The contract for borrowing property is a common type of civil contract, and currently, this type of contract is also widely known and used by parties for different purposes. In the following article, TNTP sends you some notes when drafting the contract for borrowing property.

I. What is the contract for borrowing property?

According to Article 494 of the Civil Code 2015, the contract for borrowing property is understood as an agreement between parties whereby a lender delivers property to a borrower for use free of charge for a period of time and the borrower returns the property at the end of the period of time or when the purpose of the borrowing has been achieved.

The nature of the contract for borrowing property is to deliver the property to the borrower for use within a period of time. At the end of the period, such property returns to the lender. Thus, the subject matter of this contract is any non-consumable property such as gold, silver, cars, motorbikes, televisions, refrigerators, etc.

II. Features of the contract for borrowing property

(i) The subject matter of this contract is any non-consumable property. Accordingly, the non-consumable property means an object that is used many times but retains the original properties, shape, and features of use. After using the borrowed property, the borrower shall return such property to the lender. The borrower shall compensate for damage where the borrower causes damage to or loss of the borrowed property.

(ii) There is no transfer of property ownership in this contract.

(iii) This contract is a bilateral contract which means a contract whereby each party has an obligation to the other.

(iv) This contract is an unidentifiable contract because the borrower does not have to pay any material benefits when using the borrowed property of the lender.

III. Drafting the contract for borrowing property

In order to ensure the interests of the parties and to constrain disputes, when drafting the contract for borrowing property, it is necessary to ensure that the basic terms are as follows:

(1) Draft detailed and clarified information about the parties. Specifically, the contract should clearly show information regarding the full name, address, identification card (if it is an individual), tax code (if it is a legal entity), contact information (phone number, email address), etc. of the borrower and the lender.

When entering into the contract, the parties should be attentive to the subjectivity of the borrower and the lender. Accordingly, participants who make and enter into the contract have legal personality and legal capacity in conformity with such a contract. The determination of the legal capacity of the parties is extraordinarily essential. It is the first condition to determine whether the contract for borrowing property is legally concluded or not, legally valid or not. Thus, the borrower and the lender must have legal capacity in accordance with the provisions of the law.

(2) Stipulate the subject matter of the contract. Specifically, the parties need to agree in the contract on the type, quantity, quality, and condition of the property. For instance, if the subject matter of the contract is television, the parties need to describe in detail characteristics such as brand, new or old condition, the value of the television, etc.

(3) Agree on the term of the contract. Accordingly, the duration of the contract shall be agreed upon by the parties. If the parties do not agree on a specific borrowing term, the lender is entitled to reclaim the property as soon as the borrower achieves the purpose. However, the lender still has the right to reclaim the property even if the contract is not due or when the borrower has not achieved the purpose of use in case the lender has an unexpected and urgent need to use it but with reasonable advance notice. Reasonable time will be based on each specific case.

(4) The parties can consider the actual situation to draft their rights and obligations. The parties can refer to some basic contents as follows:

● The borrower has the following rights: Use the borrowed property strictly in accordance with its utility and agreed-on purpose; require the lender to reimburse reasonable expenses incurred in carrying out repairs or improvements to the borrowed property which increase its value if so agreed; and do not bear liability for normal wear and tear of the borrowed property.

● The borrower has the following obligations: Take care of and preserve the borrowed property and not change the condition thereof at the volition of the borrower; the borrower must repair any normal damage to the property; do not on-lend the property to any other person without the consent of the lender; return the borrowed property on the due date; if there is no agreement on the time for returning the property, the borrower must return the property immediately after the purpose of the borrowing has been achieved; compensate for damage where the borrower causes damage to or loss of the borrowed property and the borrower must bear the risk in relation to the borrowed property during the period of late return.

● The property lender has the following rights: Reclaim the property immediately after the borrower has achieved its purpose where there is no agreement on the borrowing period; if the lender suddenly and urgently needs to use the borrowed property, the lender may reclaim it upon giving reasonable prior notice to the borrower, even if the borrower has not yet achieved its purpose; reclaim the property where the borrower fails to use it strictly in accordance with the agreed purpose, utility, or method or where the borrower on-lends the property without the consent of the lender; and demand compensation for damage to the property caused by the borrower.

● The property lender has the following obligations: Provide necessary information on the use of the property and its defects; reimburse the borrower for expenses incurred in carrying out repairs or improvements to the borrowed property which increase its value if so agreed; and where the lender knows but fails to notify the borrower of a defect in the property which results in damage to the borrower, to compensate the borrower for such damage, except where the borrower knows or should know of such defect.

(5) Agree on the purpose of using the borrowed property. According to the provisions of law, the property lender has the right to reclaim the property if the borrower fails to use it strictly in accordance with the agreed purpose, or the borrower must return the property immediately after the purpose of the borrowing has been achieved. Thus, the agreement on the purpose of using the property will relate to the rights and obligations of the parties. Therefore, this provision should be considered and agreed upon by the parties.

Besides, in case one of the parties breaches the contract, the parties should agree on sanctions such as compensation for damage or fines for violations. Furthermore, dispute resolution provisions are also important content. Accordingly, the parties may agree that the dispute shall be settled through negotiation or conciliation. If no settlement is reached by doing so, the parties may initiate a lawsuit at Arbitration or Court.

Above is the content of the article “Techniques for drafting a contract for borrowing property” that TNTP sent to readers. If you have any further questions, please do not hesitate to contact TNTP for the best support.

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