A loan agreement is an agreement on the basis of which one person transfers the thing for free use for a specified period to the other party, and the latter undertakes to return it in the condition in which it was received, taking into account depreciation. This transaction belongs to the category of property transfer agreements. Its provisions can be regulated by the same points as the lease, but at the same time there are still differences between these agreements. This agreement is often referred to as a “temporary use agreement”.
Parties and object of the contract
The parties to this agreement are:
- The lender is the owner of the thing (authorized person), which is subject to transfer. It is worth noting that when you change this person, the loan agreement is not terminated.
- Borrower - a person who has received the right to use a certain thing (things).
The law does not specify which specific objects may be transferred under a loan agreement. The main thing is that these things be clearly established and specified in the contract. For example, if some equipment is being transferred, it is important to write down all its characteristics (name, quantity, year of manufacture, cost, etc.) in the document.
Loan: terms of agreement
The transaction form must be written in such cases:
- One of the participants is a legal entity.
- The cost of the loan facility exceeds the minimum wage by 10 times.
A very important condition for the transaction is its gratuitousness (that is, gratuitousness). If, however, a fee is charged for using the subject of the loan, then this will already be a lease agreement. A loan agreement can be either urgent or indefinite. But if one of the parties decides to terminate the agreement, it must warn the other in a month.
Contractual obligations
The lender must:
- transfer a thing that does not have any defects (if defects are present, stipulate this);
- warn the recipient of the rights of third parties to this subject;
- if accessories go to a thing, transfer them along with it;
- transfer the property, which meets the terms of the contract.
The borrower must:
- use the facility for its intended purpose and in accordance with the provisions of the contract;
- maintain the item in proper condition, as well as carry out major or ongoing repairs if necessary;
- do not transfer the item without the consent of the owner to other persons;
- upon the expiration of the term, return the thing to the lender.
Termination of the contract
A loan agreement is terminated on the following grounds:
- end of term;
- death of the borrower or liquidation of the organization (if it is a legal entity);
- cancellation of a contract by one of the parties (if it is a perpetual agreement) ;
- other conditions (if specified in the agreement).
A transaction may be terminated ahead of schedule in the following circumstances:
- use of the thing by the recipient for other than its intended purpose;
- deterioration of the subject;
- transfer of property by the borrower to other entities;
- transfer by the lender of the defective thing, failure to notify about the rights of other persons to it, as well as failure to provide belonging to it or documents to it.