If necessary and possible, agree on terms of guarantee - World Credit Organization

7.9 If necessary and possible, agree on guarantee terms

If necessary and possible, the parties to the contract can agree on guarantee clauses to guard against contract risks. Guarantee clauses agreed in our country or guarantee contracts where the two parties agree to use Chinese law as the applicable law must be carried out in accordance with the "Guarantee Law of the People's Republic of China", otherwise, the guarantee clauses may be invalid.

According to the "Guarantee Law of the People's Republic of China", there are five types of guarantee methods: guarantee, mortgage, pledge, lien, and deposit. Below we discuss the precautions for each guarantee method.

7.9.1 Guarantee

Guarantee refers to the agreement between the guarantor and the creditor that when the debtor fails to perform the debt, the guarantor will perform the debt or assume responsibility according to the agreement.

1. When guaranteeing a guarantee, it should be checked whether the guarantor is qualified for guarantee.

A legal person, other organization or citizen who has the ability to pay off debts on behalf of others may act as a guarantor. But be aware of the following special cases.

1. State agencies shall not be guarantors, except those that are approved by the State Council to use loans from foreign governments or international economic organizations for on-lending.

2. Schools, kindergartens, hospitals and other public institutions and social groups shall not be guarantors.

3. Branches and functional departments of an enterprise legal person shall not be guarantors. If a branch of an enterprise legal person has written authorization from the legal person, it may provide guarantee within the scope of authorization.

4. A natural person without capacity for civil conduct shall not serve as a guarantor.

Second, when guaranteeing a guarantee, it should be examined whether the guarantee contract conforms to the statutory form.

The guarantor and the creditor shall enter into a guaranty contract in writing. The parties can be a written contract concluded separately, including letters and faxes between the parties with a guarantee nature, or it can be a guarantee clause in the main contract. However, the parties cannot use an oral security agreement.

In addition, the guarantee contract should include the following contents:

1. The type and amount of guaranteed main creditor's rights;

2. The time limit for the debtor to perform the debt;

3. The way of guarantee;

4. The scope of guarantee guarantee;

5. The period of guarantee;

6. Other matters that both parties think need to be agreed upon.

Where the guarantee contract does not fully meet the contents specified in the preceding paragraph, it may be amended.

3. When guaranteeing a guarantee, it should be examined whether the guarantee method meets the needs of risk prevention.

Guaranteed ways are:

1. General Warranty

If the parties agree in the guaranty contract that when the debtor fails to perform the debt, the guarantor shall bear the guaranty responsibility, which is a general guaranty.

The guarantor of a general guaranty may refuse to undertake the guaranty liability to the creditor before the main contract dispute has not been tried or arbitrated, and the debtor's property has been enforced according to the law and the debt cannot be performed.

2. Joint liability guarantee

If the parties agree in the guaranty contract that the guarantor and the debtor shall bear joint and several liabilities for the debt, it is a joint and several liability guaranty.

If the debtor of the joint liability guarantee fails to perform the debt at the expiration of the debt performance period stipulated in the main contract, the creditor may require the debtor to perform the debt, or require the guarantor to undertake the guarantee responsibility within the scope of its guarantee.

7.9.2 Mortgage

Collateral means that the debtor or a third party does not transfer the possession of the property, and uses the property as a guarantee for the creditor's right. When the debtor fails to perform its obligations, the creditor has the right to receive preferential repayment from the price of the property or the proceeds from the auction or sale of the property.

The above-mentioned debtor or third party is the mortgagor, the creditor is the mortgagee, and the property provided as guarantee is the mortgage.

1. When mortgage guarantee, it should be checked whether the property can be mortgaged.

(1) The following properties can be mortgaged:

1. The house and other ground fixtures owned by the mortgagor;

2. Machines, vehicles and other properties owned by the mortgagor;

3. State-owned land use rights, houses and other ground fixtures that the mortgagor has the right to dispose of according to law;

4. State-owned machines, means of transportation and other properties that the mortgagor has the right to dispose of according to law;

5. The land use rights of barren hills, ditches, hills, beaches and other barren lands contracted by the mortgagor in accordance with the law and approved by the contract issuing party;

6. Other property that can be mortgaged according to law.

The mortgagor may mortgage the properties listed in the preceding paragraph together.

(2) The following properties shall not be mortgaged:

1. Land ownership;

2. Collectively-owned land use rights such as cultivated land, homesteads, private plots, private hills, etc., but Item 5 of Article 34 of the Guarantee Law of the Mortgaged barren hills, barren ditches, barren hills, barren beaches and other wasteland land use rights), Article 36 Paragraph 3 (that is, the land use rights of townships (towns) and village enterprises shall not be mortgaged separately. Township (town) ), factory buildings and other buildings of village enterprises, the land use rights within the occupied area shall be mortgaged at the same time.) except as stipulated;

3. Schools, kindergartens, hospitals and other institutions for the purpose of public welfare, educational facilities, medical and health facilities and other social public welfare facilities of social groups;

4. Properties whose ownership and use rights are unclear or disputed;

5. Property that has been sealed up, seized and supervised according to law;

6. Other properties that cannot be mortgaged according to law.

Second, when mortgaging as a guarantee, it should be examined whether registration of the mortgaged property should be carried out.

Where the following properties are mortgaged, registration of the mortgaged property shall be carried out, and the mortgage contract shall become effective from the date of registration.

