Borrowing Gold: Must You Repay in Gold or Original Cash Value?

Customer Question:
Lawyer’s Answer:

Customer Question:

In the past, I borrowed 2 taels of gold from a relative to build a house. At the time of borrowing, the gold price was only about 50 million VND/tael, so I only received over 100 million VND after selling it. Now that the debt is due, the gold price has risen to over 160 million VND/tael, equivalent to over 320 million VND for 2 taels. This is significantly higher than the value of the loan at the time I borrowed it.

Therefore, I proposed to repay the debt in cash based on the gold price at the time of borrowing. However, the lender disagreed, stating: “If you borrow gold, you must return gold.”

Question for the Lawyer: According to current legal regulations, am I obligated to return gold in this case, or can I simply pay the cash value at the time of borrowing?

Lawyer’s Answer:

1. Determining the legal nature of a gold loan transaction

According to Article 463 of the Civil Code 2015, a property loan contract is defined as follows: “A property loan contract is an agreement between parties whereby the lender delivers property to the borrower; when the loan becomes due, the borrower must return property of the same type, quantity, and quality to the lender, and shall only pay interest if so agreed or provided by law.”

In this case, gold—not money—is the object of the loan contract. The fact that the borrower sold the gold for personal use does not change the nature of the repayment obligation.

2. General principle: Borrow gold, return gold

Based on Clause 2, Article 466 of the Civil Code 2015, the repayment obligation is regulated as follows: “Where the borrowed property is an object, the borrower must return an object of the same type, quantity, and quality upon maturity; if the object cannot be returned, the borrower may pay in cash equivalent to the value of the object at the time and place of repayment, provided that the lender agrees.”

Accordingly:

If you borrowed 2 taels of gold, you must return exactly 2 taels of gold of the same type (e.g., 9999 gold, SJC gold, etc.) upon maturity.
Fluctuations in gold prices (increase or decrease) do not constitute grounds for the borrower to unilaterally change the repayment obligation.

Therefore, as a legal principle, the lender’s demand that “borrowed gold must be returned in gold” is in accordance with the law.

3. When can a borrower pay in cash instead of gold?

A borrower is only permitted to repay in cash in the following cases:

First: At the time of borrowing, both parties clearly agreed that the debt would be repaid in cash at a specific price or based on the gold price at the time of borrowing.
Second: There was no initial agreement, but at the time of maturity, the lender agrees to accept cash instead of gold.
Third: The borrower is unable to return gold, and the lender agrees to convert the repayment obligation into cash based on the gold price at the time and place of repayment.

Aside from the cases mentioned above, the borrower has no right to unilaterally choose to pay cash based on the gold price at the time of borrowing.

4. How are disputes resolved?

If the two parties cannot reach an agreement on cash repayment and a dispute arises, when the case is brought to Court, the Court typically compels the borrower to:

Return the gold in the exact quantity and type borrowed; or
Convert the gold repayment obligation into cash based on the gold price at the time of trial or judgment enforcement, rather than applying the gold price at the time of borrowing.

For each specific case, please contact Vo & Associates for detailed advice.

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