Several Changes of Guarantee Rules in Civil Code
2021. 3. 22
Several Changes of Guarantee Rules in Civil Code
Change I: If the guarantee mode is "not agreed or unclear", it shall be treated as a general guarantee.
Background information: In daily life, the receipt for a loan written by the parties is often relatively simple. It only has three Chinese characters which mean "guarantor" in the place of a signature, the specific personnel will sign and seal under the characters of “guarantor”, instead of agreeing on the guarantee method in the main part of the receipt for a loan.
Before the implementation of the Civil Code: In practice, it was presumed that the guarantee under this case shall be a joint and several liability guarantee.
After the implementation of the Civil Code: The right and obligation of the parties shall be determined according to a general guarantee.
Legal Basis: Article 686 of the Civil Code:
The forms of guarantee include general guarantee and joint and several liability guarantee.
In the absence of agreement or if the agreement is not clear on the guarantee mode in a guarantee contract, the parties shall bear the guarantee liability according to the general guarantee.
Change II: The change of guarantee term
Before the implementation of the Civil Code: The guarantee period of two years
After the implementation of the Civil Code: If there is no agreement or such agreement is unclear, a period of six months shall be applied uniformly.
Legal Basis: The Second Paragraph of Article 692 of the Civil Code:
The creditor and the guarantor may agree on the guarantee term, however, if the stipulated term of guarantee expires earlier than the term for performing the principal obligation or at the same time as the term for performing the principal obligation, such term shall be deemed to have not been agreed; if there is no agreement or such agreement is unclear, the guarantee term shall be six months from the date of expiration of the term for performing the principal obligation.
Change III: The exceptions that the guarantor of a general guarantee refusing to undertake the guarantee liability are added
The added exceptions after the implementation of the Civil Code: 1. The whereabouts of the debtor is unknown and there is no property available for enforcement. 2. The creditor has evidence to prove that the debtor’s property is insufficient to perform all the debt obligations or the debtor has lost the capacity to discharge the debts, the guarantor shall not claim the right of plea for preference claims.
Legal Basis: The Second Paragraph of Article 687 of the Civil Code:
The guarantor under a general guarantee shall have the right to refuse to assume guarantee liability to the creditor before a dispute concerning the principal contract has been adjudicated or arbitrated and when such debtor has failed to perform his obligation despite enforcement against his property in accordance with the law, except under any of the following circumstances:
(I)The whereabouts of the debtor is unknown and there is no property available for enforcement;
(II) The people's court has accepted the debtor's bankruptcy case;
(III) The creditor has evidence to prove that the debtor's property is insufficient to perform all the debt obligations or the debtor has lost the capacity to discharge the debts; or
(IV) The guarantor expresses in writing to waive his right as stipulated in this paragraph.
Change IV: The creditor shall notify the guarantor to assign the creditor's rights, otherwise, such assignment shall be of no effect on the guarantor.
Before the implementation of the Civil Code: There was no necessity for notifying. During the guarantee term, if the creditor assigned the creditor's rights in accordance with the law, the guarantor shall continue to undertake the guarantee responsibility within the scope of the original guarantee.
After the implementation of the Civil Code: The notifying is necessary, otherwise, the assignment shall be of no effect on the guarantor.
Legal Basis: Article 696 of the Civil Code:
Where the creditor assigns all or part of the claim without notifying the guarantor, the assignment shall be of no effect on the guarantor.
If the guarantor and the creditor agree to prohibit the assignment of the claim, and the creditor assigns the claim without the written consent of the guarantor, the guarantor no longer bears guarantee liability for the assignee.
