LAW OF OBLIGATION ACT, PART 3, CHAPTER 22, DIVISION 1

Chapter 22

LOAN AGREEMENT AND CREDIT AGREEMENT 

Division 1

General Provisions 

  • 396. Definition of loan agreement

(1) By a loan agreement, one person (the lender) undertakes to grant a sum of money or a fungible thing (a loan) to another person (the recipient of the loan), and the recipient of the loan undertakes to repay the same sum of money or return a thing with the same characteristics in the same amount and with the same quality.

(2) A person who owes a sum of money or a fungible thing on any other legal basis may agree with the obligee that the sum of money or thing is owed as a loan.

(3) The provisions of this Chapter also apply if the objects of a loan agreement are things with specific characteristics, particularly securities, unless the parties have agreed otherwise.

  • 397. Loan interest

(1) Interest shall be paid on loans granted in economic or professional activities. In the case of other loan agreements, interest shall be paid only if so agreed.

(2) If the interest rate is not agreed on in the agreement, the ordinary rate which is usual in the case of loans of the same type at the time when and in the place where the loan is granted is presumed to be the rate or, in the absence of an ordinary rate, the rate provided for in § 94 of this Act is deemed to be the rate.

(3) Interest shall be calculated and paid at the end of each calendar year. If a loan is to be repaid before the end of a year, interest shall be paid upon repayment of the loan.

(4) The provisions of subsections (1) to (3) of this section do not preclude or restrict the rights of the parties as regards penalties for late payment.

  • 398. Ordinary cancellation of loan agreement entered into for unspecified term

(1) If the term for repayment of a loan is not agreed, the lender may demand repayment of the loan after cancellation of the loan agreement. The lender and the recipient of the loan may cancel the loan agreement entered into for an unspecified term by giving at least two months’ notice.

(2) The recipient of a loan may cancel the loan agreement without interest and repay the loan without giving advance notice.

  • 399. Extraordinary cancellation of loan agreement by lender

(1) A lender may cancel a loan agreement and demand immediate repayment of the loan if:

1) according to the agreement, the loan is to be repaid in parts and the recipient of the loan delays the repayment of more than two parts or delays the repayment of one part for longer than three months;

2) the recipient of the loan fails to perform the obligation to pay interest;

3) the recipient of the loan violates the requirement to use the loan only for a certain specified purpose.

(2) A lender may cancel a loan agreement before the grant of the loan or may refuse to grant the loan if the financial situation of the recipient of the loan has deteriorated such that the repayment of the loan is at risk or if the recipient of the loan has knowingly submitted false information in order to obtain the loan. The lender also has this right if the recipient of the loan has become insolvent before entry into the agreement and if this becomes known to the lender only after entry into the agreement.

  • 400. Extraordinary cancellation of unfixed interest rate loan agreement by borrower

[RT I 2010, 77, 590 – entry into force 01.07.2011]

(1) The recipient of an unfixed interest rate loan may cancel the loan agreement at any time by giving at least three months’ notice.

[RT I 2010, 77, 590 – entry into force 01.07.2011]

(2) A loan agreement is not deemed to have been cancelled by the recipient of the loan pursuant to subsection (1) of this section if the recipient does not repay the loan within two weeks after the cancellation enters into force.

(3) Any agreement to preclude the right of cancellation which belongs to the recipient of a loan who is a consumer pursuant to subsections (1) and (2) of this section or to impair the exercise thereof is void.

[RT I 2010, 77, 590 – entry into force 01.07.2011]

(4) The provisions of this section do not apply to a consumer credit contract, in the case of which the consumer may perform the obligations arising from it before the prescribed time pursuant to § 411 of this Act.

[RT I 2010, 77, 590 – entry into force 01.07.2011]

  • 401. Credit agreement

(1) A credit agreement is an agreement by which one person (the creditor) undertakes to transfer a sum of money (the credit) to the disposal of another person (the debtor), and the debtor undertakes to pay a fee for the use of the credit and repay the credit upon the expiry of the agreement.

[RT I 2010, 77, 590 – entry into force 01.07.2011]

(2) The postponement of a due date for a charge, leasing or any other similar financial accommodation may be the object of a credit agreement.

[RT I 2010, 77, 590 – entry into force 01.07.2011]

(3) The provisions concerning loan agreements apply to credit agreements unless otherwise provided by law.

  • 4011. Credit intermediation contract

A credit intermediation contract is a contract by which one person (credit intermediary) undertakes to arrange, for a charge, for credit to be granted to consumers in the course of the economic or professional activities of the credit intermediary or to indicate the possibility to enter into a credit contract or undertakes, in the interests of and for the benefit of the creditor, to negotiate or enter into contracts in the name and on account of the creditor independently and on a permanent basis.

[RT I 2010, 77, 590 – entry into force 01.07.2011]

  • 4012. Freedom to contract insurance together with credit contract

(1) If the conditions of a credit contract prescribe the obligation of the debtor to enter into an insurance contract, the conditions of the credit contract concerning the main subject matter of the contract shall not depend on which insurer having the right to engage in insurance activities in Estonia the debtor chooses or the services of which insurance intermediary having the right to engage in mediation activities in Estonia the debtor uses upon entry into the insurance contract, if the insurance contract entered into provides insurance cover equivalent to the insurance contract offered by the insurer preferred by the creditor or mediated by the insurance intermediary.

(2) The creditor is required to inform the debtor of the freedom of choice provided for in subsection (1) of this section prior to entry into the credit contract.

(3) Upon violation of the prohibition provided for in subsection (1) of this section, the policyholder has the right to cancel the insurance contract which was the condition for entry into the credit contract. The credit contract is valid under the former terms and conditions.

[RT I, 07.07.2015, 1 – entry into force 01.01.2016]