Court Orders Repayment of CNY 80,000 Loan in Guarantee Dispute
A credit cooperative in Eastern China City obtained a court judgment ordering a borrower to repay a loan of CNY 80,000 plus interest and a guarantor to bear joint liability. The case arose from a standard financial loan contract where the borrower failed to repay the principal and interest at maturity. The court upheld the validity of the contract and enforced the guarantor’s obligations under Chinese contract and guarantee laws.
The dispute began on April 21, 2010, when the borrower, Mr. Lin, signed a loan agreement with the plaintiff credit cooperative for CNY 80,000, with a term ending April 20, 2011. The monthly interest rate was set at 8.7 per thousand, with interest payable quarterly and principal due at maturity. A penalty of 30 percent additional interest applied from the date of default. Mr. Bao acted as joint liability guarantor, with a guarantee period lasting until two years after the loan maturity, covering principal, interest, penalties, and collection costs. After the loan matured, Mr. Lin did not repay the principal or interest, and Mr. Bao failed to fulfill his guarantee obligations. The plaintiff sought repayment of the principal plus interest calculated to February 3, 2012 (CNY 8,709.28), and ongoing interest thereafter, with the guarantor jointly liable.
At the hearing on March 5, 2012, the plaintiff presented evidence including the loan application, the guarantee loan contract, and a loan receipt. The court noted that the defendants had been properly summoned but did not appear without justification. The plaintiff’s legal representative attended and argued the case. The court reviewed the documentary evidence and found that the facts as presented by the plaintiff were consistent with the records. No evidence contradicted the plaintiff’s claims, and the court proceeded to judgment based on the uncontested records.
The court held that the guarantee loan relationship between the plaintiff and both defendants was clearly established. The contract did not violate any mandatory provisions of law or administrative regulations and was therefore valid and enforceable. Under the contract, Mr. Lin was obligated to repay the loan by April 20, 2011. His failure to do so constituted a clear breach of contract. Mr. Bao, as joint liability guarantor, also breached his obligations by not performing when the borrower defaulted. The court ruled that both defendants must bear responsibility for the default.
According to relevant law, including Article 107, Article 205, Article 206, and Article 207 of the Contract Law, and Article 18, Article 21(1), and Article 31 of the Guarantee Law, the court found that the plaintiff’s claims were legally sound. The borrower must repay the principal and pay interest and overdue interest as specified. The guarantor is jointly liable for the entire debt, with the right to seek reimbursement from the borrower after performing. The court also ordered that if payment is delayed beyond the judgment period, double the statutory interest applies for the delay. Litigation costs of CNY 1,009 were assessed against the borrower, with the guarantor jointly responsible.
This case confirms that properly executed loan and guarantee contracts are strictly enforced by courts in Eastern China. Borrowers and guarantors should be aware that default triggers not only repayment of principal and interest but also penalty interest and litigation costs. The judgment underscores the importance of fulfilling contractual obligations and the strong legal protection available to financial institutions. Guarantors, in particular, should understand that joint liability exposes them to full recovery actions even when the borrower is unable to pay.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.