Guarantor Liability for Verbal Loan: Civil Appeals Court Ruling
A civil dispute over a guarantor’s obligation to repay a loan arose when the primary borrower defaulted on a one hundred thousand yuan debt. The background of the case involved a loan agreement made on July 7, 2011, between a lender and a third-party borrower, with a separate individual acting as the guarantor. The loan was documented through a written promissory note, which specified a repayment period from July 7, 2011, to August 26, 2011, and a monthly interest rate of two percent. The guarantor signed the note, thereby agreeing to assume responsibility if the borrower failed to repay. The lender subsequently filed a lawsuit on December 16, 2011, after the borrower did not repay the principal or interest, and the guarantor also refused to fulfill the guarantee.
The dispute centered on the guarantor’s failure to honor the guarantee after the borrower defaulted. The lender presented evidence including the promissory note and identification documents to establish the parties’ identities and the debt’s existence. The lender initially sought repayment of the full principal plus interest at the original two percent monthly rate but later amended the claim to a reduced monthly rate of one point seven percent. The guarantor, despite being properly served with court notices and evidence materials, did not appear at the hearing or file any objections. The court noted that the guarantor’s absence constituted a waiver of the right to challenge the evidence or present a defense. The lender’s evidence was deemed legally sourced, factually accurate, and relevant to the case.
The judgment found the guarantee agreement valid, as all parties had voluntarily entered into the arrangement with genuine intent and without violating any legal prohibitions. The court determined that the guarantor was liable for the outstanding principal of one hundred thousand yuan and interest calculated at the amended monthly rate of one point seven percent from the loan’s inception until the judgment’s fulfillment date. The court ordered the guarantor to make payment within ten days of the judgment’s effective date, with additional penalties for delayed payment. The legal analysis emphasized that the guarantor’s obligation was a joint and several liability, meaning the lender could seek full repayment from the guarantor directly. The court also reduced the litigation costs, ordering the guarantor to bear half of the original filing fee.
A general legal principle from this case is that a guarantor who signs a valid loan agreement is legally bound to repay the debt if the primary borrower defaults, and failure to appear in court or contest the evidence does not relieve the guarantor of this liability.