Guarantor Held Liable for CNY 80,000 Loan Default
A dispute over an unpaid loan of CNY 80,000 has resulted in a court judgment ordering both the borrower and the guarantor to repay the principal plus accrued interest. The plaintiff, Mr. Liu, claimed that the borrower, Mr. Zhao, failed to return the loan after paying only partial interest, and the guarantor, Mr. Qian, did not fulfill his guarantee obligations. The court ruled in favor of the plaintiff, making the guarantor jointly liable for the full debt.
The case arose from a loan agreement made on September 22, 2009, in Eastern China City. Mr. Zhao borrowed CNY 80,000 from Mr. Liu for business purposes, with a monthly interest rate of 0.8%. Mr. Qian provided a guarantee for the loan. On the same day, both defendants signed a promissory note to Mr. Liu. After the loan was made, Mr. Zhao paid interest only up to December 21, 2011, but never repaid the principal or any remaining interest. Mr. Qian also refused to honor the guarantee. Despite repeated demands, Mr. Liu could not recover the money, leading him to file a lawsuit on February 24, 2012.
During the court hearing on March 31, 2012, Mr. Liu appeared in person and presented evidence. The evidence included identity documents of all parties to establish proper legal standing, and the original promissory note signed by both defendants. The note clearly stated the loan amount, the monthly interest rate of 0.8%, and Mr. Qian’s role as guarantor. The court had served copies of these documents to the defendants along with the complaint. However, both Mr. Zhao and Mr. Qian failed to appear in court without any valid excuse and did not submit a written defense. The court therefore treated their absence as a waiver of their rights to challenge the evidence and present arguments. After reviewing the materials, the court accepted the evidence as lawful, relevant, and credible.
The court found that the loan relationship between Mr. Liu and Mr. Zhao was legally established, supported by the promissory note. The agreed interest rate of 0.8% per month did not violate any national restrictions on lending rates and was therefore valid. Since the loan had no fixed repayment date, the lender was entitled to demand repayment within a reasonable time. Mr. Zhao’s failure to repay the full principal and interest after being called upon constituted a breach of contract. Regarding the guarantor, the court noted that Mr. Qian had offered a guarantee without specifying its type, scope, or duration. Under applicable law, such a guarantee is treated as a joint and several liability guarantee, meaning Mr. Qian is responsible for the entire debt.
The court applied relevant provisions of the Contract Law and the Guarantee Law. Where a loan has no agreed maturity date, the lender may demand immediate repayment after giving reasonable notice. A guarantor who does not specify the guarantee type is deemed to have provided a joint and several guarantee. The lender may demand performance from the guarantor within six months after the principal debt becomes due. In this case, the court found that the interest claimed from December 22, 2011, forward was legally sound. The court also ordered that if payment is delayed beyond the specified period, additional interest at double the statutory rate for delayed performance must be paid.
The court issued a judgment requiring Mr. Zhao to repay the principal of CNY 80,000 together with interest calculated at 0.8% per month from December 22, 2011, until the date the payment is fully made under the court order. Mr. Qian is jointly and severally liable for the entire amount. Court costs of CNY 940 were also imposed on both defendants, with Mr. Qian bearing joint liability. This case illustrates that a guarantor who signs a promissory note without specifying limitations may face full liability for the borrower’s default. Borrowers and guarantors alike should understand the serious consequences of failing to appear in court or fulfill repayment obligations.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.