Court Orders Repayment of CNY 500,000 Loan with Interest

In a recent civil dispute over a private loan, a court in Eastern China City ruled in favor of the lender, ordering the borrower to repay 500,000 yuan plus interest. The case also involved a guarantor who was held jointly liable for the debt. The judgment, issued on March 28, 2012, underscored the legal obligations of borrowers and guarantors under Chinese contract and guarantee law.

The plaintiff, Mr. Li, alleged that the first defendant, Mr. Wang, borrowed 500,000 yuan for business purposes on March 11, 2011. Mr. Li transferred the funds to Mr. Wang’s bank account the same day. On March 12, 2011, Mr. Wang issued a promissory note confirming the loan, with a monthly interest rate of 2%. The second defendant, Mr. Zhang, signed as a guarantor. After repeated demands, Mr. Wang failed to repay the principal or interest, and Mr. Zhang did not fulfill his guarantee. Mr. Li initially sought repayment with interest at 2% per month, but later reduced the claim to 1.5% per month during trial.

During the hearing, Mr. Li presented the original promissory note as evidence. Mr. Wang acknowledged the loan but argued that he had already paid interest through monthly installments of 30,000 yuan from March to December 2011, claiming these payments covered both principal and interest. He requested the court to verify his bank records. However, Mr. Wang provided no documentary evidence to support his claim. The guarantor, Mr. Zhang, did not appear in court despite proper notice and submitted no defense.

The court found that the promissory note clearly established a valid loan agreement between Mr. Li and Mr. Wang, as well as a valid guarantee contract with Mr. Zhang. Since Mr. Wang failed to produce any evidence of repayment or interest payments, the court dismissed his defense. The court held that under the Contract Law and the Guarantee Law, Mr. Wang was obligated to repay the principal and interest, and Mr. Zhang was jointly and severally liable as a guarantor.

The court reasoned that the burden of proof for repayment lies with the borrower. Mr. Wang’s unsubstantiated claims about monthly payments did not meet the standard of proof required. According to relevant law, a guarantor who does not specify the type of guarantee is presumed to assume joint and several liability. The court also noted that Mr. Li’s reduction of the interest rate from 2% to 1.5% per month was within legal limits and thus permissible.

This case illustrates the importance of clear documentation in private lending and the enforceability of guarantee agreements. Borrowers must provide concrete evidence if they assert partial repayment, and guarantors cannot escape liability by remaining silent. The ruling reinforces that courts will uphold written loan terms and hold all parties accountable. For lenders, maintaining a signed promissory note and proof of fund transfer is critical. For guarantors, understanding the scope of liability before signing is equally essential.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.