Guarantor Held Jointly Liable for 32,400 Yuan Personal Loan in Guilin

A lender in Guilin has obtained a judgment against both a borrower and guarantor for a 32,400 yuan personal loan. The case clarifies that when a guarantee does not specify the type, Chinese law automatically treats it as joint liability, placing the guarantor on equal footing with the borrower.

In April 2011, Mr. L borrowed 32,400 yuan from Mr. W and issued a written IOU. The loan was structured with staggered repayment terms: 2,400 yuan was to be repaid in monthly installments of 1,200 yuan on the seventh of each month, while the remaining 30,000 yuan was due in full by June 8, 2011.

Ms. L signed the IOU as guarantor, with her signature dated July 7, 2011. However, the IOU did not specify whether her guarantee was joint liability or general liability.

The borrower made no repayments after receiving the funds. The lender’s collection efforts proved unsuccessful, as both the borrower and guarantor became unreachable. The lender eventually filed suit after learning that both parties could not be located.

Neither the borrower nor the guarantor appeared in proceedings or submitted any defense.

The court examined the IOU and confirmed it documented a valid lending relationship with clear terms. The loan amount, repayment schedule, and parties were all clearly stated.

On the guarantee question, the court applied Article 19 of the Chinese Guarantee Law, which provides that when parties fail to specify the type of guarantee, joint liability is presumed. This means the guarantor bears the same level of responsibility as the primary borrower and can be pursued for the full amount without the lender first exhausting remedies against the borrower.

The court also applied Article 21 of the same law, which states that when the scope of guarantee is unspecified, the guarantor is responsible for the entire obligation including principal, interest, and collection costs.

The court ordered the borrower to repay 32,400 yuan plus interest calculated at the standard bank lending rate from June 2011 until full settlement. The guarantor was held jointly liable for the entire amount.

This case serves as a practical reminder for anyone considering acting as a guarantor. Under Chinese law, the default guarantee type is joint liability, which is the most burdensome form. Guarantors should explicitly negotiate for general liability guarantees if they wish to limit their exposure.

Disclaimer: This article summarizes a court judgment for educational purposes only and does not constitute legal advice.