Loan agreement
Credit agreement or loan agreement ( English loan agreement ) is a contract between a credit institution and borrower about the granting of a certain loan , especially in the banking sector .
Legal bases
In Germany, the loan agreement is subject to the provisions of the law of obligations of § § 488 ff. BGB . Since the law of obligations generally grants the contracting parties freedom of contract, only the minimum legal requirements are anchored here. According to this, loan (the law always speaks of "loan") is a contract under the law of obligations, which includes the transfer of money (in the form of cash or book money ) or other reasonable property ( loan in kind ) into the property of the borrower and his repayment obligation. The loan agreement is only concluded when a legally effective offer by the lender and an equally effective declaration of acceptance by the borrower are available as declarations of intent within the meaning of Section 145 BGB.
If the credit agreement is legally effective, both parties must ensure that it is fulfilled. The lender is (only) obliged to pay out the loan if the agreed disbursement requirements have been met by the borrower and / or a third party. This includes, in particular, any proof of legitimation, legally effective ordering of agreed loan collateral and other evidence. If these disbursement requirements have been met, the borrower is entitled to a disbursement, which can be assigned / pledged or attached independently (§ § 398 ff. BGB).
In addition, various special laws and regulations such as the Price Indication Ordinance or the provisions of the so-called “ Money Laundering Act ” apply . The credit institutions regularly include their terms and conditions in the credit agreements , which contain general provisions and no longer need to be specifically mentioned there because they are included in the credit agreements.
Contract components
In addition to the payment obligation of the lender and the repayment obligation of the borrower as main obligations, the loan agreement contains a large number of other parts of the contract, agreements and clarifications, which are mostly to be fulfilled or observed by the borrower. The credit terms include in particular
Loan type and amount
The type of loan determines the availability, purpose and method of repayment of the loan. Major types of loans are overdraft , overdraft facility , medium- and long-term loans ( consumer , investment and real estate financing ) or the assumption of guarantees / warranties (so-called guarantee facility ). The loan amount is specifically mentioned along with the currency and forms the contractually precisely defined upper limit of the loan ( credit line ). Also, foreign currency loans are possible.
Lending Interest / Costs
The lending interest incurred and the fees incurred in connection with the granting of the loan are specified together with their due date and form of payment. In the case of consumer loans , all price-determining factors in accordance with Section 6 of the Price Indication Ordinance must be included in the “initial annual percentage rate”.
Banks are not allowed to charge processing fees for loans ; corresponding clauses in their terms and conditions are not permitted. In May 2014, the Federal Court of Justice (BGH) decided in a landmark ruling on loan processing fees that “pre-formulated provisions on processing fees in loan agreements between a credit institution and a consumer are ineffective”. Processing fees for loans that are unjustifiably charged by the banks can be reclaimed retrospectively for up to ten years, whereby the knowledge-dependent limitation period begins on December 31, 2011. The Stiftung Warentest provides a sample letter for the recovery and a detailed description of the legal situation.
Loan term / repayment
Loan term or simply term is the length of time between the creation of the loan debt and its maturity . Loans are limited in time as is customary in banks, whereby the term must be consistent with the repayment and liquidity options of the borrower. The repayments , differentiated according to installment or annuity repayment , are specified with their amount, due date and form of payment. At the end of the agreed credit period, the loan and all other ancillary services are due for repayment without the need for a special request by the lender. Repayment surrogates such as savings payments from endowment insurance , annuity insurance or building society contracts are referred to as redemption surrogates or redemption substitutes and must be specially recognized as a type of repayment in the loan agreement.
Loan collateral
If credit collateral is agreed, the credit agreement contains a so-called security agreement / security purpose declaration in which the borrower / security provider undertakes to provide certain loan security and the lender assumes the obligation to return the security if the reason for security no longer applies. The actual collateral is usually provided in separate contracts. The legal basis for the provision of collateral is therefore not the loan agreement, but the security agreement. Although the loan agreement was the actual cause of the provision of collateral, it did not establish the obligation to provide certain collateral.
Disclosure of the economic situation
According to Section 18 KWG , banks are obliged to have the economic situation of their borrowers disclosed annually ( credit check ). They pass on this obligation towards the banking supervisory authority ( BAFin ) to their borrowers in the loan agreements. Exceptions are only provided for loans that do not exceed the limit of € 750,000 and for certain real estate financing . If the borrower does not meet his contractual obligation to submit creditworthiness documents in the context of the disclosure of the economic situation, or not fully, this triggers extraordinary termination rights due to a breach of contractual obligation (see below).
other agreements
This includes not insignificant agreements that are important for the fulfillment of a loan agreement. In banking practice, the term covenants has become established for this .
The borrower is obliged to make assurances that aim to maintain the original business basis for the loan approval during the loan term. There are assurances that the borrower must have fulfilled before the loan is disbursed / made available ( conditions precedent ; see conditionality ) and those that he must adhere to without interruption during the term of the loan ( covenants in the narrower sense). One of the key points of these agreements is the clause on the substantial deterioration in the financial situation, the facts of which increase the credit risk of the credit institutions during the credit period and therefore trigger subsequent collateral or termination rights. As a rule, this clause is not mentioned separately in the loan agreement, but results from the inclusion of the terms and conditions, which contain general provisions that do not have to be repeated in the loan agreement because of their inclusion. So-called assignment clauses are contained in the loan agreements so that loans can be transferred to other lenders in the future, for example in the context of loan trading .
