Source: Legal Lecture Hall

Author: Lawyer Qi Jingzhi

Since January 1, 2021, the implementation of the Civil Code and the Supreme People's Court's Interpretation on the Application of the Civil Code of the People's Republic of China concerning the Guarantee System has ushered in a new era of legal protection for the legitimate rights and interests of guarantors in our country! Prior to the Civil Code, the focus of the guarantee legal system was on protecting the interests of creditors. Starting with the Civil Code, the protection of the legitimate rights and interests of debtors and guarantors will also be significantly strengthened.

   This article, though humbly offered, analyzes the following:

1. If the creditor and guarantor do not agree on the guarantee liability in writing, the guarantor shall not bear the liability.

Article 685 of the Civil Code stipulates: A guarantee contract may be a separately concluded written contract or a guarantee clause in the main debt contract. If a third party unilaterally makes a guarantee to the creditor in writing, and the creditor receives it without objection, the guarantee contract is established.

Article 490 of the Civil Code stipulates: Contracts stipulated by laws, administrative regulations, or agreed upon by the parties shall be concluded in writing. If the parties do not use written form, but one party has already performed the main obligations and the other party accepts it, then the contract is established.

（ (2016) Su0382 Minchu 1736 case holds that: For the loan from Yuan Yicheng to Zhang Yuejun, Li Zhankun only provided verbal guarantee and did not sign a written contract. The plaintiff Zhang Yuejun also has no evidence to prove that Li Zhankun has fulfilled the main guarantee obligations, therefore, the guarantee contract is not established, and Li Zhankun should not bear the guarantee liability.

2. If the creditor does not bring a lawsuit or arbitration or claim rights against the guarantor during the guarantee period, the guarantor shall not bear the liability.

Article 693 of the Civil Code stipulates: If the creditor of a general guarantee does not bring a lawsuit or apply for arbitration against the debtor during the guarantee period, the guarantor shall no longer bear the guarantee liability. If the creditor of a joint and several liability guarantee does not request the guarantor to bear the guarantee liability during the guarantee period, the guarantor shall no longer bear the guarantee liability.

The Civil Code stipulates: In the absence of an agreement or if the agreement is unclear, the guarantee period is 6 months after the expiration of the main performance period.

3. The general guarantor has the right of prior defense and has the right to refuse to bear the guarantee liability.

Article 687 of the Civil Code stipulates: If the parties agree in the guarantee contract that the guarantor shall bear the guarantee liability when the debtor fails to perform the debt, it shall be a general guarantee. A guarantor in a general guarantee has the right to refuse to bear the guarantee liability to the creditor before the dispute over the main contract has been adjudicated or arbitrated, and even if the debtor's property has been enforced by law but still cannot be performed.

The right of prior defense of the general guarantor, the prerequisite conditions stipulated in the old and new laws are consistent, both require the main contract to be adjudicated or arbitrated, and the debtor's property is enforced, the change is in the exceptional circumstances.

4. After the commencement of the debtor's bankruptcy, the guarantee period of the guarantor has expired, and the creditor shall not have the right to require the guarantor to bear the liability within 6 months after the conclusion of the bankruptcy proceedings.

Article 44 of the "Interpretation of the Guarantee Law" stipulates that the guarantor shall still bear the guarantee liability for the portion of the creditor's claim that is not repaid in the bankruptcy proceedings after the claim is filed. The creditor shall request the guarantor to bear the guarantee liability within six months after the conclusion of the bankruptcy proceedings. It seems that the guarantee period is no longer a consideration for guarantee liability in the case of the debtor's bankruptcy. Combining the Supreme People's Court's reply to the Yunnan Provincial Higher People's Court's request on how to apply Article 44 of the "Interpretation on Several Issues Concerning the Application of the Guarantee Law of the People's Republic of China," "Article 44 only applies to the situation where the guarantee period has not yet expired when the debtor's bankruptcy proceedings commence, and the guarantee period expires during the period when the creditor files a claim to participate in the repayment of bankruptcy property," it can be seen that the debtor's bankruptcy does not exclude the application within the guarantee period, that is, only when the guarantee period has not yet expired, the debtor goes bankrupt, and the creditor does not claim the guarantee liability from the guarantor, can the creditor still claim it from the guarantor within six months after the conclusion of the bankruptcy proceedings. However, if the guarantee period has already expired when the debtor goes bankrupt, then the aforementioned provision does not apply.

