A loan agreement is a contract in which one party lends money to another. The loan agreement is one of the most common legal instruments for borrowing money, which can be concluded in either a simple written form or through notarization. The loan can be either interest-bearing or interest-free. Like any contract, the loan agreement has certain features that must be followed, and failure to adhere to them can lead to negative consequences for either the lender or the borrower.
In the case of a loan, a significant condition is the confirmation and documentation by the lender or the party providing the loan that the money has actually been transferred to the borrower or the party receiving the loan, in such a way that it does not create any further disputes or doubts regarding the existence of the loaned money. Not transferring the money in fact or not receiving it, or disputing the contract in court on the grounds of lack of funds is the most common basis, and as statistics show, the 'most effective' one. In cases where the lender cannot provide sufficient evidence that the money has actually been handed over to the borrower, or if there are multiple debtors, then all of them, it can lead to the complete or partial loss of the loaned amount, which can occur due to incorrect formulation of the relevant legal provisions in the loan agreement, as well as due to the actual actions of the person who provided the loan or the recipients thereafter. These actions can testify to both the receipt of the money and the non-receipt of it. It is also of significant importance who drafted the contract; whether it is a standard form or was drafted by the debtor and the creditor, this also matters in case a dispute arises regarding the receipt of the money / there is a precedent from the Supreme Court on this matter. See ESHD/4213/02/14
In cases where the contract is not drafted by the individuals who signed it personally (standard contract, exemplary form of the contract, etc.), the Supreme Court may consider a situation where certain provisions are already provided for in such contracts, and in those contracts, if the moment of signing the contract is considered as the moment of payment of the contract price, the mere signing of the contract cannot itself testify to the fact that the money or the price of the contract was paid at the moment of signing.
In another case, the money was handed over to only one borrower, but several individuals were indicated as the parties to the loan. However, later, the person who provided the loan was deprived of the right to make claims against the debtors on the grounds that the actual loan amount was not received by them. Here too, it would have been possible to avoid such adverse consequences by making the correct entries in the contract. see ARD1/0107/02/14
In the same case, the actions performed by the person who provided the loan were also of significant importance, which, due to lack of appropriate knowledge, inadvertently caused adverse consequences for him, and with the presence of proper legal assistance, it would have been possible to recover the handed-over money, which is no longer possible in the presence of a final judicial act.
Receiving proper legal advice when providing a loan and documenting the debt has become more relevant and in demand.