Dispute between a Shenzhen information consulting company and a Yangjiang company over private loan

Abstract of judgment:

The Loan Guarantee Agreement is entered into to secure the performance of the loan agreement. Therefore, determining the validity of the Loan Guarantee Agreement necessitates assessing the validity of the Loan Agreement under the laws of the performance location and those in the Hong Kong Special Administrative Region.

The performance location of the Loan Agreement is the Chinese mainland, and its validity has been confirmed by the Haidian District People's Court and the Beijing No 4 Intermediate People's Court. According to the findings of ascertainment regarding laws in Hong Kong as stated in the effective civil judgment submitted by the plaintiff, a Shenzhen-based information consulting company, under common law, factors affecting the validity of a contract include misrepresentation, mistake, illegality, duress, undue influence and unconscionable bargains. With the exception of illegality, all other factors affecting contract validity are factual determinations.

Based on the facts established in this case, the Loan Agreement represents the genuine intentions of the plaintiff, the Shenzhen information consulting company, and the defendant, a Yangjiang-based company. The existing evidence does not prove the presence of misrepresentation, mistake, duress, undue influence or unconscionable bargains in the Loan Agreement. Furthermore, the agreed-upon interest rate in the Loan Agreement, equivalent to an annual interest rate of 24 percent, does not exceed 60 percent and therefore does not constitute an illegal act. Moreover, since it does not exceed 48 percent, it is not considered extortion. Accordingly, the Loan Agreement does not violate laws in Hong Kong or its public policy, and should be deemed valid.