Article 687 of the Civil Code stipulates that when the debtor goes bankrupt, the guarantor of a general guarantee does not have the right of prior defense, and the creditor can directly claim the guarantee liability from the guarantor.

5. If the creditor transfers all or part of the creditor's rights without notifying the guarantor, the transfer shall not be effective against the guarantor.

Article 696 of the Civil Code stipulates: If the creditor transfers all or part of the creditor's rights without notifying the guarantor, the transfer shall not be effective against the guarantor.

If the creditor transfers part of the creditor's rights without notifying the guarantor, the guarantor shall bear the guarantee liability for the part of the creditor's rights that has not been transferred. That is, the creditor shall claim rights or sue for arbitration to the guarantor during the guarantee period; if the creditor does not claim, the guarantor shall not bear the guarantee liability.

If the creditor transfers all of the creditor's rights without notifying the guarantor, and the assignee of the creditor's rights, not the creditor, claims rights or sues for arbitration to the guarantor during the guarantee period, the guarantor shall not bear any guarantee liability.

6. If the guarantor and the creditor agree to prohibit the transfer of creditor's rights, and the creditor transfers the creditor's rights without the written consent of the guarantor, the guarantor shall no longer bear the guarantee liability to the transferee.

Article 696 of the Civil Code stipulates: If the guarantor and the creditor agree to prohibit the transfer of creditor's rights, and the creditor transfers the creditor's rights without the written consent of the guarantor, the guarantor shall no longer bear the guarantee liability to the transferee.

If the guarantor has a written agreement prohibiting the transfer of creditor's rights, and the creditor transfers the creditor's rights without the written consent of the guarantor, even if the creditor notifies the guarantor, the guarantor shall absolutely not bear any guarantee liability to the transferee. Even if the transferee claims rights or sues for arbitration to the guarantor during the guarantee period, the guarantor shall not bear any guarantee liability to the original creditor or the transferee of the creditor's rights.

7. After the guarantee period, the guarantor's mere signature on the "collection letter" sent by the creditor to the debtor does not constitute a new guarantee.

Supreme People's Court's Reply on How People's Courts Should Determine the Issue of Guarantors Signing on Collection Notices After the Guarantee Period Has Expired: Yunnan, Hebei, Sichuan Provincial Higher People's Courts: Yun Gao Fa Received: [2003] No. 69 "Request for Instructions on How to Determine the Nature and Liability of a Guarantor Who Signs a Collection Notice After the Guarantee Period Has Expired", (2003) Hebei Provincial High People's Court No. 1 "Request for Instructions on How to Determine the Civil Liability of a Guarantor Whose Guarantee Period Has Expired and Who Has Stamped the "Debt Transfer Confirmation Notice" of the China Great Wall Asset Management Company", and Sichuan Higher People's Court [2003] No. 69 "Request for Instructions on the Legal Validity of a Guarantor and Debtor Signing or Stamping a Collection Notice on the Same Day After the Guarantee Period Has Expired".

After review, the following is our reply: According to the provisions of the Guarantee Law of the People's Republic of China, if the guarantee period expires and the creditor fails to assert the guarantee liability against the guarantor in accordance with the law, the guarantee liability is extinguished. After the guarantee liability is extinguished, if the creditor requests the guarantor to assume guarantee liability or repay the debt by written notice, and the guarantor signs the collection notice, the people's court shall not determine that the guarantor continues to assume guarantee liability. However, if the content of the collection notice conforms to the provisions of the Contract Law and the Guarantee Law concerning the establishment of relevant guarantee contracts, and is signed and acknowledged by the guarantor, and a new guarantee contract can be deemed to have been established, the people's court shall determine that the guarantor shall assume liability in accordance with the new guarantee contract.

