Do you want to lend money or have you already lent it and the borrower is not returning it?
If you have decided to lend money to someone or take a loan, it is advisable /even mandatory if the amount exceeds 20,000 AMD or if one party is a legal entity/ to formalize that transaction with a document. The relationships related to lending money are regulated by the Civil Code of the Republic of Armenia. One of the most common and acceptable options for legalizing these relationships is to conclude a loan agreement, where the lender is the Lender and the recipient of the money is the Borrower:
When concluding a loan agreement, it is important to consider several key aspects. For lending money, that is, for concluding a loan agreement, notarization of the contract is not required regardless of the amount. This means that a contract signed in a simple written form between the lender and the borrower has legal force as defined by law, and in case of non-fulfillment or improper fulfillment of the obligations undertaken by one of the parties, it is possible to apply to the court by presenting the loan agreement and requesting protection of rights from the court, which we will discuss below:
The loan agreement is drawn up in a simple written form, and the lender and borrower themselves determine the terms of the agreement, of course, taking into account the imperative conditions provided by Chapter 46 of the Civil Code of the Republic of Armenia. Article 878 of the Civil Code of the Republic of Armenia states that failure to maintain a written form leads to the invalidity of the loan agreement. Such an agreement is void. What is established by law as a mandatory prerequisite for any legal relationship cannot be changed by the agreement of the parties. The price of the loan agreement /the large amount of debt being lent/ or the desire of the parties to provide special conditions are important motives for seeking the assistance of a legal office. A well-drafted agreement will help avoid problems that may arise later and will assist in more effectively implementing the protection of rights in case of violations:
When intending to conclude an agreement, the first question that the parties usually discuss is whether the loan will be with interest or interest-free, which is mentioned in the contract. Here, it is important to note a very important prerequisite. The maximum interest rate of the loan agreement cannot exceed twice the calculated rate set by the Central Bank of Armenia. Since the calculated rate set by the Central Bank has been 12% since 2010 and has not changed to this day, it turns out that the maximum interest rate under the loan agreement can be 24%. But what consequences may arise from violating this condition, for example, if the interest rate under the loan agreement is set at 30%? It should be noted that under Article 213 of the Criminal Code of the Republic of Armenia, it is considered usury to receive interest exceeding twice the calculated rate set by the Central Bank for the money lent or property determined by its qualitative characteristics, and this is punishable by a fine of three hundred to five hundred times the minimum wage or imprisonment for a maximum of two years. Very often, although formally the parties agree to lend money at a high interest rate, later, when the party receiving the loan is unable to fulfill its obligation to return the money for various reasons, it turns to law enforcement agencies and reports the fact of usury, which is associated with numerous court cases in our reality.
The next basis that allows the borrower to contest the loan is provided by Article 882 of the Civil Code of the Republic of Armenia. If it is proven that he did not actually receive money or other property from the lender or received less than the amount specified in the contract:
Here, attention should be paid to how the method of handing over the money is formulated in the contract and whether it is stated as an already completed action, while the borrower cannot refer to witness testimonies as evidence of not receiving the money:
The resolution of the deadline issue is also of significant importance when concluding a contract.
In cases where the deadline for returning the loan is not specified in the contract or is specified as on demand, the borrower must return the loan amount within thirty days from the day the lender presents the demand, unless otherwise specified in the contract:
The borrower can return the interest-free loan amount early:
The loan amount provided with interest can only be returned early with the lender's consent, unless otherwise specified by law or the loan agreement:
This means that if the contract does not provide for the possibility of early return of the funds, and those funds are provided with interest, then the borrower cannot unilaterally refuse the contract and return the funds specified in the contract before the expiration of the term specified in the contract:
The lender must also be aware of another important imperative condition established by the code, which cannot be changed by the contract.
In cases where the person who took the loan does not return the loan amount within the time specified in the contract, the interest provided for in the loan agreement ceases, and only the interest payable on that amount is subject to payment in accordance with point 1 of Article 411 of the Civil Code of the Republic of Armenia, starting from the day the money was supposed to be returned until the day the money is returned to the lender:
This means that the interest on overdue loans is subject to calculation at an annual rate of 12%. Regardless of what consequences the parties have provided for in the loan agreement:
Renewal of Debt by Loan
In cases where there is a concluded sales contract or lease agreement and the buyer or tenant has an outstanding monetary obligation to the seller/lessor, especially when the term of the contract has expired, the parties can conclude a loan agreement thus renewing their ongoing or completed relationships. In the loan obligation, the debt is replaced with the preservation of claims regarding renewal (Article 430) and in the manner prescribed for concluding a loan agreement.
Failure to fulfill obligations by the borrower: The debt is not returned within the specified time
In this case, it is especially important for the lender to promptly document the situation, as delaying may result in permanently losing the opportunity to recover the lent money – due to the statute of limitations or as a result of the borrower intentionally alienating or accidentally losing their property:
In the matter of recovering the money lent, the Alex Law Office offers an exclusive condition.
In cases where our investigations reveal that the borrower has financial resources, movable or immovable property, that is, the possibility of recovering the debt from the borrower is real, the services are provided under the following condition: The company only takes any agreed payment if the money has been returned to the lender. This means that the principle of success fee applies. Payment is made only in the case of returning the money:
How does the money recovery process work?
The submitted documents, the deadlines for providing the money, and other conditions are studied.
An analysis of the debtor's financial situation is conducted.
In cases where it is concluded that it is possible to recover the money, a claim is prepared.
The recovery of the money is carried out through judicial means, and the enforcement order is submitted to the Enforcement Service for compulsory execution.
As a result of compulsory execution, the money is returned to the lender. The remuneration for the services rendered is realized:
If you want to know more, you can send a message or call any of the phone numbers listed in the feedback section: