"Haworth & Lexon Law Newsletter" is issued every month, mainly introducing the legal change in the fields of Corporate, Securities, Foreign investment, Intellectual property rights, International trade etc. with necessary comment. All the comments do not mean the legal opinion of our firm and the firm does not have any legal liability for such comment. Should you have any interest in any topics or any questions please feel free to contact the firm. You will be expected to have satisfactory response from the professional attorney of our firm.
Guidelines
?News of Haworth & Lexon
Miss Kitty Ling joined Haworth & Lexon recently, which promotes Haworth & Lexon's legal services in the areas of Large Project Construction, Real Estate Development, Construction, Corporate Management and etc
?Latest Laws and Regulations
Amendments to the Criminal Law of the People's Republic of China (VI)
Measures for Supervision on Processing Trade Enterprises through Network by China Customs
Measures for Administration for the Margin Financing and Securities Lending Business of Securities Companies on Trail Basis
Provisions on Banning the Entry into the Securities Market
Opinion of the State-owned Assets Supervision and Administration Commission of shanghai Municipality on the implementation of <Circular of General Office of the State Council on Distributing the Notice of State-owned Assets Supervision and Administration Commission on further Standardizing the Reform of State-owned enterprises (Trial)
Measures of China Securities Regulatory Commission for the Implementation of Freezing and Sealing-up
?IP Cases
The Compromise Made by the Parties in the Settlement Agreement shall not be used as Evidence Unfavorable to Him Thereafter
Using a Name Known by the Public as the Name of A Service and Business Place is Proper Use
Links Providing Searching Results shall not be Deemed as Infringement of Right to Network Dissemination of Information
There are Special Conditions for Confirming Non-infringement of Trademark
Lessee shall not be Liable for Infringement of Trademark by Leased Assets
?Case Analysis
The Existing Guaranty Relationship shall not be Affected by Joining of A New Guarantor
News of Haworth & Lexon
Miss Kitty Ling joined Haworth & Lexon recently, which promotes Haworth & Lexon ' s legal services in the areas of Large Project Construction, Real Estate Development, Construction, Corporate Management and etc.
Miss Kitty Ling obtained her LLB degree from East China University of Politics and Law, and then went to University of Technology , Sydney , to pursue her legal study for the Master ' s Degree, and once worked in Shanghai City Development Law Firm as a partner. She is experienced in Large Project Construction, Real Estate Development, Construction, Banking, and Corporate Management. She once provided legal service for the construction of a Shanghai Telecom Park Project, legal opinions for an investing company on BOT of water factory, and legal service, including drafting documents, negotiation and dealing with formalities of guaranty, for the acquisition and transfer of an electricity factory by a foreign financial institution. She also provided legal service with Salans Shanghai Representative Office for the transfer of an under-construction project of a well-known Shanghai international school. She represented to deal with the litigation of construction contract dispute with the amount of RMB 100,000,000, and won the litigation at last. Her major clients include HSBC Shanghai Branch, China Ping An Property & Casualty Insurance ( Shanghai ) Co., Ltd., Great Pacific Financial Group, HK Plaza, Savills Property Services ( China ) Co., Ltd. ?Shanghai, Chinese-Polish Joint Stock Shipping Company, China Construction First Group Corporation Limited, Shanghai Jingrui Development Co., Ltd., Shanghai Lixing Real Estate Co., Led. She was also invited by Singaporean Chamber of Commerce of Shanghai to present a speech to the Singaporean companies in Shanghai .
Latest Laws and Regulations
Amendments to the Criminal Law of the People's Republic of China (VI)
1 Article 161 is crime of offering false financial statements. According to the new regulations, the subject of this crime is 揳ny company or enterprises which is obliged to disclose information? and the objective respect of the crime is 損roviding any false financial and accounting statements or concealing any important facts in such statements or failure to disclose any other important information that shall be disclosed according to law so that the interests of the shareholders or any other person are severely injured, or where there are other severe circumstances?
2 Article 162 is crime of disturbing liquidation. The subject of this crime is 揳ny company or enterprise? There are three behaviors that may constitute this crime, which are ( 1 ) concealing properties; ( 2 ) undertaking fabricated debts; ( 3 ) transfer or disposing of its properties by any other means or goes through false bankruptcy, and which makes the interests of the creditors or any other person severely injured. Then the person-in-charge or any other directly liable person shall be punished.
3 In Article 163 and Article 164, the subject of crime of accepting a bribery and the object of crime of giving a bribery are both extended to the personnel of companies, enterprises or other entities.
4 There is an insertion to Article 169, which provides that if a director, supervisor, a senior manager of a listed company violates fiduciary duty, goes against his fiduciary duty to the company and takes advantage of his position to manipulate the listed company, then he will be punished. The specific misdeed includes but not limited to Providing any fund, commodity, service or any other asset gratuitously to any other entity or individual; Waiving any credit or undertaking any debt without justifiable reasons; Providing any fund, commodity or guarantee to any entity or individual who obviously does not have the ability of repayment, or providing guarantee to any other entity or individual.
5 The amended Article 182 extends 揷rime of manipulating securities trading?to 揷rime of manipulating securities and futures trading? It only requires 搒erious?as the circumstances of crime, and 搕he purpose of obtaining illegitimate profits or transferring risks?is not a requirement any more.
6 An article is inserted after former Article 185 called crimes of appropriating funds and crimes of appropriating public funds for personal use, which stipulates: where any commercial bank, stock exchange, futures exchange, securities company, futures brokering company, insurance company, or any other financial institution violates its fiduciary duty, unlawfully utilizes the funds or any other entrusted property of its clients, the entity thus has offended the criminal law. Punishment shall be imposed upon the entity, and the persons-in-charge who are held to be directly responsible as well as other directly liable persons shall be punished.
Measures for Supervision on Processing Trade Enterprises through Network by China Customs
揗easures for Supervision on Processing Trade Enterprises through Network by China Customs?was promulgated on June 14, 2006 and came into force on August 1, 2006.
The supervision on processing trade enterprises through network by the customs means that a supervision way that the processing trade enterprises report and deliver the requested and satisfactory data on logistic and production and business to the customs by means of data exchange platform of other network, and the customs check and assess the data and then rectify with the relevant objects.
The processing trade enterprises who apply for implementation of shall meet the following conditions: has capacity of processing and trading; registered at the customs; and is a production enterprise.
The customs should set up electronic ins and outs account according to the materials the on-line corporation s have sent and implement the management towards the electronic account.
Measures for Administration for the Margin Financing and Securities Lending Business of Securities Companies on Trail Basis
Margin financing and securities lending business refers to business activities lending funds to clients for buying securities or lending securities to clients for selling out by them, and collect collateral accordingly.
In order to carry out such business, there are many requirements for the securities, subject to approval of CSRC. Some requirements are made on corporate governance and finance, and some are on directors, supervisors and senior managements.
The Measures provides that when the securities company carry out the business, it shall, in its own name, open a stocks special-purpose securities account, the customer guarantees securities account, the credit trade securities account and the credit trade fund account. What's more, the company should separately open the special-purpose fund account of financing and the guarantee fund account for customer's credit trade in the commercial bank in its own name.
The Measures also provides that the securities company shall charge a deposit proportionately in margin financing and securities lending. Securities can be used as deposit. Securities Company shall preserve the deposit separately from the securities which are bought by the financed funds and the funds which are acquired from the selling of financed securities. The securities company should also calculate the proportion of the value of the collateral which the customer deposits with the debt owed day by day. If the proportion is lower than the lowest guarantee maintenance proportion, the securities company should notify the customer to mend the deficit within certain time limit. The securities company should deal with the guarantee according to the agreement immediately, in the event that clients fail to pay adequate money on schedule or repay the debt before the specified date.
Provisions on Banning the Entry into the Securities Market
The Provisions set out the personnel who may be banned to enter into the securities market, such as directors, supervisors, senior managements of the issuers, listed companies or its controlling shareholders, actual controllers, directors, supervisors, senior managements and other liable persons of securities companies, as well as directors, supervisors, senior managements of the securities service entities and securities investment fund managers.
Any person subject to the measures for banning the entry into the securities market shall, when being banned, shall not continue his former position, nor shall he engage in the securities practice in any other organization or hold the post of director, supervisor or senior manager of any other listing company.
The banning term, according to the circumstances, may be from 3 to 5 years, or from 5 to 10 years.
Meanwhile, 揟he Provisions?points out that if the relevant liable persons voluntarily eliminate or mitigate the negative aftermath of his misdeed, have made meritorious contributions or other circumstances, he may be given a lighter, mitigated punishment of banning the entry into the securities market or be exempted from such measures.
Opinion of the State-owned Assets Supervision and Administration Commission of shanghai Municipality on the implementation of <Circular of General Office of the State Council on Distributing the Notice of State-owned Assets Supervision and Administration Commission on further Standardizing the Reform of State-owned enterprises (Trial) >
State-owned Assets Supervision and Administration Commission of shanghai Municipality printed and distributed 揙pinion on the implementation of 慍ircular of General Office of the State Council on Distributing the Notice of State-owned Assets Supervision and Administration Commission on further standardizing the Reform of State-owned enterprises (Trial)'?(Hereinafter referred to as 揙pinions? on May 12, 2006.
揟he opinion?mainly gives some comments on the reformation work of Shanghai 's state-owned enterprise, combining the actual situation in Shanghai . For example , it requests the state-owned and the state holding enterprises to perfect their reformation plans of the enterprise invested by them. It also requests them to carry out the operational procedure of reformation strictly.
According to 揟he opinion? the formulation body, the approval body and the approval procedure of the reformation plans are different for different types of enterprises.
揟he opinion?emphasized that the legal opinions on the reformation plans shall be given by law firms or the legal counsels of the enterprise.
揟he opinion?also made a series of stipulations on how to appraise the property in reformation of state-owned enterprises.
Measures of China Securities Regulatory Commission for
the Implementation of Freezing and Sealing-up
China Securities Regulatory Commission promulgated 揗easures for the Implementation of Freezing and Sealing-up?on December 30, 2005 (Hereinafter referred to as 揗easures?.
The Measures authorizes China Securities Regulatory Commission (hereinafter referred to as the CSRC) and its detached offices the right to freeze or seal up the illegal capitals or securities of the parties, and other properties or important evidence involved in a case. It also enumerated four circumstances to apply for freezing or sealing-up. Where there is necessary to implement freezing or sealing-up, an application shall be submitted, subject to the approval by the person-in-charge of the CSRC.
揟he Measures "also made some stipulations that the law enforcement personnel shall abide by when implementing freezing or sealing-up and put forward the request on the content of the records made on the scene. In addition, 揟he Measures?stipulated that the time limit for the freezing or sealing-up shall be six months; the time limit can be extended where there are some special reasons .
IP Cases
The Compromise Made by the Parties in the Settlement Agreement shall not be used as Evidence Unfavorable to Him Thereafter
Beijing Haidian People's Court made the first ruling in the case Dalian Penghong Wood Co., Ltd (Hereinafter referred to as 揚enghong?vs. Yang Gongli and Yang Yong regarding trademark infringement dispute on June 16, 2006, where the plaintiff's petitions was rejected.
The plaintiff stated that, the trademark 揚enghong?was approved to be registered on March 21, 2001 and the approved commodities were woods. On July, 2005, the plaintiff found that the defendant was selling the wood board with the registered trademark 揚enghong?in the Tiantong Homeland Building Materials Market. Song Changhui and other two consumers once had sued Yang Gongli for selling fake 擯enghong?wood board at Beijing Changping District People's Court. In this lawsuit, Yang Gongli and Yang Yong entered into a 搒ettlement agreement?with the three consumers and acknowledged that he had sold the fake 揚enghong?wood board. Therefore the plaintiff brought the suit to the court.
