Perspective | How Should "Lending Agreement" Be Determined in Private Lending?
Published:
2024-11-27
Private lending mainly refers to the lending and repayment activities conducted between natural persons, legal entities, and non-legal entities engaged in lending business, using their own funds, characterized by occasional and non-profit nature. Article 668 of the Civil Code of the People's Republic of China stipulates that loan contracts should be in written form, except where there are other agreements between natural persons. According to the above provisions, although loan contracts should generally be in written form, in judicial practice, there are also cases of oral loans between natural persons. Therefore, proving whether there is a "loan agreement" between the parties is key to determining whether a private lending relationship exists. This article analyzes the identification of "loan agreement" in private lending between natural persons in conjunction with relevant cases.
Private lending mainly refers to the lending and repayment behavior between natural persons and legal entities or non-legal entities other than financial institutions engaged in lending business, using their own funds, characterized by occasionality and non-profit nature. Article 668 of the Civil Code of the People's Republic of China stipulates that loan contracts should be in written form, except where there are other agreements between natural persons. According to the above provisions, although loan contracts should generally be in written form, there are also cases of oral loans between natural persons in judicial practice. Therefore, proving whether there is a "loan agreement" between the parties is key to determining whether a private lending relationship exists. This article analyzes the identification of "loan agreement" in private lending between natural persons in conjunction with relevant cases.
1. Identification of "loan agreement" in written form lending
According to Article 91 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China, the party claiming the existence of a private lending legal relationship shall bear the burden of proof for the basic facts of the loan agreement reached by both parties. Specifically, if the loan between natural persons is in written form, the written debt certificate is the most direct and key evidence that the loan agreement has been reached between the natural persons.
Case 1: Zhu and Feng are married, having registered their marriage in 2002, and they previously operated an egg business. In 2018, Zhu and Feng borrowed 200,000 yuan from Zhang for some reason but failed to repay it on time. After Zhang urged repayment, Zhu, Feng, and Zhang reached an agreement on January 29, 2021, to issue a written IOU for the principal and corresponding interest of the loan, stating that Zhu borrowed 285,700 yuan from Zhang for the egg business, with an agreed monthly interest rate of 3%, and a loan term from March 15, 2022, to March 14, 2024, with Zhang having the right to unilaterally terminate the loan term at any time. Afterward, Zhang's attempts to collect the loan were unsuccessful, leading to a lawsuit against Feng and Zhu.
The court held: 1. The written IOU involved states a loan of 285,700 yuan, of which 200,000 yuan constitutes a loan agreement formed between the parties and has been actually paid. This part of the loan contract is legally established and valid. The borrower has failed to repay on time as agreed, constituting a breach of contract, and Zhang's request for the borrower to continue fulfilling the repayment obligation is legally supported, and the court supports it accordingly.
2. Regarding the loan interest, the parties have clearly stated in the written IOU that interest of 85,700 yuan has accrued from the time of borrowing until March 15, 2022, and this interest has actually accrued. The amount of interest calculated does not exceed the legal limit for private lending interest rates, making it legal and valid. Based on the principle of autonomy of will, the debt certificate involved is voluntarily agreed upon by both parties, and the amount of this interest is recognized.
3. The written debt certificate redefines the loan interest from March 15, 2022, to March 14, 2024, with an agreed monthly interest rate of 3% and an annual interest rate of 36%, which exceeds the legal limit of "four times the one-year loan market quoted interest rate." For the excess part, the court does not support it according to the law, and the court only supports "four times the one-year loan market quoted interest rate" at the time the contract was established.
4. Regarding the borrower, although the written IOU only names Zhu, it states that the loan is used for the egg business, which is a joint production and operation activity during the marriage. Furthermore, when Zhang's husband called to urge repayment, Feng also acknowledged that the loan was used for the couple's joint production and operation. Therefore, these two loans should be legally recognized as joint debts of the couple, to be borne jointly by Zhu and Feng.
In this case, the court conducted a comprehensive review of the authenticity of the IOU based on the valid evidence provided by both parties, using the undisputed written debt certificate as a basis, along with other evidence and relevant facts. After confirming the authenticity and legality of the debt certificate, the court inferred the existence of a loan agreement, thereby further recognizing the establishment of a private lending relationship.
2. Identification of "loan agreement" in oral lending
If the loan between natural persons is in oral form, the party claiming the existence of a private lending legal relationship must provide objective evidence in addition to their own statements to prove the existence of a loan agreement.
Case 2: Shao is an intermediary, and Shao and Cao are high school classmates. Wang borrowed 200,000 yuan from Cao through Shao's introduction, but Wang and Cao have never met. Cao claimed not to know Wang, and only learned Shao's real name during Shao's court testimony, and also did not recognize the amount as a loan. Wang claimed to have never met Cao and had not personally sought Cao since 2012, but had entrusted Shao to request the amount. Wang later sued Cao in court.
The court held: According to Article 2, Paragraph 1 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases: "When a lender brings a private lending lawsuit to the people's court, they should provide IOUs, receipts, promissory notes, and other debt certificates, as well as other evidence that can prove the existence of the lending legal relationship." Wang claimed that the nature of the disputed amount is a loan, which Cao denied. Wang did not submit written debt certificates such as IOUs or loan agreements, nor did he provide other evidence such as WeChat messages, text messages, or call recordings to prove the existence of a loan agreement or communication of loan intent. Therefore, the evidence proving the existence of a loan agreement is insufficient, and Wang's lawsuit request is not supported.
In this case, the transfer certificate from the financial institution is not a debt certificate and cannot directly prove the existence of a loan agreement. In cases of private lending between natural persons without a written debt certificate, judicial practice usually follows Article 16 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases: If the plaintiff only relies on the transfer certificate from the financial institution to file a private lending lawsuit, and the defendant argues that the transfer is a repayment of previous loans or other debts, the defendant should provide evidence to support their claim. After the defendant provides corresponding evidence to support their claim, the plaintiff still bears the burden of proof for the establishment of the lending relationship. This adjudication model is more conducive to restoring the facts of the case and protecting the legitimate rights and interests of creditors.
3. Conclusion
The identification of the loan agreement is the cornerstone of determining the private lending relationship. In judicial practice, courts usually consider various factors such as written evidence, oral agreements, and transfer certificates to determine the existence of a loan agreement. For the parties involved, retaining and providing sufficient evidence is key to proving the existence of a loan agreement. At the same time, when courts hear such cases, they will also use penetrating judgment thinking based on the specific circumstances of the case to ensure the realization of fairness and justice.
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