Features of loan agreement

Extracts for legal literacy News

Under the loan agreement, one party (a lender) transfers or undertakes to transfer to the ownership of an other party (a borrower) money, things defined by generic characteristics, or securities, and the borrower undertakes to return the same amount of money (sum of a loan) or an equal number of things received by the lender of the same kind and quality or of the same securities.

If the lender in the loan agreement is an individual, the agreement is considered concluded from the moment the sum of the loan or other subject of the loan agreement is transferred to the borrower or a person indicated by him/her.

According to the requirements of Article 917 of the DPR Civil Code, a loan agreement between individuals must be concluded in writing if its amount exceeds 10,000 Russian rubbles, and in the case when the lender is a legal entity, regardless of the sum.

In confirmation of the loan agreement and its terms, a receipt of the borrower or other document may be presented, certifying that the lender has transferred a certain sum of money or a certain number of things to him/her.

In accordance with Part 1 of Article 918 of the DPR Civil Code, the lender has the right to receive interest from the borrower for using the loan in the amount and in the manner specified by the agreement. In the absence of a clause on the amount of interest for the use of the loan in the agreement, their amount is determined by the key rate of the Central Republican Bank of the Donetsk People’s Republic, which was in effect in the relevant periods.

The loan agreement is assumed to be interest-free, unless it expressly stipulates otherwise, in cases where:

an agreement is concluded between individuals, including individuals – entrepreneurs, for a sum not exceeding 100,000 Russian rubbles;

– under an agreement, other things determined by generic characteristics is transferred to the borrower, but not money.

By virtue of Article 919 of the DPR Civil Code, the borrower is obliged to return the received sum of the loan to the lender within the time period and in the manner provided for by the loan agreement.

It must be remembered that if the repayment period is not established by the agreement or is determined by the moment of demand, the sum of the loan must be returned by the borrower within 30 days from the date the lender submits a request for this, unless otherwise provided by the agreement.

Unless otherwise provided by the loan agreement, the sum of the interest-free loan may be repaid by the borrower ahead of schedule in full or in part.

The sum of the loan provided at interest to an individual borrower not related to entrepreneurial activity may be repaid by the individual borrower ahead of schedule in full or in part, provided that the lender is notified of this at least 30 days before the day of such return.

The loan is considered to be returned at the moment of its transfer to the lender, including at the moment of receipt of the corresponding amount of funds in the bank in which the lender’s bank account is opened.

Article 920 of the DPR Civil Code regulates the legal consequences of violation by the borrower of the loan agreement.

Thus, in cases where the borrower does not return the loan amount on time, interest is payable on this sum in the amount provided for in Part 1 of Article 496 of the DPR Civil Code, from the day when it should have been returned until the day it was returned to the lender, regardless of payment of interest provided for in Part 1 of Article 918 of the DPR Civil Code.

Please note that if one of the parties violates obligations regarding the loan agreement, these disputes are resolved in court, taking into account the current legislation of the Donetsk People’s Republic.