Analysis Of The Case Of Inter-enterprise Loan Contracts

Except for a handful of cases, most courts generally recognized Inter-Enterprise Loan Contracts to be invalid. However, the standard of cognizing is still to be confusion. And the treatment about the interest is also thought to be unreasonable. In this article, we will discuss a case which leads to the problem of the validity of Inter-Enterprise Loan Contracts. In the first and second instance, the courts have different attitudes about this Inter-Enterprise Loan Contract. The Court of First Instance hold the following attitude:the loan agreement is the true meaning of both parties, which does not violate the mandatory provisions of laws and administrative regulations. Hereby, the agreement is legal and effective. In the opposite, the court of second-instance holds the Inter-Enterprise Loan Contracts to be invalid but they agree with the treatment of interests and overdue fees. However, about the interests and overdue fees, they changed a way of expression:the loss because of embezzlement. According to this case, we have a series of queries:why the Inter-Enterprise Loan Contracts are mostly regard to be invalid in judicial practice? Is the argument adequate? How about the opinion of other market economy countries? Whether the risk can be controlled or not if our country admit the Inter-Enterprise Loan Contracts?In Judicial practice, recognizing Inter-Enterprise Loan Contracts to be invalid is based on the " General Rules on Loans" of People’s Bank of China and Supreme People’s Court related judicial interpretation in1990s. As "Contract Law" implemented, Supreme Court’s judicial interpretation on "Contract Law" Ⅰ" Provided that invalidating a contract shall be based on laws enacted by the NPC and its Standing Committee and the State Council administrative regulations; Supreme Court’s judicial interpretation on "Contract Law" Ⅱ even recognize the mandatory provisions On the validity of the contract as effectively mandatory provisions. Hereby,’General Rules on Loans" and other related judicial interpretations could not be used to the basis of the contract invalid cognizance.Inter-enterprise lending is a contract behavior, therefore, we recognize the contract to be valid should be based on the provisions of Article52of the "Contract Law". With the deepening of China’s reform and opening up and the developing market economy, the idea of judicial philosophy and the social environment is also changing. Thus, the former Policy and judicial interpretations of with a strong planned economy idea has been difficult to adapt to social development. The provisions on contract validity cognizance in "Contract Law","Company Law" and other normative documents have become mollification. By learning from the system design of Inter-Enterprise Loan Contracts in developed market economy countries, examining the legal basis of cognizing Inter-Enterprise Loan Contracts invalid, and analyzing from multi-angle of the realistic reason of Inter-Enterprise Loan, the value and efficiency of law and the Contract Freedom Principle, we can draw such a conclusion:to cognize the validity of Inter-Enterprise Loan Contracts, we should recognize it as valid in principle, and recognize it to be void or voidable as an exception.Progressively liberalizing the Inter-Enterprise Loan is the general trend of development although it will undertake a very big risk undoubtedly. In the last part of this article, we will think about the risk prevention after liberalizing the Inter-Enterprise Loan, and we will also try to propose some shallow recommendations about how to establish the regulatory mechanism.