The Supreme Court has clarified the issue regarding loan agreements.
Information on this was provided to Modern.az by the court.
It was stated that in daily life, people often lend money to each other. These relationships are often built on mutual trust and, in most cases, are not formalized in writing. However, when a dispute arises between the parties later, the improper documentation of loan relationships significantly complicates the protection of the parties' rights.
In practice, a significant portion of court disputes related to loan relationships arises precisely due to the failure to conclude the agreement in writing or the absence of written evidence regarding the giving and repayment of the loan.
When should a loan agreement be concluded in written form?
According to legislation, a loan agreement must be concluded in written form if the loan amount exceeds 3000 manats, or if one of the contracting parties is a legal entity, regardless of the loan amount.
Why is written form important?
A written agreement allows for the clear expression of the parties' will. In this case, the loan amount, repayment period, repayment method (lump sum or in installments), as well as other conditions are precisely defined. This helps prevent potential disputes in the future and also protects the parties from a heavy burden of proof during future disputes.
If the agreement is not concluded in written form when required by law, the relationship between the parties may be evaluated not as a loan relationship, but within the framework of unjust enrichment rules. This can lead to more unfavorable legal consequences for the parties. For instance, the statute of limitations for claims related to unjust enrichment is two years, whereas a three-year statute of limitations applies to claims arising from a loan agreement.
In addition to the loan agreement, it is important to document the performance of the parties' obligations arising from the agreement in a certain form. That is, actions related to the lender providing funds and the borrower repaying the loan should also be confirmed in writing as much as possible. For example, through bank transfers, receipts, correspondence between the parties, and other means.
Otherwise, that is, in cases where the loan relationship is established orally and funds are given and repaid hand-to-hand without any written confirmation, it becomes difficult for the parties to prove these facts, and their claims are rejected by the courts or their objections are not accepted because they cannot substantiate the circumstances they assert with sufficiently reliable evidence.
Recommendations
When entering into loan relationships, it is recommended to pay attention to the following points to prevent potential legal risks in the future:
· always conclude a written agreement if the loan amount exceeds 3000 manats;
· clearly specify the loan amount, repayment period, and payment method in the agreement;
· provide funds via bank transfer whenever possible;
· obtain a receipt or written confirmation when giving and repaying the loan;
· retain messages and other correspondence exchanged between the parties;
· seek professional legal advice for drafting the agreement when necessary.
Proper drafting of a loan agreement and transparent formalization of relationships serve to protect the rights of the parties, prevent future disputes, and ensure legal certainty in civil circulation.