The defendant Yang Gongli defended that he signed the 搒ettlement agreement?because he had lack of legal knowledge. Moreover, the 搒ettlement agreement?had been signed during the settlement process, so it could not be used as evidence unfavorable to him in the later lawsuit
Yang Yong defended that he had been an employee of Yang Gongli and signed his name on the 搒ettlement agreement?as instructed by him.
The court held that according to Article 67 of 揚rovisions of the Supreme People's Court on Evidence in Civil Procedures?, 搃n the process of litigation, the evidences which they have affirmed through compromise for the sake of reaching a mediation or agreement or reconciliation may not be used by the parties concerned in later litigations as an evidence unfavorable to the other party.?However, Penghong did not submit evidence furthermore. Therefore, the testimony, proving that Yang Gongli sold fake wood board, should not be accepted by the court without any other evidence. The suit was rejected.
Using a Name Known by the Public as the Name of a Service and Business Place is Proper Use
Beijing Higher People's Court made the final ruling in the case Beijing Yelusheng Trading Co., Ltd (Hereinafter referred to as 揧elusheng Company? vs. Beijing Xinya Shenghong Real Estate Development Co., Ltd (Hereinafter referred to as 揦inya Shenghong Company? and Beijing Xiushuijie Attire Market Co., Ltd (Hereinafter referred to as 揦iushuijie Company? regarding infringement of exclusive right of trademark and unfair competition on June 9, 2006, which confirmed the judgment of first instance.
On November 28, 2002, Yelusheng Company got the trademark 揦iushuijie?approved to be registered and the approved 35 th category was sales promotion (for others). Xiushuijie Market was one of the most important markets in Beijing . Since November 18, 2002, Xinya Shenghong Company undertook the relevant approval procedures for the reformation of Xiushuijie Market, and entrusted Siushui Haosen Company to attract investment and undertake the management. Xiushui Haosen Company changed the name of it to Xiushuijie Company in February, 2006.
The previous court stated that service provided by a person or an organization shall be included in the 35 th category, but the enterprises, whose main activity was selling commodities shall be excluded. So the exclusive use right of trademark of Yelusheng Company shall be limited to provide suggestion, scheme, publication, consultation and such service for selling commodities (or providing service) for others, but shall not include the activities such as advertising and layout for its own use. The service provided by Xinya Shenghong Company and Xiushui Haosen Company was within the scope of market or supermarket service, and the advertisements on the relevant newspaper, using guiding boards at the entrance of subway pass, and laying out the Xiushuijie Buildings were all activities for its own business. Therefore, it did not infringe the exclusive using right of registered trademark.
The appellant defended that Xiushuijie Company used the products not for its own use, but for the promotion of the products for the merchants in the market.
The court thought that the service provided by Xinya Shenghong and Xiushuijie Company was succeeded from the service previously provided by Xiushui Market, which belonged to market or supermarket service. So the previous opinion that the 35 th service was different from the service provided by Xinya Shenghong and Xiushui Haosen ? Xiushuijie Market was famous and 揦iushuijie?was a name known to the public. Therefore, during the development and operation of Xiushuijie Mansion , it's a proper use while Xinya Shenghong and Xiushuijie used 揦iushuijie?as the name of market and used such name and logo outside and inside the mansion. The appeal was rejected.
Links Providing Searching Results shall not be Deemed as Infringement of Right to Network Dissemination of Information
Beijing Chaoyang People's Court made a judgment in the case Beijing Dedu Investment Consulting Company (Hereinafter referred to as 揇edu? vs. Beijing Sanqieryi Technology Company (Hereinafter referred to as 揝anqieryi? regarding copyright infringement dispute on June 20, 2006, which rejected the application of the plaintiff.
The plaintiff stated that it had made a notice on the home page of the website that required the searching engine to rank the link to its company among the first 20 linked websites. But the rank of its website on the searching engine provided by the defendant was beyond the first 20. The defendant infringed the copy right of the plaintiff while it copied the website of the plaintiff and stored it in the server for profit purpose by means of website snap without permission. The defendant infringed the right of network dissemination of information while it provided the works to the public without permission for profit purpose. At the mean time, the defendant infringed the right to use website while it adapted and annotated the works of the plaintiff and promulgated on the website.