Article 693 of the Civil Code stipulates: If the creditor of a general guarantee does not bring a lawsuit or apply for arbitration against the debtor during the guarantee period, the guarantor shall no longer bear the guarantee liability. If the creditor of a joint and several liability guarantee does not request the guarantor to bear the guarantee liability during the guarantee period, the guarantor shall no longer bear the guarantee liability. After the guarantee period has expired, the guarantor shall no longer bear the guarantee liability unless the creditor and the guarantor reach a new agreement on the guarantee matter. However, after the guarantee period has expired, the guarantor merely signs a "collection letter" sent by the creditor to the debtor. First, this does not constitute an invitation to guarantee from the creditor; second, the guarantor's mere signature does not constitute an undertaking, and therefore does not constitute a new guarantee.

8. If the creditor allows the debtor to transfer all or part of the debt without the written consent of the guarantor, the guarantor shall no longer bear the guarantee liability for the debt transferred without its consent, unless otherwise agreed between the creditor and the guarantor.

Article 697 of the Civil Code stipulates: If the creditor allows the debtor to transfer all or part of the debt without the written consent of the guarantor, the guarantor shall no longer bear the guarantee liability for the debt transferred without its consent, unless otherwise agreed between the creditor and the guarantor.

The debtor's external transfer of debt requires the consent of both the creditor and the guarantor. If the creditor does not agree to the debtor's transfer of debt, the debt shall not be transferred. If the creditor agrees to the debtor's transfer of debt, but the guarantor does not agree, the debt transfer shall still be effective, but the guarantor shall no longer bear the guarantee liability for the transferred debt.

9. In a general guarantee, if the guarantor provides the creditor with the true situation of the debtor's assets available for execution after the maturity date of the principal debt, and the creditor waives or fails to exercise its right, resulting in the inability to execute such assets, the guarantor shall no longer bear the guarantee liability within the value of the assets it provided for execution.

Article 698 of the Civil Code stipulates: In a general guarantee, if the guarantor provides the creditor with the true situation of the debtor's assets available for execution after the maturity date of the principal debt, and the creditor waives or fails to exercise its right, resulting in the inability to execute such assets, the guarantor shall no longer bear the guarantee liability within the value of the assets it provided for execution.

Banks, as financial institutions, often stipulate in loan and guarantee contracts that the guarantor opens an account with the lending bank. Once the debtor fails to repay the bank loan on time, the lending bank has the right to directly deduct the overdue loan principal and interest from the guarantor's bank account with the lending bank. However, if the debtor or a third party simultaneously provides real estate mortgage to the lending bank, and the bank waives or fails to execute the real estate mortgage for the sake of convenience of execution, the guarantor shall no longer bear the guarantee liability within the value of the mortgaged property.

10. The guarantor may assert the debtor's statute of limitations defense against the creditor. If the debtor waives the statute of limitations defense, the guarantor still has the right to assert the statute of limitations defense against the creditor.

11. If the debtor has the right of set-off or rescission against the creditor, the guarantor may refuse to bear the guarantee liability within the corresponding scope.

12. If the creditor defrauds the guarantor, or the debtor defrauds the guarantor, and the creditor is aware of it, the guarantor may sue to rescind the guarantee.

Article 148 of the Civil Code: If one party uses fraudulent means to induce the other party to enter into a civil legal act against its true intention, the defrauded party has the right to request the people's court or arbitration institution to rescind it.

Article 149: If a third party commits fraud, inducing one party to enter into a civil legal act against its true intention, and the other party knows or should have known of the fraud, the defrauded party has the right to request the people's court or arbitration institution to rescind it.

During the era of the original Guarantee Law, there were also clear provisions for cases where the creditor defrauded the guarantor, or the debtor defrauded the guarantor, and the creditor knew about it. Article 30 of the Guarantee Law: The guarantor shall not bear civil liability under any of the following circumstances:

(1) The principal contract parties collude to deceive the guarantor into providing a guarantee;

(2) The creditor of the principal contract uses fraudulent, coercive or other means to induce the guarantor to provide a guarantee against its true intentions. Article 40 of the Judicial Interpretation of the Guarantee Law: If the debtor of the principal contract uses fraudulent, coercive or other means to induce the guarantor to provide a guarantee against its true intentions, and the creditor knows or should have known of the fraud or coercion, it shall be handled in accordance with the provisions of Article 30 of the Guarantee Law.

In the era of the Civil Code, when the above situations occur, the guarantor may rescind the guarantee behavior through litigation or arbitration.

