CNY 30,000 Debt Assignment Dispute – Guarantee Period Expired
In this case, a lender assigned a personal loan to a third party, but the guarantor was released due to the expiration of the legal guarantee period. The court ordered the borrower to repay the principal amount of CNY 30,000, while dismissing the claim against the guarantor. The ruling highlights the importance of timely enforcement of guarantee rights under Chinese law.
The dispute arose from a loan of CNY 30,000 made by Mr. Wang to Mr. He on April 10, 2010. The loan was due on May 10, 2010. Mr. Sun signed the loan receipt as a guarantor, but the parties did not specify the type of guarantee. On August 30, 2011, Mr. Wang assigned the debt (along with other debts totaling CNY 70,000) to Mr. Gao, with the borrower’s written consent. Mr. Gao then demanded repayment from Mr. He multiple times, but Mr. He refused to pay. Mr. Gao filed a lawsuit in February 2012, seeking repayment from Mr. He and joint liability from Mr. Sun.
The plaintiff Mr. Gao attended the court hearing and submitted two pieces of evidence: the original loan receipt showing the loan and guarantee, and a written debt assignment agreement signed by Mr. Wang, Mr. He, and Mr. Gao. The defendants, Mr. He and Mr. Sun, were properly summoned but did not appear in court or provide any defense. The court reviewed the evidence and accepted both documents as authentic and relevant, noting they met the formal requirements for valid evidence under procedural rules.
The court found that the loan between Mr. Wang and Mr. He was genuine, and the debt assignment was valid. The assignment contract reflected the true intent of the parties and did not violate any mandatory legal provisions. The court also noted that the assignment had been communicated to the debtor and the guarantor, making it binding. However, regarding the guarantor Mr. Sun, the court held that because the guarantee period was not agreed upon, the law prescribes a six-month guarantee period starting from the loan’s due date (May 10, 2010). Since Mr. Gao did not provide any evidence that he or Mr. Wang had demanded performance from Mr. Sun within that six-month period, the guarantee was extinguished. The court therefore ordered Mr. He to repay the CNY 30,000 within ten days of the judgment, but dismissed the claim against Mr. Sun.
The legal reasoning focused on two key points. First, under the Contract Law (Articles 79 and 81), creditors may assign their rights to third parties, and the assignment is effective once the debtor is notified. Here, the debtor consented in writing, so the transfer was valid. Second, under the Guarantee Law (Article 26), if no guarantee period is specified, the guarantor is liable only for six months after the principal debt’s due date. After that, if the creditor fails to demand performance within that period, the guarantor is discharged. The court found that Mr. Gao’s lawsuit was filed more than 21 months after the loan matured, and no earlier demand had been proved. Thus, Mr. Sun’s guarantor liability had expired.
This case serves as a practical reminder for creditors and assignees of debts. While debt assignments are generally enforceable, the rights against guarantors are time-sensitive. A guarantee period of six months without a written agreement can easily lapse if the creditor does not act promptly. The ruling also confirms that the guarantor’s absence from court does not relieve the plaintiff of the burden to prove that the guarantee was enforced within the statutory period. Borrowers remain liable for repayment, but guarantors may escape liability if the creditor delays.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.