CNY 85000 Loan Dispute – Repayment Ordered with Guarantor Liability
A court in Eastern China City has ruled in favor of a lender seeking repayment of a 85000 CNY loan, along with interest, from the primary borrower and two guarantors. The dispute arose after the borrower failed to repay the loan by the agreed maturity date. The court found that the loan agreement was valid in part and that the guarantors were jointly liable for the debt under the terms of the guarantee.
The case involved a loan agreement dated May 9, 2009, under which the borrower, Ms. Wang, obtained 85000 CNY from the lender, Ms. Li. The loan carried a monthly interest rate of 20 per thousand, and the repayment period extended from May 9, 2009, to January 30, 2011. Two guarantors, Mr. Zhang and Mr. Liu, signed as joint and several guarantors, agreeing to repay the principal, interest, and any overdue amounts if the borrower defaulted. After the maturity date, Ms. Wang failed to repay either the principal or the accrued interest. Ms. Li then filed a lawsuit seeking repayment of the 85000 CNY principal plus interest calculated at the agreed monthly rate from the loan origination date, and also sought enforcement of the guarantors’ obligations.
During the court hearing on March 22, 2012, the lender, Ms. Li, appeared and presented the loan agreement and a receipt as evidence. The borrower, Ms. Wang, also appeared and acknowledged the loan and the guarantee, but stated she was financially unable to repay. The two guarantors, Mr. Zhang and Mr. Liu, did not attend the hearing despite proper legal notice. The court examined the documentary evidence and found it to be authentic, lawful, and relevant. Based on the evidence and Ms. Wang’s admissions, the court accepted the facts as presented by Ms. Li.
The court held that the loan agreement represented the true intentions of the parties. However, the agreed interest rate of 20 per thousand per month exceeded the legal limit, making that part of the contract invalid. The rest of the contract, including the principal amount and the guarantee provisions, remained valid and enforceable. Because Ms. Wang did not repay the loan as agreed, she was in breach of contract. The court also found that Mr. Zhang and Mr. Liu had voluntarily provided guarantees and were therefore bound by their joint and several liability obligations.
In its legal analysis, the court noted that the lender had voluntarily modified her claim for interest to an annual rate of 20 percent, which did not harm the defendants’ rights. The court accepted this modification. Under the Contract Law of the People’s Republic of China, a borrower must repay the loan principal and interest according to the agreed terms, or pay overdue interest if late. Under the Guarantee Law, a guarantor who agrees to joint and several liability may be required to repay the debt if the primary borrower defaults. The court also noted that the guarantors, by failing to appear, had waived their right to defend against the claim.
The court ordered Ms. Wang to repay the 85000 CNY principal plus interest calculated at an annual rate of 20 percent from May 9, 2009, until the date of full payment, within ten days of the judgment taking effect. Mr. Zhang and Mr. Liu were ordered to bear joint and several liability for the entire amount. The court also ordered the three defendants to pay the reduced court costs of 1450 CNY. This case illustrates that courts will enforce loan agreements and guarantee obligations when the core terms are lawful, even if interest provisions require adjustment. Lenders and guarantors should ensure that interest rates comply with legal limits and that all parties understand their responsibilities.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.