Loan Agreement
Have you ever borrowed some money from someone, and vice versa? Many years ago, one of my friends borrowed me some money, I gave him the money without hesitating. I did not even ask him when he would repay me. Until now, he has not repaid me yet. He may forget! When I study law, I just realized that any agreement should be made in writing.
Under Civil and Commercial Code, section 653 states that a loan of money for a sum exceeding two thousand baht in capital is not enforceable by action unless there is some written evidence of the loan signed by the borrower
First, we talk about the amount of money. Only a loan of money that exceeds two thousand baht is needed to do in writing, otherwise such loan cannot be taken by action. Therefore, any loan of money can be made by oval. However, I recommend that always make it in writing.
“Some written evidence” some people understand that the loan agreement must be made only in a piece of paper. Actually, you can write a loan agreement anywhere. You may make it on a wall, a table, your body, etc. However, the loan agreement should be written in a paper because it is easier to show the Court. Please be noted that in the loan agreement must at least show that someone borrows your money, and he will repaid, the amount of money, and signed by the borrower. A name of lender, the expected date of repayment, the date of loan agreement are not needed. However, the more information you put in the agreement, the easier to prove to the Court.
Edition or Alternation of a loan agreement
***If a loan agreement is made completely, the second loan agreement should be made separately from the first one. If the second loan agreement is not made, the borrower just crosses the amount of money of the first loan out, combines the amount of money for the first and second loan together, and put it in the first agreement without signing his name again. Only the first loan agreement is considered to be written evidence.
For an example, Mr. Peter borrows Miss Somsri for the amount of five thousand baht. They both make a loan agreement already. On the same day, Peter needs two thousand baht more, so they agree that they crosses out five thousand baht out and put seven thousand baht instead in the agreement. Under law, only the loan agreement for five thousand baht is considered to be written evidence. Therefore, Peter is liable for only five thousand baht.
In addition, law provides that interest shall not exceed fifteen percent per year; when a higher rate of interest is fixed by the contract, it shall be reduced to fifteen percent per year.
Time to pay back
If a loan agreement is made in writing and the borrower repay by money, the borrower can prove the repayment to the Court when:
- There is some written evidence signed by the lender; or
- The document evidencing the loan has been surrendered to the borrower; or
- The document evidencing the loan has been canceled
Therefore, if the borrower repay by giving things, not money, the borrower does not need to follow the either method as mentioned above to prove the Court.
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Before taking any legal action, persons are advised to seek the advice of a lawyer qualified in the area of law concerned.