Secondary duties
From a loan agreement, the lending bank has the secondary obligation not to endanger the creditworthiness of the borrower through assertions of fact - even if they are true - or through value judgments or expressions of opinion. The obligation to safeguard interests and loyalty arising from a loan agreement is culpably violated if the borrower's creditworthiness is jeopardized both by factual assertions, even if they are true, as well as by value judgments or expressions of opinion. As in the present case, this can trigger tortious liability according to Section 823 (1) BGB.
shape
Either there is a statutory written form, as is the case with consumer loan contracts, or a deliberate written form, if both parties agree on the written form given the freedom of form ( Section 127 BGB). Since credit agreements, with the exception of consumer loan agreements, do not require any form, the written form is contractually agreed; this also applies to all subsequent changes. As an exception, there is still the possibility that credit agreements come about conclusively (implicitly) as in the case of an account overdraft .
International
The Loan Market Association has developed creditor-friendly standards for loan agreements that are based on Anglo-Saxon common law and are used in international credit transactions, particularly in the case of syndicated loans , but are also sometimes used in German-language credit agreements. Since the common law rather judge-made law as statutory law represents the Treaties definitions ( English definitions ) precedes all possible terms, even if they are commonly known as ( credit , interest rate , margin ). Quotations from the law and the inclusion of the General Terms and Conditions are unusual. This is followed by conditions precedent ( English: conditions precedent ) and in the broader sense ( English representations and warranties , English covenants and undertakings ), the non-compliance of which triggers a loan termination ( English event of default ) by the lender.
- The “conditions precedent” are payment requirements in the narrower sense. A distinction must be made between the disbursement conditions before the first disbursement ( English conditions precedent prior to first drawdown ) and those for each subsequent disbursement ( English conditions precedent to each drawdown ). The latter must be fulfilled repeatedly if there are several partial payments. The lender required by a legal opinion ( English legal opinion ) the confirmation of the legal existence of the borrower and its authority to include credit agreements legally binding and mandatory signing of the credit agreement. Their fulfillment by the borrower triggers the bank's payment obligation.
- "Representations and warranties" are a multitude of declarations and assurances of facts and of compliance with all relevant laws , on the basis of which the bank declares its willingness to pay out. They are very broad because they require the borrower to comply with all imaginable laws. The "representations" are assurances about existing legal and economic facts ( status quo ), which must be fulfilled before a payout, "repeating representations" in turn are to be repeated for each further payout. “Warranties”, on the other hand, relate to obligations of conduct that the borrower must comply with during the loan term. Your non-compliance ( English misrepresentation ) triggers an event of default of the bank.
- “Covenants” are contractual assurances by the borrower to meet certain conditions or to refrain from certain actions during the loan term. "Undertakings" are general behavioral requirements, which include, in particular, information obligations (on the annual financial statements and interim reporting ) and the borrower's obligations to act and refrain from acting (taking out new loans, dividend payments with the "dividend restriction clause" or the "change of control clause").
Some clauses can be incorporated into German-language contracts without hesitation ( “material adverse change” ), but others only if an English choice of law has been made (such as the third-party default clause, English cross default ). According to the third-party default clause, a lender can already terminate the loan if the borrower receives the loan termination from any other creditor.
Invalidity of credit agreements
In certain cases, loan agreements can be ineffective from the outset or subsequently become ineffective even though the loan amount has already been paid out. This means that they then have no legal effect. However, if a loan agreement is ineffective, this does not mean that the borrower is released from his repayment obligation. From a legal point of view, however, the borrower is then no longer contractually obliged to repay , but instead is obliged to repay based on provisions under enrichment law ( Section 812 (1), sentence 1 BGB), i.e. by law.
This legally provided abstraction principle also exists in the relationship between the loan agreement and the security agreement contained therein. The immorality of a loan does not automatically affect the collateral provided. These usually remain in place and serve to secure the right to repayment of the loan under enrichment law. The ineffectiveness of the credit agreement can also be due to the lack of power of representation of a third party. The contract is then pending ineffective up to the declared approval of the borrower if the borrower refuses the approval; with approval, the contract is retrospectively fully legally effective. The lack of power of representation can result in particular from the problem of so-called “ scrap real estate ”.
The reason for ineffectiveness can also be a so-called usury-like loan. According to the case law of the BGH, this can be assumed if there is a noticeable imbalance between performance and consideration and the lender deliberately uses the weaker position of the other party to his advantage. According to the established case law of the BGH, a noticeable disproportion exists if the effective contractual interest rate exceeds the effective market interest rate relatively by 100% or absolutely by twelve percentage points. If the interest rate is twice as high as usual or if it is twelve percentage points above the market average, the contract can be immoral and therefore ineffective. In the opinion of the BGH, the costs of residual debt insurance are not to be taken into account in the calculation, as these also bring advantages for the borrower and are not included in the comparative interest rates of the monthly statistics of the Deutsche Bundesbank, provided that the residual debt insurance only has a negligible effect on the effective annual interest rate.
