining 30,000 yuan should be repaid by June 8, 2011. A second person signed the IOU as a guarantor on July 7, 2011.

The IOU did not specify what type of guarantee the guarantor was providing. Under Chinese guarantee law, when parties do not specify the guarantee type, the guarantee is presumed to be a joint and several liability guarantee rather than a general guarantee. This means the lender can demand repayment from either the borrower or the guarantor, or both, without first exhausting remedies against the borrower.

Neither the borrower nor the guarantor repaid the loan as agreed. The lender filed a lawsuit in December 2011 seeking repayment of the 32,400 yuan principal plus interest calculated from June 9, 2011, at the benchmark bank lending rate. The lender also sought to hold the guarantor jointly liable for the debt.

Both defendants were served through public announcement as required when parties cannot be located through normal channels. They failed to appear at the hearing, forfeiting their opportunity to present defenses or challenge the evidence.

The court examined the IOU and found it clearly established the lending relationship. The document showed the principal amount, repayment schedule, and the guarantor’s signature confirming the guarantee commitment. Since neither defendant appeared to contest the evidence, the court accepted it as sufficient proof.

On March 15, 2012, the court ordered the borrower to repay the 32,400 yuan principal plus interest from June 9, 2011, at the benchmark bank lending rate until full payment. The guarantor was held jointly liable for the entire debt, meaning the lender could pursue either party for the full amount.

The court also confirmed that the guarantor’s liability extended to the principal, interest, and costs of enforcing the debt, since the parties had not specified any limitation on the guarantee scope. Under Chinese law, when the guarantee scope is unspecified, the guarantor is liable for the full debt including principal, interest, damages, and enforcement costs.

This case illustrates important principles about guarantees in Chinese law. First, when the guarantee type is not specified, courts presume joint and several liability, which is more favorable to lenders than general guarantees. Second, when the guarantee scope is not specified, guarantors are liable for all debt-related amounts. Third, guarantors who fail to participate in litigation lose the opportunity to argue for limitations on their liability.

Disclaimer: The information presented in this article is based on publicly available court records and is intended for educational purposes only. It does not constitute legal advice. Readers should consult qualified legal professionals for advice specific to their circumstances.