The defendant defended that, 搒earch bidding?was a lawful profiting way. Search engine provider should not be liable for selecting and judging the object information, and it was abuse of right that the plaintiff made such notice on the website.
The court held that the provisions of Copyright Law on 搉otice?were usually about reprinting or publishing excerpts. The plaintiff required that its website should be ranked among the first twenty, which was beyond the provisions of Copyright Law. The link provided by the defendant was simple and did not include other service, because when the user inserted the key words, then the relevant websites would be found, but the actual provider of website contents was still the plaintiff. The behavior of the defendant was only to provide a tool, not to copy as provided by Copyright Law. So the case was rejected.
There are Special Conditions for Confirming Non-infringement of Trademark
Guangxi Higher People's Court made the final judgment in the case Zhujiang Drinks Co., Ltd, Zhongshan (plaintiff in the first instance) vs. Tiansi Medicine & Healthcare Co., Ltd (defendant in the first instance, hereinafter referred to as 揟iansi?, Red Bull Vitamin Drinks Co., Ltd (defendant in the first trial, hereinafter referred to as Red Bull) and Jizhu Lan (defendant in the first instance) regarding trademark infringement dispute on May 30, 2006. The final judgment did not support the appeal.
The court of first instance stated that the case of confirming non-infringement of the trademark was among infringement cases. But according to Trademark Law and other relevant laws and regulations, there were three requirements to be met while the suspected infringer brought such case to the court. In this case, the Warning Letter, which was the basis for the plaintiff to file this case, was only stamped by Nanning Zhumei Sugar, Cigarette and Wine Shop (hereinafter referred to as 揨humei?, and not signed by Jizhu Lan. So it was hard to maintain that the Warning Letter was made by Jizhu Lan, Tiansi or Red bull. At the mean time, Tiansi and Red Bull had applied for the administration for Industry and Commerce for resolution of dispute within the lawful time limit. Therefore, the court did not think that the indictment was in accordance with the laws and the case was rejected.
The applicant stated that the first judgment wrongly applied the laws. The opinion that there were three conditions for confirmation of non- infringement by the trademark, fabricated beyond Article 108 of Law of Civil Procedure Law, was lack of legal basis. Additionally, the court of first instance also wrongly recognized the fact.
The appealing court held that the court of first instance ascertained the case correctly, and confirmation of non-infringement needs meeting some conditions. First, the plaintiff should provide some evidence to prove that the obligee had sent warning to the plaintiff. Secondly, the obligee had not applied to the court or any administrative authority after sending the warning, and had or might have damaged the lawful rights of the suspected infringer. But in this case, the invoice presented by the plaintiff as evidence only proved that Zhumei sold one bottle of 揜ed Bull Vitamin Functional Drink?to Tingjian Wei, but could not prove Zhumei or Jizhu Lan was the distributor of Red Bull. Therefore, Zhujiang Company did not meet the requirements on filing this case. The court of first instance was right.
Lessee shall not be Liable for Infringement of Trademark by Leased Assets
Beijing No.2 Intermediate People's Court made the judgment of first instance in the case Ruchang Zhou vs. Cao Xueqin Wine Co., Ltd (Hereinafter referred to as ?Cao Xueqin Company ? and Beijing Laijin Yuxuan Restaurant (Hereinafter referred to as 揕aijin Yuxuan? regarding copyright infringement dispute on June 20, 2006, which ruled that Cao Xueqin Company should stop infringement, make apology and compensation and Laijin Yuxuan should stop infringement.
The plaintiff stated that he was the writer of handwriting 揅aoxueqin Wine? The defendant infringed the lawful right of the plaintiff by using the handwriting on the door of the factory, the wine produced by it, advertisements and the website. Laijin Yuxuan infringed its right because it sold the wine with such handwriting.
