Study On The Nature And Validity Of The Guarantee Contract

In recent years,a popular guarantee method appears in private lending:the debtor and creditor sign another guarantee contract besides the loan contract,which will be executed if the debtor fails to pay off the debts before the agreed deadline,where the creditor will own the debtor's property.In practice,different courts hold different opinions on the nature and validity of the guarantee contract,which is fully reflected by the totally opposite adjudications of two Supreme Courts on“Zhu Junfang Case" and"Jiamei Case".In order to unify the judicial adjudications and protect the interests of the parties involved,the Article 24 of 'Judicial Interpretation of Private Lending' issued on Sep.1st of 2015 defines some regulations on this guarantee contract and stipulates that this kind of case should be defined as private lending dispute,but without any further detail on the nature and validity of such contracts.Even though the parties involved in the guarantee contract would like to acquire the property guarantee,according to the law and the nature of ownership,the parties haven' t registered or transferred the ownership,which means it is only written in the contract but invalid.Moreover,to respect the autonomy and balance the interests of the parties,the guarantee contract doesn' t have to be interpreted as ownership guarantee,while it is more reasonable to be explained as datio in solutum.Such kind of contract is related to selling and purchasing on the surface but in fact is datio in solutum which can also be considered as a guarantee.Datio in solutum is the same with fluidity clause,which should be controlled by the prohibitions.However,the prohibitions won't make datio in solutum totally invalid,just like fluidity clause won' t affect the validity of the guarantee contract,only needing to add a liquidation process which is also defined in the 2nd term of the Article 24 of'Judicial Interpretation of Private Lending'.On the other hand,under the Article 24,it won' t happen that one party hides the real meaning and thus causes invalid expression.Based on the above,the guarantee contract won' t become invalid for the reason of prohibitions of fluidity clause or fault meanings.The parities involved in the guarantee contract haven't defined the ownership or performed any publicity such as mortgage registration,with no effect against the third party or details disclosed to others.The guarantee contract is only a guarantee on the debts whose function is realized by the price fluctuation of the property,without any effect of priority right to be repaid or lien.