1. If the land use right without fixed objects on the ground is mortgaged, the land management department that issues the land use right certificate;

2. For the mortgage of urban real estate or factory buildings of township (town) and village enterprises, it shall be the department prescribed by the local people's government at or above the county level;

5. If the equipment and other movable properties of the enterprise are mortgaged, it shall be the administrative department for industry and commerce in the place where the property is located.

If the parties mortgage other properties than the above-mentioned properties, they can voluntarily register the mortgaged property, and the mortgage contract will become effective from the date of signing. If the party fails to register the mortgaged property, it shall not confront the third party. If the parties handle the registration of the mortgaged property, the registration department shall be the notary department in the place where the mortgagor is located.

Third, when mortgaging as a guarantee, it should be examined whether the mortgage contract conforms to the statutory form.

The mortgagor and the mortgagee shall enter into a mortgage contract in writing. The parties can be a written contract concluded separately, including letters and faxes between the parties with a guarantee nature, or it can be a guarantee clause in the main contract. However, the parties cannot use an oral security agreement.

In addition, the mortgage contract should include the following:

1. The type and amount of the guaranteed main creditor's right;

2. The time limit for the debtor to perform the debt;

3. The name, quantity, quality, condition, location, ownership or use right of the mortgaged property;

4. The scope of mortgage guarantee;

5. Other matters that the parties deem necessary to agree on.

If the mortgage contract does not fully meet the requirements of the preceding paragraph, it may be supplemented.

7.9.3 Staking

Pledge is divided into movable property pledge and right pledge, which means that the debtor or a third party transfers its movable property or rights exercise right to the creditor for possession, and uses the movable property or right exercise right as the guarantee of creditor's rights. When the debtor fails to perform its obligations, the creditor has the right to receive priority repayment from the price of the movable property or the proceeds from the auction or sale of the movable property or the proceeds from exercising relevant rights.

The above-mentioned debtor or third party is the pledger, the creditor is the pledgee, the transferred movable property is the pledge, and the transferred right exercise certificate is the pledge.

1. When pledged as a guarantee, it should be reviewed whether the pledge contract conforms to the statutory form.

The pledger and the pledgee shall enter into a pledge contract in writing. The parties can be a written contract concluded separately, including letters and faxes between the parties with a guarantee nature, or it can be a guarantee clause in the main contract. However, the parties cannot use an oral security agreement.

In addition, the pledge contract should include the following:

1. The type and amount of the guaranteed main creditor's right;

2. The time limit for the debtor to perform the debt;

3. The name, quantity, quality and condition of the pledged substance;

4. The scope of pledge guarantee;

5. The time for the transfer of pledges;

6. Other matters that the parties deem necessary to agree on.

Where the pledge contract does not fully meet the provisions of the preceding paragraph, it may be amended.

2. When pledged as a guarantee, it should be reviewed whether it is necessary to register with the relevant unit and the effective time of the pledge contract.

1. When chattels are pledged, there is no need to register with the relevant units. The pledge contract becomes effective when the pledged property is handed over to the pledgee.

2. If a bill of exchange, check, promissory note, bond, deposit receipt, warehouse receipt, or bill of lading is pledged, the title certificate shall be delivered to the pledgee within the time limit stipulated in the contract. The pledge contract becomes effective on the date of delivery of the certificate of title.

3. For the pledge of legally transferable stocks, the pledgor and the pledgee shall sign a written contract and register the pledge with the securities registration authority. The pledge contract becomes effective from the date of registration.

4. If the shares of a limited liability company are pledged, the relevant provisions of the Company Law on the transfer of shares shall apply. The pledge contract becomes effective from the date when the pledged shares are recorded in the register of shareholders.

5. For the pledge of property rights in trademark rights, patent rights, and copyrights that can be transferred according to law, the pledgor and the pledgee should sign a written contract and register the pledge with its management department. The pledge contract becomes effective from the date of registration.

7.9.4 Lien

If the debtor fails to perform the debt due to the creditor's rights arising from the storage contract, transportation contract, or processing contract, the creditor has the right of lien. A lien is a statutory power that can be possessed without agreement. However, the parties may agree in the contract that the property shall not be retained.

1. For contracts that generate lien rights (storage contracts, transportation contracts, processing contracts), it is necessary to examine whether it is necessary to stipulate the things that cannot be retained.

If the value of the relevant object is too high or special, the parties may agree that part of the object shall not be retained.

Second, for the contracts (storage contracts, transportation contracts, and processing contracts) that generate the lien, it should be checked whether the lien period has been agreed.

The creditor and the debtor shall agree in the contract that after the creditor retains the property, the debtor shall perform the debt within a period of not less than two months. If there is no agreement between the creditor and the debtor in the contract, after the creditor retains the debtor's property, it shall fix a time limit of more than two months and notify the debtor to perform the debt within the time limit.

7.9.5 Deposit

The parties may agree that one party shall pay a deposit to the other party as a guarantee for the claim. After the debtor performs the debt, the deposit shall be offset against the price or recovered. If the party paying the deposit fails to perform the agreed debt, it has no right to demand the return of the deposit; if the party receiving the deposit fails to perform the agreed debt, it shall return double the deposit.

1. For the deposit contract or the deposit clause, it should be checked whether it conforms to the statutory form.

The deposit should be agreed in writing. The parties shall agree on the time limit for paying the deposit in the deposit contract. The deposit contract becomes effective from the date of actual delivery of the deposit.

Second, for the deposit contract or deposit clause, it should be checked whether the amount exceeds the legal limit.

The above content is excerpted from "Building an Integrity Unit - ICE8000 Integrity Management" (written by Fang Bangjian, free to use, but please indicate the source)