The court held that Cao Xueqin Wine Group was an independent legal person from Cao Xueqin Wine Co., Ltd. The door of the factory was the asset of Cao Xueqin Wine Group. Cao Xueqin Wine Company leased the premise from Cao Xueqin Wine Group, so it did not have the ownership on the leased assets. Therefore, the plaintiff has no basis to require Cao Xueqin Company to stop using the handwriting on the door of the factory. The characters used on the package of the products were revised from the handwriting of the plaintiff, which impaired the right of revision and right of keeping integrity of the works. Cao Xueqin Wine Company should take liability for it. Laijin Yuxuan Restaurant provided evidence to prove the source of the wine, so it needed not take liability for compensation, but it should stop selling the products.
Analysis of Cases
The Existing Guaranty Relationship should not be Affected by Joining of A New Guarantor
The Supreme People's Court made the final judgment in the case China CINDA Asset Management Corporation Shijiazhuang Office (plaintiff in the first trial, hereinafter referred to as 揅INDA? vs. China-Arabia Fertilizer Co., Ltd (defendant in the first trial, hereinafter referred to as 揅A Company? and Jizhou Zhongyi Fiber Reinforced Plastics Factory, Hebei (defendant in the first trial, hereinafter referred to as 揨hongyi Factory? regarding a guaranty contract dispute on January 18, 2006.
The court of first instance ascertained that on October 20, 1993, Zhongyi Factory entered into a foreign exchange loan contract with China Construction Bank Hebei Branch (CCA), which said that the amount would be used in investing in Jizhou Zhongyi Fiber Reinforced Plastics Co., Ltd, Hebei (Hereinafter referred to as 揨hongyi Company?. CA Company signed on an 揑rrevocable Guarantee Letter? stating that 揟his guarantee letter intends to guarantee that the guarantor will pay all or part of the due interests under No. 93008 loan contract, and agree to pay the loan, relevant interests and expenses for the borrower within 14 days after receiving the written notice from CCA.?After the conclusion of guarantee contract, CCB provided the loan, which was used to invest in Zhongyi Company by Zhongyi Factory.
On November 25, 1995, Zhongyi Company signed on Guaranty Letter, which stated that 揨hongyi Factory borrowed US$ 1,820,000 from your bank according to No. 93008 foreign exchange contract on October 20, 1993. Our company warrants that we will undertake the repayment liability for the principal and interests, and we waive any defense. This Warranty Letter was supplementary to No .93008 foreign exchange contract, and both of them have equal legal effect.?/P>
When the loan was due, neither the borrower nor the guarantor repaid the money. On December 3, 1999, CCB transferred its right to CINDA by a Debt Transfer Agreement between CCB and CINDA. On November 30, 2004, CINDA filed a suit, applying the court to rule that Zhongyi Factory repay the principal and its interest, and CA Company take the guaranty liability.
It was ascertained: according to the 揚resent Situation of Zhongyi Company?presented by Zhongyi Company, it had been set up by three parties, Hebei Townership Enterprise Economic and Trading Development Co., Ltd, Zhongyi Factory and Italy Cyprus Group. It was stated in the 揈xplanations for Transferring the Loaned US$1,820,000 to Shishi Zhongyi Fiber Reinforced Plastics Co., Ltd? the loan of US$1,820,000 from CCB registered in your account was dealt with by Shishi Zhongyi Fiber Reinforced Plastics Co., Ltd as an agent and in your name. However, according to the commitment made in writing by Shishi Zhongyi Fiber Reinforced Plastics Co., Ltd to CCB, it would be responsible for the loan and its interest. So you have no relationship with the loan.
Hebei Higher People's Court stated that the loan agreement between CCB and Zhongyi Factory was lawful and effective. The irrevocable Guaranty Letter singed by CA Company was its true expression of will. Though the Guaranty Letter did not state the liability clearly, since the premise that the guarantor should be liable was the debtor 揹oes not repay the loan on time? the liability for CA Company was joint liability. During the performance of this agreement, Zhongyi Company negotiated with CCB and CA Company for changing the debtor, which failed because CA Company refused to provide guaranty for it. Then Zhongyi Company committed to CCB that it would take joint liability for the loan and waived any defense. According to the contents of Guaranty Letter, Zhongyi Company guaranteed for the loan and CCB accepted it, so the nature of legal acts of both parties should be decided by the contents of guaranty letter which had been accepted by CCB. The liability of Zhongyi Company was guaranty liability. CA Company refused to provide guaranty for the transferred debt, and after the guaranty letter issued by Zhongyi Company, CCB and CINDA only made request on Zhongyi Company, so it could be maintained that the guarantor had been changed to Zhongyi Company, and CCB and CINDA waived their creditors' rights secured by CA Company.
