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Supreme Court Interprets Issues on Guarantee Law
The State Supreme Court Tuesday published a judicial interpretation on some questions relating to the application of the Guarantee Law. The interpretation entered into force Wednesday, December 13.
According to the judicial interpretation, if a government department or public welfare institution or social group provides guarantee in violation of related laws and regulations, the guarantee contract shall be deemed void. Any loss arising due to such an invalid contract to the creditors should be settled according to the Guarantee Law.
The judicial interpretation also clarifies specific issues as affirmation of void contracts, legal consequences of invalid guarantee, the action period of guarantee cases, and the application of guarantee registration, earnest money and penalty provisions.
If two or more parties provide guarantee for the same subject matter and the debtor is unable to perform its obligation at the expiry of the performance period, the creditor is entitled to ask the debtor to honor the obligations, and may also demand any of the guarantors to fulfill the obligations, according to the interpretation.
With a rising number of cases involving irregular guarantee in recent years, the interpretation is of significance in guiding the people's courts at all levels to settle disputes related to guarantee correctly and impartially.
Source: chinadaily.com.cn
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