14. When the mortgage provided by the debtor coexists with the guarantee of the guarantor, the guarantor may be exempted from liability.

Article 409 of the Civil Code: If the debtor sets a mortgage on its own property, and the mortgagee waives the mortgage right, mortgage priority, or changes the mortgage right, other guarantors shall be exempted from guarantee liability within the scope where the mortgagee loses the priority right to claim payment, unless otherwise committed by other guarantors.

This article has been stipulated in Article 194 of the Property Law: If the debtor sets a mortgage on its own property, and the mortgagee waives the mortgage right, mortgage priority, or changes the mortgage right, other guarantors shall be exempted from guarantee liability within the scope where the mortgagee loses the priority right to claim payment, unless otherwise committed by other guarantors.

15. If the main contract is invalid, the guarantee contract is invalid.

Article 8 of the Judicial Interpretation of the Guarantee Law: If the main contract is invalid, resulting in the invalidity of the guarantee contract, and the guarantor is without fault, the guarantor shall not bear civil liability. If the guarantor is at fault, the portion of civil liability borne by the guarantor should not exceed one-third of the portion that the debtor cannot repay.

Article 388 of the Civil Code: If the main principal-debtor contract is invalid, the guarantee contract is invalid, except as otherwise provided by law. After the guarantee contract is deemed invalid, if the debtor, guarantor, or creditor is at fault, they shall bear corresponding civil liability according to their respective faults.

The Civil Code does not stipulate in the guarantee chapter that the invalidation of the main contract leads to the invalidation of the guarantee contract; it is reflected in the general provisions of security interests in Part IV. The Civil Code also stipulates that guarantee contracts include mortgage contracts, pledge contracts, and other contracts with guarantee functions. Lawyers believe that guarantee, as another contract with a guarantee function, can apply this provision.

16. Even during the guarantee period, the guarantee contract's invalidity can restrain the creditor.

Article 33 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China: If the guarantee contract is invalid, and the creditor has not exercised its rights in accordance with the law within the agreed or statutory guarantee period, and the guarantor claims that it should not bear compensation liability, the people's court shall support it.

17. If a branch company provides a guarantee in its own name without a resolution from the company's shareholders' meeting or board of directors, it is invalid.

Article 11 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China   If a branch of a company provides a guarantee in its own name without a resolution from the company's shareholders' meeting or board of directors, and the counterparty requests the company or its branch to assume guarantee liability, the people's court shall not support it, unless the counterparty is unaware and should not be aware that the branch's provision of a guarantee was not carried out through the company's resolution procedure.

18. If a state organ legal person provides a guarantee, the people's court shall deem the guarantee contract invalid.

Article 5 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China: If a state organ legal person provides a guarantee, the people's court shall deem the guarantee contract invalid.

19. The guarantor shall not bear guarantee liability for debts exceeding the scope of liability that the debtor should bear.

Article 3 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China If the parties stipulate special liability for breach of contract regarding the assumption of guarantee liability, or if the agreed scope of guarantee liability exceeds the scope of liability that the debtor should bear, and the guarantor claims to bear liability only within the scope of liability that the debtor should bear, the people's court shall support it.

20. If a residents' committee or villagers' committee provides a guarantee, the people's court shall deem the guarantee contract invalid.

Article 5 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China: If a residents' committee or villagers' committee provides a guarantee, the people's court shall deem the guarantee contract invalid.

21. If a non-profit school, kindergarten, medical institution, nursing home, etc., with a public welfare purpose, provides a guarantee, the people's court shall deem the guarantee contract invalid.

Article 6 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China: If a non-profit school, kindergarten, medical institution, nursing home, etc., with a public welfare purpose, provides a guarantee, the people's court shall deem the guarantee contract invalid.

22. If a legal representative of a company exceeds their authority to represent the company in entering into a guarantee contract with a non-good-faith counterparty, the guarantee contract shall not be effective for the company.

Article 7 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China: If a legal representative of a company violates the provisions of the Company Law concerning the resolution procedure for a company's external guarantee, exceeds their authority to represent the company in entering into a guarantee contract with a counterparty, and the counterparty is not good-faith, the guarantee contract shall not be effective for the company.

