The Peoples Republic of Chinas Guarantee Law
The Peoples Republic of Chinas Guarantee Law (hereinafter referred to as the “Guarantee Law”) was adopted on August 31, 2001 by the 5th Session of the Standing Committee of the 10th National Peoples Congress and came into force on October 1 2001. The purpose of the law is to protect the legal rights and interests of surety providers, establish rules for the formation, performance, termination and impairment of debt guarantee contracts, and promote the development of commodity credit and other guarantee businesses.
The Guarantee Law provides general provisions on the subject, contractual basis and other aspects of the guaranteeing contract and defines the civil liability of the guarantor. According to Article 2, the guarantor should be an established company or other organizations, or individuals who are capable of assuming civil liabilities. Unless an agreement made between the parties involved or otherwise mentioned in the relevant laws, the guarantor should not be a minor or a person under guardianship.
Articles 6 and 7 of the Guarantee Law concern the commitment of the guarantor. Article 6 stipulates that the guarantor should perform the responsibility of reliance and supervision arising from the debt guarantee contract. Article 7 states that the guarantor should bear the civil liability for compensation according to law if the main debtor defaults on its debt and the guarantor has no legitimate defense.
Moreover, the circumstances of a guarantor’s non-performance or non-fulfilment of the debt guarantee contract are stipulated in Articles 8 and 9. Article 8 lists five circumstances in which a guarantor may not be liable. Article 9 states that a guarantor shall still be liable in the circumstance that the principal debtor is insolvent or dies, or in case of damage due to force majeure, except as otherwise provided in legislation.
In conclusion, the Guarantee Law is designed to protect the guaranteed creditor and the guarantor, and to provide a basis for the convenient and effective performance of guaranty contracts. The law helps make sure that guarantors can get a fair and efficient legal system for them when they enter into guarantee contracts.
