Court Orders Repayment of CNY 35,000 Loan Plus Interest
A financial institution in Eastern China City filed a lawsuit against two individuals, Mr. Li and Mr. Wang, after a business loan of 35,000 CNY went unpaid at maturity. The plaintiff sought repayment of the principal along with accrued interest and late charges. The court ruled in favor of the lender, holding both the borrower and the guarantor jointly liable. The judgment affirmed the validity of the loan contract and the enforceability of the guarantee.
The case arose from a loan agreement dated May 24, 2010. Mr. Li borrowed 35,000 CNY from the plaintiff for business purposes. The loan term ran from May 24, 2010 to May 20, 2011, with a monthly interest rate of 8.7 per mille. Repayment was due in full at maturity, with interest payable annually. The contract provided that if the borrower failed to repay on time, an additional penalty of 30 percent above the agreed rate would apply from the date of default. Mr. Wang signed as a joint and several guarantor, with the guarantee covering principal, interest, penalties, damages, and collection costs. The guarantee period extended two years after the loan maturity. After the due date passed, Mr. Li did not repay the principal or interest, and Mr. Wang did not fulfill the guarantee. The plaintiff demanded payment and then initiated litigation.
During the hearing, the plaintiff presented documentary evidence including the loan application, the guarantee and loan contract, and the loan receipt. The court noted that the plaintiff’s representative attended the hearing, but both defendants, after being properly summoned, failed to appear without providing any excuse. The court proceeded with the trial in their absence. The evidence submitted by the plaintiff was reviewed and found to be consistent and credible. The court determined that the facts as alleged by the plaintiff were supported by the record and adopted them as the established facts of the case.
The court found that a clear guarantee and loan relationship existed between the plaintiff and the two defendants. The written contract between the parties did not violate any mandatory provisions of law or administrative regulations and was therefore valid and binding. All parties were required to perform their obligations in full accordance with the contract. Mr. Li, as the borrower, was obligated to repay the loan principal and interest by May 20, 2011. Since he failed to do so, he was in breach of contract. Mr. Wang, as a joint and several guarantor, was obliged to step in when Mr. Li defaulted. His failure to perform also constituted a breach. Under the law, breaching parties must continue performance and pay default interest as specified in the contract or as prescribed by the relevant regulations.
The court applied the relevant provisions of the Contract Law and the Guarantee Law. It held that a valid contract creates enforceable obligations. The lender was entitled to recover the outstanding principal plus all accrued interest and penalty interest. The guarantor’s liability was co-extensive with that of the borrower, meaning the lender could seek full repayment from either party. After satisfying the debt, the guarantor would have the right to seek reimbursement from the borrower. The court also noted that if the defendants failed to pay within the time specified in the judgment, they would be liable for double the interest rate on the overdue amount for the period of delay, as set out in the Civil Procedure Law.
The court ordered Mr. Li to repay the principal of 35,000 CNY together with interest and overdue interest calculated up to February 3, 2012, totaling 4,924.24 CNY, and continuing interest from February 4, 2012 until the date of actual payment, at the rate specified by the People’s Bank of China. Mr. Wang was ordered to bear joint and several liability for the entire amount. The court also directed Mr. Li to pay half of the court costs, with Mr. Wang jointly responsible, and granted the guarantor the right of recourse against the borrower. This case illustrates the strict enforcement of financial loan contracts and guarantee obligations in Eastern China City courts. Borrowers and guarantors should be aware that failure to appear in court does not prevent a judgment, and that contractual default can result in significant additional costs and penalties.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.