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Loan agreement
Definition and legal basis
The loan agreement is a central legal institution in civil law, which is regulated in Sections 598-606 of the German Civil Code (BGB). It describes a contract in which the lender provides an item to a borrower free of charge for temporary use. In contrast to rental or purchase contracts, ownership remains with the lender. Use is free of charge unless otherwise agreed. The loan agreement can be concluded for both movable and immovable property. It requires an express or implied agreement between the lender and borrower. The absence of payment is an essential feature of the loan agreement. Case law has developed differentiated principles for the interpretation and implementation of loan agreements.
Rights and obligations of the contracting parties
The lender is obliged to hand over the item to the borrower in a usable condition. The lender is only liable in cases of intent and gross negligence. Defects may not be concealed, otherwise the lender shall bear the liability for defects. The borrower receives a free transfer of use and must bear the costs of maintaining the item. This includes, for example, feeding costs for animals or maintenance costs. Use is limited to the agreed purpose. Any transfer to third parties requires the consent of the lender. After the loan period has expired or the purpose of use has been fulfilled, the item must be returned. The item must be returned in a condition in accordance with the contract, taking into account normal wear and tear.
Termination and return
The loan agreement can end in various ways. If a loan period has been agreed, it ends when the period expires. If no time limit is specified, the lender can reclaim the item once the purpose has been achieved. The borrower is obliged to return the item when the purpose of use has been fulfilled. If the loan period is indefinite, the lender may reclaim the item at any time. Special grounds for termination may be agreed in the contract. The item must be returned in a condition that shows only normal wear and tear. If the item deteriorates beyond the usual extent, the lender may demand compensation. The burden of proof for the condition of the item lies with the borrower.
