Money is the nerve of the dream, and sometimes we need to borrow money from others. In this article, we’re going to talk about loan money agreements and relevant legal matters. It is useful for both the lender and the borrower. However, this article doesn’t include loan Security Agreements which we’re going to talk about in the future.
If you do it in Thailand, below are the important points to know.
A Loan of Money is a Part of a Loan for Consumption
Section 650 of the Civil and Commercial Code (C.C.C.) provides the definition of a loan for consumption as a contract whereby the lender transfers to the borrower the ownership of a certain quantity of property that is consumed by the user, and the borrower agrees to return a property of the same kind, quality, and quantity.
The contract is complete only on delivery of the property, which means that in the case of a loan of money, the payment is in full of the amount borrowed.
Compulsory Form of the Contract
The contract itself is only subject to written and signed evidence by the borrower. The lender’s and witness’s signatures are not required (Section 653 of the C.C.C.). This evidence doesn’t need to mention the word loan or who is the lender if it is enough to understand that the defendant owes the plaintiff and the defendant will make the payment to the plaintiff (Supreme Judgement No. 5235/2542, 807/2529, 408/2532). Also, online chat like Facebook Messenger, Line, or WhatsApp can be evidence for the lender to file the lawsuit against the borrower according to the Electronic Transactions Act B.E. 2544, Sections 8, 9, and 653 C.C.C., Supreme Judgement No. 8089/2556.
An exception in the case of a loan of money for a sum not exceeding two thousand baht in the capital doesn’t need written evidence. But keep in mind that the lender still needs to prove that he or she has completed the payment.
The best evidence that the amount borrowed has been refunded is the payment transfer evidence. No repayment of a loan of money evidenced by writing may be proved unless there is some written evidence signed by the lender or the document evidencing the loan has been surrendered to the borrower or cancelled.
Note that to be usable at the court, the agreement must bear a duty stamp; otherwise, the judge will reject it for procedure breach according to Section 85 of the Civil Procedure Code and Section 118 of the Revenue Code.
Interest and Calculation
According to Section 654, the usurious rate is 15% per year; when a higher rate of interest is fixed by the contract, even Section 654 stipulates that it shall be reduced to 15% per year, but under The Act Prohibiting Calling Interest Over Rate, B.E. 2475 Section 5 and C.C.C. Section 150. However, this isn’t applicable to financial institutions. In this case, the interest rate would be 3% per year.
Normally, the capitalization of interest is not accepted. Section 655 of the C.C.C. stipulates that interest shall not bear interest. But one exception is possible if the parties to a loan of money agree that the interest due for not less than one year shall be added to the capital and that the whole shall bear interest, but such an agreement must be made in writing.
Commercial usage for the calculation of compound interest in current accounts, as well as in similar commercial transactions, is not governed by the foregoing paragraph.
Generally, it is 10 years from the refund due date; however, when the refund is agreed to be done by instalment, with each instalment including part of the capital and part of the interest, the right to claim repayment of the loan is, therefore, valid for 5 years according to the C.C.C., Sections 193/30 and 193/33 (2), and Supreme Judgement No. 12442/2553.
Borrower or lender, before signing any contract, it is better to come to see us talk about this loan of money, the question of the guarantee is also primordial.