Court Orders Repayment of CNY 480,000 Loan with Interest
A court in Eastern China City has ruled in favor of a lender seeking repayment of a 480,000 CNY loan, ordering the borrower to repay the principal plus interest and overdue interest. The court also held that the guarantor company was released from liability because the lender filed the lawsuit after the statutory six-month guarantee period had expired.
The plaintiff, Mr. Wan, filed the lawsuit on September 16, 2011, against the borrower, Mr. Wang, and the guarantor, Eastern China City Taiyuan Garments Co., Ltd. According to Mr. Wan, on September 18, 2007, he lent 200,000 CNY to Mr. Wang, followed by an additional 280,000 CNY on September 20, 2007. Mr. Wang issued a single IOU on September 20, 2007, acknowledging the total debt of 480,000 CNY and promising to repay by October 30, 2007, with interest calculated at the Bank of China one-year fixed deposit rate. The guarantor company affixed its seal to the IOU as a surety. Neither Mr. Wang nor the company repaid the loan or interest.
At the court hearing on March 9, 2012, Mr. Wan’s legal representative, Mr. Sun, appeared and submitted evidence. This included the original IOU and a lawyer’s letter dated September 17, 2009, along with postal receipts showing that Mr. Wan had formally demanded repayment from both defendants. The defendants, Mr. Wang and the company, did not appear in court, nor did they file any defense or provide evidence. The court reviewed the IOU and the lawyer’s letter, found them to be authentic and relevant, and admitted them as valid evidence.
The court found that the IOU was a direct and reliable record of the loan agreement. Mr. Wan had proven that he lent 480,000 CNY to Mr. Wang and that Mr. Wang had failed to repay the principal or any interest. The court calculated the interest due for the loan period from September 20, 2007, to October 30, 2007, based on the agreed Bank of China one-year rate of 6.84 percent, and determined that the correct amount was 3,632.80 CNY (not the 6,236 CNY claimed by Mr. Wan). For overdue interest after October 30, 2007, the court applied the same agreed rate (within the legal limit of four times the benchmark lending rate) and awarded 120,841 CNY.
On the question of the guarantor’s liability, the court applied the Guarantee Law of China. Because the IOU did not specify the type of guarantee or any guarantee period, the guarantee was deemed to be a joint and several liability guarantee, but only for six months from the maturity date of the loan (October 30, 2007). Mr. Wan did not demand performance from the guarantor within that six-month window. He sent a lawyer’s letter in September 2009 and later filed suit in September 2011, both well beyond the six-month period. Accordingly, the court ruled that the guarantor company was released from all liability. All claims against the company were dismissed.
The court ordered Mr. Wang to repay the full principal of 480,000 CNY, plus 3,632.80 CNY in contractual interest and 120,841 CNY in overdue interest, for a total of 604,473.80 CNY. Mr. Wang was also ordered to pay most of the litigation costs. The judgment underscores the importance of guarantee periods: lenders must enforce guarantees promptly or risk losing recourse against the surety. Borrowers should note that failing to repay leads to substantial overdue interest. The case serves as a practical reminder to review all loan documents for guarantee terms and deadlines.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.