23. If there are two or more third parties providing guarantees for the same debt, and there is no agreement among the guarantors on mutual recourse and sharing of liability, and a guarantor who has assumed guarantee liability requests other guarantors to share the portion that cannot be recovered from the debtor, the people's court shall not support it.

Article 13 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China   If there are two or more third parties providing guarantees for the same debt, and the guarantors have agreed on mutual recourse and the sharing of liability, and a guarantor who has assumed guarantee liability requests other guarantors to share the liability according to the agreed share, the people's court shall support it; if the guarantors have agreed to assume joint and several guarantee liability, or have agreed on mutual recourse but have not agreed on the sharing of liability, each guarantor shall share the portion that cannot be recovered from the debtor proportionally.

If there are two or more third parties providing guarantees for the same debt, and the guarantors have not agreed on mutual recourse and have not agreed to assume joint and several guarantee liability, but each guarantor has signed, stamped, or fingerprinted on the same contract, and a guarantor who has assumed guarantee liability requests other guarantors to share the portion that cannot be recovered from the debtor proportionally, the people's court shall support it.

Except for the situations stipulated in the preceding two paragraphs, if a guarantor who has assumed guarantee liability requests other guarantors to share the portion that cannot be recovered from the debtor, the people's court shall not support it.

24. If a guarantor who has assigned a debt right requests other guarantors to assume guarantee liability as a creditor, the people's court shall not support it.

Article 14 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China   If there are two or more third parties providing guarantees for the same debt, and a guarantor assigns the debt right, the people's court shall deem this act as assuming guarantee liability. If a guarantor who has assigned the debt right requests other guarantors to assume guarantee liability as a creditor, the people's court shall not support it; if the guarantor requests other guarantors to share the corresponding share, it shall be handled in accordance with the provisions of Article 13 of this Interpretation.

25. If the debtor repays an old loan with a new loan, the guarantor of the old loan shall not bear liability.

Article 16 of the Supreme People's Court's Interpretation on the Application of the Guarantee System of the Civil Code of the People's Republic of China: If the parties to the main contract agree to repay an old loan with a new loan, and the creditor requests the guarantor of the old loan to assume guarantee liability, the people's court shall not support it.

If the debtor uses a new loan to repay an old loan, and the guarantor of the new loan is different from the guarantor of the old loan and is unaware of the repayment, the guarantor of the new loan shall not bear any responsibility.

Article 16 of the Supreme People's Court's Interpretation on the Application of the Civil Code of the People's Republic of China concerning the Guarantee System   If the principal contract parties agree to repay the old loan with a new loan, and the creditor requests the guarantor of the old loan to bear the guarantee responsibility, the people's court shall not support it; if the creditor requests the guarantor of the new loan to bear the guarantee responsibility, it shall be handled according to the following circumstances:

(1) If the guarantors of the new loan and the old loan are the same, the people's court shall support it;

(2) If the guarantors of the new loan and the old loan are different, or if there is no guarantee for the old loan but there is a guarantee for the new loan, the people's court shall not support it, unless the creditor has evidence to prove that the guarantor of the new loan knew or should have known the fact that the new loan was used to repay the old loan when providing the guarantee.

If the main contract is valid but the guarantee contract provided by the third party is invalid, and the creditor is at fault but the guarantor is not at fault, the guarantor shall not bear the liability for compensation.

If the main contract is invalid, resulting in the invalidity of the guarantee contract provided by the third party, and the guarantor is not at fault, the guarantor shall not bear the liability for compensation.

After the guarantor has assumed the guarantee responsibility, he/she may seek recourse from the debtor, but unless there is an agreement on recourse among other guarantors, he/she cannot seek recourse from other guarantors for the portion that the debtor cannot repay.

A guarantor who bears the responsibility of compensation can only seek recourse from other guarantors after failing to seek recourse from the debtor.

Liu Guixiang (vice-ministerial full-time member of the Supreme People's Court's Judicial Committee) believes in "Several Major Issues Concerning Guarantees in the Civil Code": That is, before a guarantor seeks recourse from other guarantors, should he/she first seek recourse from the principal debtor? Should he/she only seek recourse from other guarantors when unable to seek recourse from the principal debtor? I believe that, in order to avoid the uncertainty and cyclical recourse of seeking recourse from the debtor and other guarantors, it is advisable to seek recourse from the principal debtor first, and then seek recourse from other guarantors for the portion that cannot be recovered from the principal debtor. Of course, in specific litigation, when the guarantor exercises the right of recourse, he/she can sue the principal debtor and other guarantors as co-defendants, and the people's court can clarify the repayment order in its judgment.

