Section 1 Suretyship and Surety
Article 6
Suretyship as used in this Law means an agreement pursuant to which a surety and a creditor1 agree that the surety shall perform the obligation or bear the liability according to the agreement, when the debtor2 fails to perform his obligation.
Article 7
A legal person, other organization or a citizen capable of assuming debts may act as a surety.
Article 8
No State organ may act as a surety, except in the case of securing loans, for onlending, from a foreign government or an international economic organization as is approved by the State Council.
Article 9
Institutions such as schools, kindergartens and hospitals established for purposes of public welfare, and public organizations may not act as a surety.
Article 10
Branches and functioning departments of an enterprise as a legal person may not act as a surety. If a branch of an enterprise as a legal person has a power of attorney from the legal person, it may provide a suretyship within the scope of authority.
Article 11
No organization or inpidual may compel a bank or another financial institution or an enterprise to provide a suretyship for another; a bank or another financial institution or an enterprise shall have the right to refuse to provide suretyship for another.
Article 12
Where there are two or more sureties for one obligation, the sureties shall undertake suretyship liability according to their proportion of suretyship agreed in the suretyship contract. In the absence of an agreement on the proportion of suretyship, the sureties shall be jointly4 and severally liable. The creditor may demand any one of the sureties to undertake all suretyship liability, and every surety shall have the obligation to ensure all of the creditor's rights. The surety who has undertaken the suretyship liability shall have the right of recourse against the debtor, or have the right to demand other sureties who are jointly and severally liable to discharge the proportion of obligations which they should respectively assume.
Section 2 Suretyship Contract and Modes of Suretyship
Article 13
A surety and a creditor shall conclude a suretyship contract in writing.
Article 14
A surety and a creditor may conclude separate suretyship contracts for a single principal contract, or may reach an agreement to conclude, to the extent of the maximum amount of claim, a single suretyship contract for loan contracts or for certain commodities transaction contracts which successively occur in a given period of time.
Article 15
A suretyship contract shall contain the following particulars: the kind and amount of the principal claim guaranteed; the time limit for the debtor to perform the obligation; the modes of suretyship; the scope of the suretyship guaranty; the term of the suretyship; and other matters the parties deem appropriate. If a suretyship contract does not contain all the particulars specified5 in the preceding paragraph, the particulars omitted may be added by amendment6.
Article 16
The modes of suretyship include: general suretyship; suretyship of joint3 and several liability.
Article 17
A general suretyship refers to a suretyship contract wherein the parties agree that the surety shall undertake suretyship liability in case the debtor defaults. A general suretyship allows the surety to refuse to undertake suretyship liability towards the creditor before a dispute over the principal contract is tried or arbitrated and the obligations are not enforceable even after the debtor's assets have been seized according to law. A surety may not exercise the right provided in the preceding paragraph in any of the following circumstances: The change of the debtor's domicile makes it extremely difficult for the creditor to have the debtor's obligation enforced; A People's Court suspends the enforcement proceedings7 due to its acceptance of the debtor's bankruptcy8 case; or The surety waives9 in writing the right provided in the preceding paragraph.
Article 18
A suretyship of joint and several liability refers to a suretyship contract wherein the parties agree that the surety and the debtor shall be jointly and severally liable. Where the debtor of a suretyship of joint and several liability defaults when the time limit for his performance of the obligation provided in the principal contract expires, the creditor may demand that the debtor perform his obligation, or demand that the surety undertake the suretyship liability within the scope of the suretyship agreement.
Article 19
In the absence of an agreed or explicitly10 agreed mode of suretyship, the parties shall bear the suretyship liability following the mode of a suretyship of joint and several liability.
Article 20
The surety of a general suretyship or a suretyship of joint and several liability shall enjoy the debtor's right of defense11. Where a debtor waives his right of defense against the obligation, the surety shall still enjoy a right of defense. The right of defense means a debtor's right to exercise his right of claim on legal basis against the creditor when the creditor seeks to enforce his rights.
