Finance Agreements

Finance Agreements
INTERNATIONAL CONTRACTING AND CIVIL LIABILITY THIRD TRIMESTER. ACADEMIC YEAR 2011-2012

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16.1 Loan Agreements
(i) Definition of loan According to article 1740 of the Spanish Civil Code, a loan agreement is that contract by virtue of which one party delivers to the other, either something non fungible so that the latter may use it for a period of time and then return itto the lender, in which case is called commodatum, or money or another fungible good, with the condition of returning another equal or similar good (including quality), in which case it is known just as loan. The commodatum is essentially free. The loan can either be free or with an agreement of paying an interest. The loan, understood as a commercial loan, is also regulated in the CommercialCode, in its articles 311 to 324, both included. In order to consider the loan a commercial loan, it is essential that it complies with both requisites set forth in article 311 of the Commercial Code: (i)That any of the parties is a trader; and (ii) That the goods that are purpose of the loan are destined to commercial acts. The loan can be related to money, to securities (valores) or merchandise(in-kind loan) (Artº 312 Commercial Code). 2

(ii) Characteristics of the loan (i) Contracting parties: • Lender: is the party in a loan agreement that allows the temporary use of something on condition that the good or its equivalent is returned. Borrower: is the party in a loan agreement which receives money or other instrument from a lender and promises to repay the same good or its equivalentto the lender in a specified time.

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(ii) Purpose: the good which is the purpose of the loan must be necessarily fungible, that is to say, money, securities or merchandise. (iii) It is a consensual agreement, that is to say, the agreement becomes concluded when the parties have agreed the amount of the loan, the terms and conditions for its return and the amount of the interests. (iv) Thereis a transmission of the property, that is to say, once the borrower receives the good that is purpose of the loan, he becomes the legal owner of it.

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(iii)

Classification of the loans According to the Commercial Code, there are several kinds of loans: Depending on what the purpose of the loan is, we can distinguish between: (a) Loan which purpose is money; (b) Loan which purpose aresecurities; and (c) Loans which purpose is a merchandise (in kind), that is to say, something fungible different to money or securities. Depending on the duration of the loan, it can be for a determined or undetermined period. Depending of the gratuity of the loan, that is to say, if the borrower has the duty of paying or not an interest for the good borrowed. Depending on the existence or not of asecurity related to the loan.

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(iv)

Duties of the lender Taking into account that the loan has a consensual character the main duty of the lender of a loan is to provide the borrower with the fungible good in the terms set forth in the loan agreement. In the event the purpose to be delivered is money, and it can be either delivered in national or foreign currency. It is essential that thelender delivers the good in order that the duties of the borrower come up.

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(v)

Duties of the borrower Basically the two main duties of the borrower are (a) the duty of returning another equal or similar good (including quality) and (b) the duty of paying the interests arisen from the A) Duty of returning another equal or similar good (including quality). The borrower acquires theownership of the good subject of the loan and has the duty of repaying the same good or its equivalent to the lender usually in a specific time. To that duty corresponds a credit right to the lender. There three important matters to analyze: 1) The termination date of the duty is fixed on the agreement. If the termination date is undetermined, the borrower has no duty of repaying until the following...