What Is a Loan Covenant?

A loan contract is also known as a "borrowing contract". The lender shall hand # a certain amount of currency or other kinds of material to the borrower for disciplinary use. The borrower shall return the same amount of currency or the same kind, same quantity, and same quality of physical objects to the borrower on a regular or irregular basis according to the agreement. Civil law and civil law are traditionally called consumer loan contracts, that is, as opposed to using a loan contract, it refers to a contract that is not the repayment of the original borrowed material but the return of the equivalent currency or physical object. The loan contract can be interest-bearing or interest-free; it can happen between citizens, it can also happen between citizens and certain organizations, and between organizations. Legal characteristics: (1) The subject matter is currency or other kinds of objects. Otherwise, the borrower cannot perform the return obligation, and the borrower's risk is also borne by the borrower. (2) The ownership or disposition of the subject matter must be transferred. Traditional civil law generally considers that ownership must be transferred, but some scholars in the field of civil law in our country also believe that the loan contract only transfers the right of disposal to distinguish it from the sales contract. (3) The loan contract is an essential contract, that is, in addition to the agreement of the parties, the loan must be delivered, and the contract can be effectively established. However, according to the "Economic Contract Law of the People's Republic of China" and the "Loan Contract Regulations", companies The signing of a loan contract signed between institutions is legally binding and should be a promised contract. (4) The loan contract is a one-way contract. Because the loan contract is based on the delivery of borrowed goods, once the contract is established, the lender no longer assumes obligations, and only the borrower assumes the obligation of return. ^[1]

Loan contract

Right!

A loan contract is also known as a "borrowing contract". The lender shall hand # a certain amount of currency or other kinds of material to the borrower for disciplinary use. The borrower shall return the same amount of currency or the same kind, same quantity, and same quality of physical objects to the borrower on a regular or irregular basis according to the agreement. Civil law and civil law are traditionally called consumer loan contracts, that is, as opposed to using a loan contract, it refers to a contract that is not the repayment of the original borrowed material but the return of the equivalent currency or physical object. The loan contract can be interest-bearing or interest-free; it can happen between citizens, it can also happen between citizens and certain organizations, and between organizations. Legal characteristics: (1) The subject matter is currency or other kinds of objects. Otherwise, the borrower cannot perform the return obligation, and the borrower's risk is also borne by the borrower. (2) The ownership or disposition of the subject matter must be transferred. Traditional civil law generally considers that ownership must be transferred, but some scholars in the field of civil law in our country also believe that the loan contract only transfers the right of disposal to distinguish it from the sales contract. (3) The loan contract is an essential contract, that is, in addition to the agreement of the parties, the loan must be delivered, and the contract can be effectively established. However, according to the "Economic Contract Law of the People's Republic of China" and the "Loan Contract Regulations", companies The signing of a loan contract signed between institutions is legally binding and should be a promised contract. (4) The loan contract is a one-way contract. Because the loan contract is based on the delivery of borrowed goods, once the contract is established, the lender no longer assumes obligations, and only the borrower assumes the obligation of return. ^[1]

Major of the loan agreement

Financial leasing and borrowing are completely different legal relationships:

(1) The loan contract is that the lender transfers the currency ownership to the borrower, and the borrower returns the same amount of currency with additional interest; in the financial lease transaction, the lessor does not give the currency ownership to the lessee, but instead In addition to the suppliers (they constitute a buying and selling relationship), the structure of the rent paid by the lessee is also more complicated than the simple structure of repayment of principal and interest on the loan contract.

(2) According to the loan contract, the equipment purchased by the borrower with the borrowed funds has the ownership and has nothing to do with the lender; in the financial leasing transaction, the existence of the use relationship of the object cannot be ignored, and the use relationship of the object belongs to the nature of creditor's rights, the lessor always Ownership of the equipment and can fight against third parties (including other creditors).

(3) The existence of the option to lease items at the end of the period contradicts the theory of the loan contract. In a financial lease transaction, after the lease period, the lessee has three options to return the leased property, renew the lease or purchase, while in the loan contract, the principal and interest After the repayment, it means that the contract is terminated by itself, and the collateral can only be returned to the borrower unconditionally.
(4) The borrowing contract theory will lead to the application of interest rate control regulations on financial leases. In fact, the composition of rents and interest calculation methods are completely different and much more complicated.

According to the loan contract theory, the financial leasing transaction is essentially a currency loan contract. Representatives of this theory include French scholar Calon, German scholar Borggrafe, and Japanese scholar Nao Xioshi. The doctrine holds that in a financial lease transaction, the rent paid by the lessee is not the consideration of using the leased item, but the repayment of the cost and interest of the lessor to purchase the leased item. The lessor does not bear the risk of buying and selling, but the lessee's Credit risk. Financing lease is a credit act with the leased object as the intermediary. The difference between it and credit is only the presence of the leased object as an intermediary. It is essentially a financing act with the leased object as the collateral. It is not advisable to say that the loan contract only focuses on the economic function of the financial lease and ignores the legal relationship between the parties.