In joint guarantees, if the creditor only asserts its rights against some guarantors during the guarantee period, the creditor is not entitled to request other guarantors to repay the guaranteed debt.

Article 29 of the Supreme People's Court's Interpretation on the Application of the Civil Code of the People's Republic of China concerning the Guarantee System: If there are two or more guarantors for the same debt, and the creditor claims that it has already exercised its rights against some guarantors within the guarantee period, claiming that it has already exercised its rights against other guarantors within the guarantee period, the people's court shall not support it.

If there are two or more guarantors with mutual rights of recourse, and the creditor has not exercised its rights against some guarantors within the guarantee period, resulting in the loss of the right of recourse by other guarantors after assuming the guarantee responsibility, the other guarantors have the right to claim exemption from guarantee responsibility to the extent that they cannot seek recourse.

If the principal debt is reaffirmed, the principal debtor loses the right to defend against the original statute of limitations, and the statute of limitations for the principal debt is recalculated due to interruption. The reaffirmation of the principal debt does not affect the guarantor's right to enjoy and exercise the statute of limitations defense against the principal debt.

If the guarantee contract stipulates that the guarantor shall bear the guarantee responsibility until the principal and interest of the principal debt are repaid, the guarantee period shall be six months from the date of expiration of the performance period of the principal debt. If the creditor claims rights from the guarantor after the expiration of the above six months, the guarantor shall not bear the responsibility. 。

If the creditor of a general guarantee files a lawsuit or applies for arbitration against the debtor during the guarantee period and then withdraws the lawsuit or arbitration application, and the creditor does not file a lawsuit or apply for arbitration again before the expiration of the guarantee period, and the guarantor claims that he/she no longer bears the guarantee responsibility, the people's court shall support it.

If the creditor of a joint and several liability guarantee files a lawsuit or applies for arbitration against the guarantor during the guarantee period and then withdraws the lawsuit or arbitration application, and the copy of the writ of summons or the arbitration application has not been served on the guarantor, and the creditor does not file a lawsuit or apply for arbitration again before the expiration of the guarantee period, and the guarantor claims that he/she no longer bears the guarantee responsibility, the people's court shall support it.

If the creditor claims the unpaid portion from the guarantor six months after the conclusion of the bankruptcy proceedings, the people's court shall not support it. 。

If the creditor knows or should know that the debtor is bankrupt, but neither reports the claim nor notifies the guarantor, resulting in the guarantor's inability to exercise the right of recourse in advance, the guarantor shall be exempted from the guarantee responsibility within the scope of the creditor's possible recovery in the bankruptcy proceedings.

In a mixed guarantee where a guarantee is provided by a third party and real estate mortgage is provided by the debtor himself/herself, if the creditor, without the consent of the guarantor, cancels the mortgage registration for the debtor and accepts other mortgage guarantees provided by the debtor, it shall still be considered that the creditor has waived the debtor's guarantee, and the guarantor shall be exempted from the guarantee responsibility within the corresponding scope. 。

According to Article 194 of the Property Law "If the debtor sets a mortgage on his/her own property, and the mortgagee waives the mortgage right, the mortgage priority, or changes the mortgage right, other guarantors shall be exempted from the guarantee responsibility within the scope where the mortgagee loses the priority right to be compensated, except for other guarantors who promise to continue providing the guarantee." In the absence of any evidence or claim by the Construction Bank of Daqing Branch that guarantors such as Shi Lijing committed to continuing to bear the guarantee responsibility when the mortgage was lifted, the guarantee responsibility of Shi Lijing and other guarantors within the scope of the priority right to be compensated for the 1256 mortgaged houses involved in the case by the Construction Bank of Daqing Branch should be exempted. Case source: (2018) Highest People's Court Min Zhong 966.

If the creditor's fault causes the loss of the property guarantee, it is deemed to be a waiver of the property guarantee. Because it damages the guarantor's priority reliance interest, the guarantor shall be exempted from the guarantee responsibility within the scope of the creditor's loss of priority right to be compensated (within the scope of the property guarantee).