CINDA did not accept the first judgment, and it appealed to the Supreme People's Court, stating that it was in lack of fact and legal basis to release the guaranty liability of CA Company with a reason that 搕he guarantor had been changed to Zhongyi Company, and CCB and CINDA waived their creditors' rights secured by CA Company.?/P>
There were mainly three arguments during the trial and the Supreme People's Court had the opinions as follows:
1 What kind of liability should be taken by CA Company? According to the Irrevocable Guaranty Letter issued by CA Company, the premise that the guarantor should be liable was that the debtor 揹oes not repay the loan on time? According to Article 2 of 揟he Official Reply of the Supreme People's Court on the Application of Judicial Interpretations to Guarantee Dispute Cases and the Determination of Guarantee Liability Forms? 揑f the guarantee contract expressly stipulates that the guarantor bears the guarantee liability when the warrantee doesn't perform the obligation, and liabilities of general guarantee can't be presumed according to the real intention of the parties in concluding the contract, the guarantee shall be regarded as a guarantee of joint and several liabilities.?/P>
2 How to recognize the Guaranty Letter given by Zhongyi Company to CCB? Zhongyi Company guaranteed that it undertook the joint liability for the loan and its interest and waived any defense. The Guaranty Letter had equal legal validity as the Foreign Exchange Loan Agreement. The judgment of the first instance maintained that the guarantor had been changed to Zhongyi Company, and CCB and CINDA waived security rights, so CA Company had no liability any more. However, according to Article 86 and Article 91 of General Principles of the Civil Law, the guaranty contract is the mutual agreement between the parties. The change of guarantor should be conditioned on the agreement by the creditor, the liability of guarantor would not be waived even if the debtor or a third party provides additional guaranty and the creditor accepts it, except there is expression of will between the creditor and the guarantor to eliminate the guaranty. In this case, there was no such expression of will made by CCB or CINDA to allow the change or termination of security liability of CA Company. The judgment of first instance wrongly ascertained the facts and applied the laws while it held that the guarantor had been changed to Zhongyi Company.
3 How to arrange the debt between the new guarantor and the former guarantor and debtor? According to the Guaranty Letter, it was no doubt that Zhongyi Compay was willing to take the debt. Article 84 of Contract Law provides that: 揑f the obligor assigns its obligations, wholly or in part, to a third party, it shall obtain consent from the obligee first.?In this case, Zhongyi Company was willing to undertake the joint liability for the loan, but CCB did not make expression to allow the change of debtor from Zhongyi Factory to Zhongyi Company. Therefore, the guaranty made by Zhongyi Company could not have such effect to change the debtor; furthermore, it was in lack of legal basis of the defense made by CA Company that it refused to undertake the guaranty liability for the debt was transferred without its consent. It had no essential difference to determine whether the act of Zhongyi Company was an addition of guarantor or an addition of debtor, while its nature was different: guaranty was a subordinate contract and the guarantor should be liable for the debt of the others. The concurrent debt was an independent contract, and the undertaker was one of the principal debtors, who were responsible for its own debt, and the number of debtors was increased from one to more than two debtors. In this case, according to the specific contents of Guaranty Letter and the dunning notice, the guarantor status of Zhongyi Company was clearly recognized, so it was legally grounded while CINDA appealed with a reason that such act was the addition of guarantor.
Therefore, the Supreme People's Court supported the appeal, ruling that CA Company should take joint liability for US$1,820,000 borrowed by Zhongyi Factory and its relevant interest.
(This case was published in the bulletin of Supreme People's Court and it shall have guiding meanings.)
