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Conclusion of a loan agreement between the physical persons and some provisions concerning fulfillment of such agreement

Conclusion of a loan agreement between the physical persons and some provisions concerning fulfillment of such agreement

The Civil Code of Ukraine regulates legal relations concerning conclusion and fulfillment of loan agreement including monetary funds.

Under the loan agreement one party (a lender) shall transfer into possession of other party (a borrower) monetary funds or the other objects specified by the gender characteristics, while the borrower shall be obliged to return the lender the same amount of monetary funds (the sum of the loan) or the same quantity of the objects of the same origin and the same quality.

The loan agreement shall be deemed concluded since the moment of the money transfer or the other objects, specified by the origin characteristics. (Article 1046 of the Civil Code).

Under Article 1048 the lender shall have the right to receive interests on the sum of loan from the borrower, unless otherwise is stipulated by the agreement or the law. The amount of interests and procedure of its receiving shall be determined be the law. Unless the agreement stipulates the interests amount, it is determined at the discount rate level of the National Bank of Ukraine.

In absence of the other arrangement between the parties the interests shall be paid every month till the day of the loan repayment.

The loan agreement shall be deemed interest free if it is concluded between physical persons for a sum not exceeding a fifty fold amount of the tax-free minimum of citizens’ income and has no connection to business activity by at least one party.

The form of a loan agreement shall be established by Article 1047 of the Civil Code. The loan agreement shall be concluded in writing, unless its sum is below a ten-fold amount of a tax-free minimum of the citizens’ income established by the law and in cases of the legal entity of a lender – irrespectively of the sum.

To confirm the loan agreement conclusion and its provisions a borrower may present a receipt or another document witnessing to the transfer of a specific monetary sum or a certain quantity of objects to him by the lender.

Thus, the confirmation of the loan agreement conclusion between physical persons shall be:

• loan agreement (if it is concluded in writing);

• receipt or another document witnessing to the transfer of a specific monetary sum by the lender to a borrower (for example bank receipt confirmed the cashless transfer of funds).

 

Under part 3 of Article 1049 of the Civil Code, the loan shall be deemed repaid at the moment of transfer of the objects specified by the origin characteristics to the lender or the entry of the borrowed funds into the lender’s bank account.

It is necessary to draw attention to this provision because either the lender may give a loan in cash or in cashless form; in order to repay a loan, a lender must have a bank account for placing a sum of loan and interests if they are stipulated by the loan agreement to.

The pledge (real estate mortgage, for example, an apartment or a house) is the most prevalent type of security for the obligation fulfillment.

Under Article 546 of the Civil Code, obligation fulfillment may be secured by pledge.

Against the pledge a creditor (pledgee) shall have the right, in the event a debtor (pledgor) does not fulfil an obligation secured by the pledge, to get satisfaction at the expense of the property in pledge in the priority order as against other creditors of this debtor, unless otherwise is specified by the law (the lien). (Article 572 of the Civil Code).

The lien shall be terminated in the case of returning to the pledgor the subject of pledge by a pledgee (Article 593).

The pledge agreement shall be concluded in writing and pledge of real estate (mortgage) shall be subject to notary witnessing and state registration in cases and per the procedure established by the law. Other cases requiring notary witnessing of the pledge agreement may also be specified by the law (Article 577 of the Civil Code).

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