Judgment Summary: In this case, the creditor's fault caused the loss of the property guarantee, and it failed to fulfill its duty of due diligence, which is deemed to be a waiver of the property guarantee, and the guarantor shall be exempted from the guarantee responsibility within the scope of the creditor's loss of priority right to be compensated (within the scope of the property guarantee). Given that the scope of the guarantor's guarantee is A loan of 1.2 million yuan in principal and interest, while the collateral involved in the case was sold by the debtor to a third party for 1.5 million yuan. The value of the collateral exceeds the guaranteed amount; therefore, the guarantor is not liable for any responsibility. Case Source: Hebei High Court "[Case Commentary] Creditor waives collateral security, guarantor is exempt from liability within the scope of collateral security."

41. If the creditor fails to establish collateral security for the debtor in accordance with the agreement, the guarantor with legitimate reliance interest is exempt from liability.

Summary of the ruling: If the guarantor provides a joint and several liability guarantee for the debt only after learning that the debtor and creditor have signed a pledge contract (and the guarantee contract does not stipulate the order of debt recovery), but the creditor subsequently fails to request the debtor to deliver the pledged property, resulting in the failure to establish the pledge right, it should be determined that the guarantor enjoys a sequential reliance interest, and is entitled to be exempted from guarantee liability within the value range where the pledge right cannot be established. Case Source: ( 2017) Supreme People’s Court (2017) Min Shen No. 925.

42. Where there is both personal guarantee and collateral guarantee on the same debt, and the joint fault of the creditor and debtor leads to the failure to establish the pledge right that should have been established by law, and the guarantor is without fault, the creditor should bear the adverse consequences for the failure to establish the pledge right.

Summary of Ruling: In mixed collateral, if the property right provided by the debtor is not established, whether other guarantors can be exempted from liability within the scope of the collateral debt should be determined based on factors such as the fault of the creditor and principal debtor, whether the guarantor has any fault, and whether the parties have any agreement on the order of debt recovery. Based on good faith, fairness and the ultimate responsibility of the debtor, a comprehensive judgment should be made on whether to protect the guarantor’s reasonable sequential reliance interest.

The joint fault of the creditor and the debtor leads to the failure to establish a legally established pledge, the debtor should bear the liability for breach of contract due to the failure to establish the pledge, and the creditor’s failure to request delivery and supervision of the collateral should be regarded as a waiver of the pledge right. Article 176 of the Property Law clearly stipulates the order of debt recovery when both collateral provided by the debtor and personal guarantee provided by a third party exist. The guarantor has a reasonable reliance on the priority repayment of the debtor's collateral. The creditor's waiver of the pledge right harms the guarantor’s sequential reliance interest, and the guarantor shall be exempted from guarantee liability within the scope of the pledgor’s loss of priority right to payment in accordance with Article 218 of the Property Law. Case Source: Supreme People’s Court Bulletin, 2018, No. 1, published the judgment of the Supreme People’s Court (2017) Min Shen No. 925.

43. If the creditor explicitly waives the guarantee liability of some guarantors, the liability of other guarantors shall be reduced accordingly.

44. In a joint and several liability guarantee, when the creditor only claims rights against the principal debtor and not against the guarantor, the statute of limitations for the guarantee debt shall not be interrupted due to the interruption of the statute of limitations for the principal debt. If the creditor claims guarantee liability from the guarantor after the guarantee statute of limitations has expired, the People’s Court shall not support the claim.

45. If the creditor knows that the renewed loan funds are used to repay the bridge loan, it should also be considered as "borrowing new to repay old," and the guarantor is exempt from liability.

The method of repaying old loans with bridge loan funds and then repaying the bridge loan with new loans (renewal loan funds) does not change the substance of the borrower using new loans to repay old loans due to the involvement of bridge loans, and should be deemed as borrowing new to repay old, applying the rules of borrowing new to repay old. If the guarantor does not know that it is borrowing new to repay old, the guarantor is exempt from liability, except for the guarantor of the old loan.

In summary, under the background of the Civil Code, the legal risks of creditors' external borrowing are far greater than those of guarantors.