Study On The Validity Of Oral Guarantee Contract

The validity of oral guarantee contract is controversial both in the fields of theoryand judicial practice.And furthermore, provisions of this issue are not definite in theexisting laws and regulations. Although Article13of “Guarantee Law” of Chinaprovides that a guarantee contract should be in written form, there is not an apparentlegal consequence when the relative parties do not adopt the right form regulated bythe law. And by using the word “should” in the expression of Article13, it createsgreat divergences for interpretation, resulting in wide difference between thejudgments of similar cases referee.In this paper, reasons for different recognitions of “Guarantee Law” Article13are summed up based on the collation and analysis of judgments related to the validityof oral guarantee contracts. Then this paper judges the nature of Article13through theemployment of literal interpretation and teleological interpretation. In addition, it willmake an evaluation of the provision accordingly. Besides the introduction, this paperis divided into the following sections:Part I: The analysis of controversial cases. Comparing two cases related to thevalidity of oral guarantee contract, we not only know that there are many differentarguments holded by the judges in the fields of judicial practice, but also recognizereasons for such differences. And ultimately, this section will point out that the key tosolve this issue is how to identify the character of the “Guarantee Law” Article13.Part II: Judgement on the nature of “Guarantee Law” Article13. To draw aconclusion that what is the nature of Article13, this paper lists out all of theperspectives. Then through the employment of literal interpretation, teleologicalinterpretation, systematic interpretations, we can reach a conclusion that Article13isa mandatory norm.Part III: Legislative defects of formal compulsion on oral guarantee contract.Based on the conclusion that “Guarantee Law” Article13is a mandatory norm, thispart will evaluate this provision, and point out that the range of formal compulsion inChinese legislation on guarantee contracts is so broad that it also leads to someguarantee contracts into the form of mandatory range which are unnecessary to betaken. Besides that, disadvantages caused by the unified legislative model can not be abated by applying the principles of “cure by performance rule” and “good faithdoctrine”.Part IV: Investigation for the guarantee contract of formal compulsion incomparative law. Compared to Chinese guarantee law on guarantee contracts whotakes a unified legislative model, extraterritorial states are more on the type thatdifferent types of guarantee contracts are required to take different forms. And intheir regulations,“standard of the subject” and “principle of the profit” are the basisfor their classification.Part V: Categorizing analysis on the guarantee contract of compulsory form. Byapplying two criteria above, the author considers that guarantee contract should bedivided into two kinds: commitment provided by the natural and non natural person,and the former should also be divided into paid and unpaid. Finally, in this section, itwill reach a conclusion that only naked guarantee contracts in which natural personact as a guarantor to be taken form of mandatory is reasonable.Part VI: Conclusion. Based on the analysis above, in term of interpretative theory,it is clear that the “Guarantee Law” Article13is a mandatory norm. Based on existinglegislation, judges shall deny the validity of oral guarantee contracts. Meanwhile,there is a flaw that formal compulsion can only be applied to naked guarantee contractin which natural person acts as a guarantor. So in term of legislative theory, guaranteecontract should be divided into commitment provided by the natural and non naturalperson, and the former should be divided into paid and unpaid.