In private lending, if the borrower defaults by failing to repay the loan as agreed but the loan term has not yet expired, does the lender have the right to demand early repayment of the entire loan? The author analyzes the possibility and precautions of early recovery through a case combined with the views of the plaintiff and defendant.

I. Basic Case Facts

From January 2016 to June 2016, Wang Mouyi borrowed 1.45 million yuan from Wang Moujia. Wang Moujia paid the above amount to Wang Mouyi. After the loan, Wang Mouyi failed to repay the loan as agreed. On January 9, 2019, Wang Mouyi re-wrote a promissory note to Wang Moujia, confirming that Wang Mouyi still owed Wang Moujia a principal of 1.45 million yuan, with an upfront interest of 450,000 yuan, totaling 1.9 million yuan in principal and interest. The two parties agreed to repay in installments, including 50,000 yuan before February 4, 2019, 300,000 yuan in June 2019, 300,000 yuan in September 2019, and the remaining 1.25 million yuan to be fully repaid before the end of 2019.

After this, Wang Mouyi repaid the first installment of 50,000 yuan as agreed, but the repayments after February 2019 were overdue and he did not answer the phone. Wang Moujia then filed a lawsuit with the court in August 2019, requesting Wang Mouyi to repay all the principal and interest of the loan in advance.

II. Arguments of the Plaintiff and Defendant

During the court hearing, the agent of the defendant Wang Mouyi argued that Wang Moujia had no right to demand Wang Mouyi to repay the debt in advance, because the two parties agreed on a repayment period, which meant that the repayment condition for the 1.25 million yuan loan was not met. Therefore, Wang Moujia had the right to refuse early repayment of 1.25 million yuan.

The agent of the plaintiff Wang Moujia argued that because Wang Mouyi was overdue in repaying the loan and did not answer the phone, his behavior indicated that he had not fulfilled his repayment obligation, and Wang Mouyi had constituted an anticipatory breach. Therefore, Wang Moujia had the right to terminate the contract and demand Wang Mouyi to repay the loan in advance in accordance with Article 108 of the "Contract Law."

 The court held that the loan relationship between the plaintiff and the defendant was legal and protected by law. The agreement between the two parties on determining the debt and repaying it in installments was a true expression of their intentions and was not illegal, and was legally valid. Secondly, interest-bearing loans are paid contracts. As of the date of the court hearing (November 2019), the performance period for three installments totaling 650,000 yuan in this case had expired. The defendant repaid 50,000 yuan of it, and the remaining 600,000 yuan of overdue payments were not repaid, accounting for about 32% of the total debt of 1.85 million yuan. The defendant constituted an anticipatory breach. Therefore, the court supported the plaintiff's claim for the defendant to repay the entire loan.

III. Lawyer's Analysis

The author believes that the court's judgment is reasonable and legally based. Here, the focus is on analyzing the basis for whether the lender can recover the loan in advance. Usually, financial loan contracts have an acceleration clause, the core meaning of which is that once the borrower defaults on interest payments, the lender has the right to demand the borrower to recover the entire loan in advance. However, in private lending, there are usually no such clauses. Nevertheless, if, according to the defendant's agent's point of view, the loan can only be recovered when it is due, it is unfair to the lender. Does the lender have to sit and wait for death? Obviously not. Under the condition that the two parties have not agreed on early repayment, the lender must jump out of the original contract and find relevant provisions in China's "Contract Law" and other laws that are conducive to safeguarding the legitimate rights and interests of the creditor in order to recover the loan in advance. It happens that Article 94 of the "Contract Law" is about the provisions of anticipatory breach, and the lender can exercise its rights based on this provision. Article 94, paragraph 2 of the "Contract Law" clearly stipulates that before the expiration of the performance period, if one party clearly expresses or indicates by its own behavior that it will not perform the main debt, the other party may terminate the contract. At the same time, referring to Article 167 of the "Contract Law" regarding "if the amount of the installment buyer's failure to pay the due price reaches one-fifth of the total price, the seller may require the buyer to pay the entire price or terminate the contract", the conditions for determining the borrower's anticipatory breach are refined. In real life, as long as the borrower experiences serious deterioration in business conditions, transfers property, withdraws funds, loses commercial credit, etc., the lender can demand the borrower to repay the loan in advance.

Of course, it would be best to add a clause in the contract in advance regarding "if the borrower is overdue in repaying one installment or the cumulative amount reaches a certain amount, the lender may require the borrower to repay the principal and interest in advance".