A loan contract is an agreement between the parties, whereby a lender will give the borrower a sum of money. At the end of the loan term, the borrower must repay that sum with interest if the parties agree or so provided by law. Currently, disputes arising from loan contracts occur quite frequently. To limit risks when lending, the parties should make a written contract and agree on specific content. In this article, TNTP will present the basic contents that parties need to pay attention to when drafting a loan contract.
I. Information of the parties entering into the loan contract
The parties to the loan contract can be individuals and/or legal entities. If one or both parties are legal entities, the following basic information is required: Legal entity name, tax code, head office address, contact information (phone number/email), representative signing enter into the contract (usually a legal representative or authorized representative). In case the one person signing the contract is an authorized representative, written authorization is required.
If one or both parties are individuals, the contract must contain the following basic information: Full name, date of birth, identification card/passport or other equivalent legal documents, address, and information contact (phone number/email) of the individual.
II. Loan amount
Current law has no restrictions on the amount in the loan contract, so the parties can freely agree on this content. However, the parties should note that, if the loan transaction is in the territory of Vietnam, the object of the loan contract must be Vietnamese Dong (Article 3 of Circular 32/2013/TT-NHNN), except for special subjects according to the law. If the loan amount is in foreign currency, the contract violates legal prohibitions and may be declared invalid. At that time, the parties must repay each other what they have received, and the injured party has the right to request the other party to compensate for the damage.
III. Loan contract term
The loan contract shall stipulate the loan term, or in other words, the amount of time for the borrower to fulfil its debt repayment obligations. The time can be days, months, years, etc. If the borrower does not fully pay the lender, the borrower is determined to be in breach of the contract from the day following the end of the period. Late payment interest will also apply from the date on which the borrower violates its loan repayment obligation.
IV. Interest rates
In the loan contract, the parties shall determine the loan interest rate, interest rate for late payment of principal, and interest rate for late payment of interest. For these types of interest rates, the parties are free to agree, however, they must comply with the maximum levels provided by law, specifically as follows: For the rate of interest, according to the provisions of Clause 1, Article 468 of the Civil Code 2015, the loan interest may not exceed 20% per year, unless otherwise prescribed by law. For interest rates on late principal repayment, according to Point c, Clause 2, Article 5 of Resolution 01/2019/NQ-HDTP, the maximum interest rate is 30%/year. Regarding the interest rate for late payment of debt, according to the provisions of Point a, Clause 5, Article 466 of the Civil Code 2015, the maximum interest rate is 10%/year, in case other relevant laws stipulate otherwise.
V. Measures to secure loan contracts
To ensure that the borrower fulfils its payment obligation, the lender can apply one or more different security measures and stipulate these measures in the contract or make and enter into a separate contract. Security measures are frequently applied as follows: Mortgage of property, pledge of property, guarantee.
VI. Governing law and dispute resolution
Choosing the governing law and dispute resolution plays an important role in the loan contract. If the provisions are not agreed by the parties, it can lead to adverse legal consequences for one or more parties in the contract. In addition, determining the dispute resolution in the contract will also affect travel, litigation costs, and the cost of hiring a lawyer when initiating a lawsuit. Therefore, depending on which party’s rights are protected in the contract, the drafter needs to ensure that the contract has applicable legal provisions and a dispute resolution that is most beneficial to the customer.
It should be noted that, for the loan contract between a foreign borrower or lender or an enterprise with foreign capital, the parties can choose the governing law to be foreign law and the local dispute resolution foreign.
Above is the content of the article “Instructions for drafting basic contents in loan contracts” that TNTP sends to readers. If there are any problems, please contact us for the best support.
Sincerely,