Finally, an (initial) over- collateralisation also leads to the ineffectiveness of loan agreements. Like immorality and usury, this form can no longer be cured, but leads to the final nullity of collateral or credit agreements.
Termination of loan agreements
Main article: Loan cancellation
Legally, a distinction is made between legal (or ordinary) and contractual (extraordinary) termination options for the loan agreement. However, the law also provides for extraordinary termination options.
Statutory termination option
According to Section 488, Paragraph 3, Clause 1 of the German Civil Code, the lender is only entitled to an ordinary right of termination with a notice period of three months for loans that are granted for an indefinite period. Such indefinite long-term obligations are unknown in our legal system, so that they are granted the only termination option - apart from final repayment - through ordinary termination. The ordinary termination does not have to be justified. As a rule, however, loans are granted for a limited period, ie with a “specific term”. Then there is no proper right of termination on the part of the lender.
Extraordinary termination option
In the case of fixed-term loans, the loan relationship is normally terminated by the expiry of the period or final repayment. However, it can happen that one of the contracting parties has reason to terminate the loan agreement prematurely. This occasion must be a so-called " important reason ". According to the legal definition of Section 314 (1) sentence 2 BGB, there is good cause if the terminating party cannot be expected to continue the loan agreement until the agreed termination, taking into account all the circumstances of the individual case and weighing the interests of both parties. In most cases, the relationship of trust between the bank and the borrower - which is of particular importance in the loan agreement - is likely to be destroyed in these cases. The reason for the extraordinary termination must be justified.
Section 490 (1) of the German Civil Code (BGB) also provides for the extraordinary possibility of terminating loan agreements in the event of a significant deterioration in the financial situation or due to a decline in the value of collateral provided. This right of termination applies as a “lex specialis” compared to Section 314 of the German Civil Code, so that Section 490 (1) of the German Civil Code takes precedence in these cases.
For consumer loan contracts, an extraordinary right of termination is established in Section 498 of the German Civil Code (BGB), provided that the loan is to be repaid in at least two installments (see in detail the article on the significant deterioration in financial circumstances ).
Breach of contract
An important reason is the breach of a contractual obligation (Section 314 (2) BGB). This includes the borrower's refusal to provide or increase loan collateral, the permanent overdraft of credit lines on a large scale or the failure to submit loan documents as part of the disclosure of the economic situation or other documents relevant to the contract. In these cases, the borrowers are given a reasonable grace period to prevent loan termination.
Other circumstances
Other circumstances (Section 314 (1) BGB) are primarily untrue, contractually relevant information provided by the borrower about his financial situation or persistent insulting statements by the borrower to the bank or its employees.
Individual evidence
- ↑ Otto Palandt , Commentary on the BGB , 46th edition, p. 614
- ↑ BGH, judgment of May 13, 2014, Az.:XI ZR 405/12
- ↑ BGH, judgment of October 28, 2014, Az .: XI ZR 348/13
- ↑ Stiftung Warentest: sample letter credit processing fee , on test.de from December 13, 2012, accessed online on May 13, 2013
- ↑ Stiftung Warentest: Loan Processing Fees: Judgments for Consumers , on test.de from January 17, 2013, accessed online on May 13, 2013
- ↑ BGH, judgment of January 24, 2006, Az .: XI ZR 384/03 (" Leo Kirch credit report in the TV interview"), in: ZIP 2006, 317
- ↑ Richard Guserl / Helmut Pernsteiner, Financial Management: Basics - Concepts - Implementation , 2015, p. 281 f.
- ↑ Clifford Chance (ed.), Project Finance , 1991, p. 107
- ↑ Richard Guserl / Helmut Pernsteiner, Financial Management: Basics - Concepts - Implementation , 2015, p. 285.
- ↑ BGH WM 1994, 583
- ↑ BGH NJW 1986, 2564; BGH ZIP 2006, 1088
- ↑ BGH NJW 1991, 834, 835
- ↑ BGH NJW 1988, 1661, 1662
- ↑ this notice period is contractually mandatory
- ^ Robert Freitag , The termination of the loan agreement according to the Law of Obligations Modernization Act , WM 2001, 2370, 2371
- ↑ so also BGH WM 1969, 335
- ^ Robert Freitag, WM 2001, 2370 (2377)
- ↑ No. 22 para. 1 AGB-Sparkassen or No. 13 para. 1 and 2 ABG-Banken
- ↑ Klaus J. Hopt, Legal Obligations of Credit Institutions to Provide Credit, Leave Loans and Restructuring Companies , ZHR 143, 139 (161)
- ↑ Volker Lang / Paul Assies / Stefan Werner, Modernization of the Law of Obligations in Bank Practice , 2002, p. 161
- ↑ a b Herbert Schimansky / Hermann-Josef Bunte / Hans-Jürgen Lwowski, Banking Law Handbook Vol. I and II , 1997, § 79 Rd. 41a
