Court Orders Repayment of CNY 242,600 in Private Lending Dispute
In a private lending dispute heard in an Eastern China City court, the plaintiffs sought repayment of principal and interest from two borrowers. The case involved two separate loan agreements and a subsequent settlement promise. The court ruled in favor of the lender, ordering the defendants to repay a total of CNY 242,600 plus ongoing interest. The judgment was delivered after a summary hearing, with one defendant absent.
The plaintiff, Mr. Dong, claimed that on February 28, 2008, the defendants, Mr. Shao A and Mr. Shao B, borrowed CNY 150,000 from him and issued an IOU. On February 11, 2010, the defendants borrowed an additional CNY 92,600 and signed a written promise to repay both sums by June 28, 2010. According to the plaintiff, despite repeated demands, the defendants made no repayment at all. Mr. Dong therefore sought repayment of the total amount of CNY 242,600, plus interest from June 29, 2010 at the benchmark lending rate set by the People’s Bank of China. Mr. Shao A admitted to the first loan but argued that the second sum of CNY 92,600 was actually interest on the first loan, and that he had previously paid over CNY 50,000 in interest. Mr. Shao B did not appear in court or submit any defense.
At the hearing, the plaintiff’s attorney, Mr. Ye, presented evidence including the plaintiff’s identification, the defendants’ identity records, the original IOU for CNY 150,000, and the written promise for CNY 242,600. Mr. Shao A did not object to these documents. The court found the evidence to be relevant, authentic, and lawfully obtained. Since Mr. Shao B had waived his right to cross-examine by failing to appear, the court admitted all evidence and relied on it to establish the facts.
The court found that on February 28, 2008, the defendants borrowed CNY 150,000 from Mr. Dong. On February 11, 2010, they settled the interest accrued up to June 28, 2010, which amounted to CNY 92,600, and converted that interest into a new loan obligation through the written promise. The total sum of CNY 242,600 was to be repaid by June 28, 2010. The court determined that the lending relationship was clear and represented the true intentions of both parties. Because the defendants failed to repay by the agreed date, they were liable for breach of contract. The court rejected Mr. Shao A’s unsupported claim that he had already paid part of the interest, as he provided no evidence.
The legal analysis centered on the nature of the second sum. The court treated the CNY 92,600 as a formal acknowledgment of accrued interest rather than a fresh independent loan. Under the Contract Law of the People’s Republic of China, the parties’ agreement to convert interest into a debt obligation is valid as a settlement of the interest liability. The court applied the principle that borrowers must perform their obligations in good faith. Since the defendants did not repay, they must bear the resulting interest from the date of default. The court also noted that Mr. Shao B, by failing to appear, forfeited his right to contest the claims.
This case illustrates how Chinese courts handle private lending disputes where interest is later formalized as a separate debt. The court upheld the lender’s right to recover both principal and interest, and imposed continuing interest at the benchmark rate until full payment. The judgment also included a penalty for delayed payment. Borrowers should be aware that converting unpaid interest into a new loan document can create a binding obligation. Parties to private loans should keep clear written records and be prepared to present evidence of any payments made. The ruling reinforces the importance of honoring repayment promises.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.