Should a beloved car be lent to another person?

Recently a man in Taizhou, Zhejiang, swapped his own Land Rover for a friend's Tesla, worth more than 600,000 yuan, and drove his friend to go swimming. While driving he threw a cigarette butt out of the window, but the wind blew it back into the car; as he bent down to pick it up the car veered off course and ran into a stream, water entered the control board, and on a preliminary assessment the car was a write-off. The matter is being dealt with.

Everyone has at some point been asked by a friend to lend a car. Refuse, and feelings are hurt and faces lost between friends; agree, and there is always the worry that trouble will come calling. When a car is lent and comes back in one piece, everyone is happy.

The man in Taizhou wrecked his friend's car, but at least he suffered only minor injuries. The truly frightening case is lending a car to a friend who then causes a crash and injures someone, and finding oneself drawn into a legal dispute without quite knowing how. The case of Guo Biao is just such an example. The entertainer Guo Biao lent his Volvo S60 to a friend, and the borrower drove drunk, raced and sped, so that the car broke through a barrier and fell from the overpass, killing four people and injuring two. The driver died, and Guo Biao faced a claim for more than seven million yuan.

So should a beloved car be lent to another person, and in what circumstances does lending it attract legal liability?

1. Article 49 of the Tort Liability Law of the People's Republic of China, on liability for compensation where damage is caused by a motor vehicle that is leased or borrowed, provides that where the owner and the user of a motor vehicle are not the same person because of a lease, a loan or the like, and responsibility for a traffic accident lies with the vehicle, the insurer shall pay compensation within the limit of the compulsory motor vehicle insurance; the user shall bear liability for the balance; and the owner, if at fault in the occurrence of the damage, shall bear corresponding liability.

2. Article 76 of the Road Traffic Safety Law of the People's Republic of China, on liability for compensation in traffic accidents, provides that where a motor vehicle causes a traffic accident resulting in personal injury or death or in property loss, the insurer shall pay compensation within the limit of the compulsory third-party liability insurance for motor vehicles, and that liability for the balance shall be borne as follows:

(1) where the accident occurs between motor vehicles, the party at fault bears liability for compensation, and where both parties are at fault they share liability in proportion to their respective fault;

(2) where the accident occurs between a motor vehicle and a driver of a non-motor vehicle or a pedestrian, and the driver or pedestrian is not at fault, the motor vehicle side bears liability for compensation; where there is evidence that the driver of the non-motor vehicle or the pedestrian is at fault, the liability of the motor vehicle side is appropriately reduced according to the degree of fault; and where the motor vehicle side is not at fault, it bears liability not exceeding ten per cent;

where the loss in the traffic accident is caused by the driver of a non-motor vehicle or a pedestrian deliberately colliding with the motor vehicle, the motor vehicle side bears no liability for compensation.

3. Article 1 of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Cases of Compensation for Damage in Road Traffic Accidents provides that where a motor vehicle causes damage in a traffic accident and the owner or manager of the vehicle is in any of the following circumstances, the people's court shall find that he is at fault in the occurrence of the damage and shall determine his corresponding liability for compensation by applying Article 49 of the Tort Liability Law:

(1) he knew or ought to have known that the vehicle had a defect, and that defect was one of the causes of the accident;

(2) he knew or ought to have known that the driver had no driving qualification, or did not hold the qualification appropriate to the vehicle;

(3) he knew or ought to have known that the driver was unable in law to drive a motor vehicle because he had been drinking, had taken narcotic or psychotropic drugs under state control, or suffered from a disease that impedes safe driving;

(4) other circumstances in which the owner or manager of the motor vehicle ought to be found at fault.

Under these provisions of Chinese law and judicial interpretation, where an owner lends a vehicle to another person and is at fault, the owner bears liability for compensation.

To avoid joint liability, Minton advises owners, before lending a car, to take the following steps.

1. Make sure before lending that the vehicle has no defect, and never lend a defective vehicle to another person.

2. Confirm the other person's driving qualification before lending, and never lend a vehicle to someone without a licence.

3. Confirm before lending whether the driver has been drinking or has taken narcotic or psychotropic drugs under state control, or suffers from a disease that impedes safe driving. Never lend a vehicle to such a person.

4. Never lend a vehicle that has no compulsory motor vehicle insurance.

Generally speaking, where lending a car leads to a traffic accident, the insurer is the first to pay compensation and the driver bears liability for the balance. Note, however, that insurance does not pay where the car has been lent on a second time without the owner's consent, and does not pay where the other person's licence is invalid, of the wrong class for the vehicle, or where he was driving drunk.

So should a beloved car be lent to another person? That is a question each person must think through carefully. A friendly reminder, too: whether lending a car to another or borrowing one, a person should consider his family and what he can bear. For safety's sake, where a loan cannot be avoided and there is real anxiety about it, a legally effective car loan agreement might be signed with the borrower, setting out clearly the condition of the vehicle, the term of the loan, the rights and obligations not assumed by the lender, the rights and obligations of the borrower, the vehicle insurance, liability for breach, termination of the agreement and the effect of the agreement. That may spare a great deal of trouble.