What is a loan?
The loan is a contract by which one of the parties delivers something to the other, which may be non-fungible so that they can use it for a certain time and return it, in which case it is called a loan, or money or another fungible thing, with the condition of returning as much of the same kind and quality, in which case it retains the loan name.
The Civil Code in Title X of Book IV relating to “loans” starts, in its general provision ( article 1740 of the Civil Code ), from the distinction between the loan for use (loan) and the loan for consumption (mutual or simple loan). ), regulating both figures (loan species) separately, the loan in articles 1741 to 1752 of the Civil Code , and the loan in articles 1753 to 1757 of the Civil Code.
The definition of both figures is included in article 1740 of the Civil Code when it establishes “by the loan contract, one of the parties delivers to the other, or something non-fungible to use for a certain time and return it, in which case it is called loan, or money or something else fungible, with the condition of returning as much of the same kind and quality, in which case it simply retains the name of loan. The loan is essentially free. The simple loan can be free or with an agreement to pay interest.
Therefore, the commodatum is the loan for use, since the immediate possession of the thing loaned is transmitted, but not the property of the same, for which the same, after the agreed time has elapsed, must be returned, and it is essentially free.
The mutual or simple loan is the so-called consumer loan, because in it the ownership of the thing is transferred, for which the borrower has to repay the same amount of the same kind and quality, and it may be free or with the agreement to pay interest.
What is mutual?
The definition of the mutual or simple loan is included in article 1740 of the Civil Code when it establishes “through the loan contract, one of the parties delivers to the other…money or another fungible thing, with the condition of returning as much of the same kind and quality, in which case it simply retains the name of the loan…The simple loan can be free or with an agreement to pay interest.”
From the legal definition the characters of the same can be derived:
- 1. It is a real contract , since the fundamental thing is that one of the parties gives the other money or another fungible thing, with the condition of returning the same amount of the same kind and quality. What is reiterated in article 1753 of the Civil Code “he who receives money on loan or something else fungible, acquires ownership of it, and is obliged to return to the creditor the same amount of the same kind and quality.”
- 2. Unilateral contract , and whether interest is agreed or not, since only obligations arise for the borrower or borrower, since the lender or lender does not contract any obligation that implies consideration or reciprocity with those of the former.
- 3. Domain transfer contract , since the borrower becomes the owner of the thing delivered.
- 4. Of temporary duration , since it supposes that a time must elapse between the delivery and the return of the same amount of the same kind and quality.
- 5. It is configured as a causal contract , not abstract, because as such it entails a legal purpose, the obligation credendi causa , on which both its validity and its subsistence depend.
What subjects are involved in the loan?
The subjects of the mutual agreement or simple loan are the lender (or borrower) who delivers the money or the fungible thing and the borrower (or borrower) who receives it, with the obligation to return the same amount of the same kind and quality.
As for the lender, since it is an act of disposition, it will require the capacity to contract and the power of disposition over the thing. In this way, section 8 of article 271 of the Civil Code requires judicial authorization so that the guardian can give money on loan.
As for the borrower who receives the fungible thing, with the obligation to return as much of the same kind and quality, he will need the general capacity to contract. However, article 287.8º requires judicial authorization so that the curator who exercises functions of representation of the person receiving support can borrow money. The emancipated minor may not borrow money without the consent of his parents, and in their absence, without that of his legal defender ( article 247 of the Civil Code ).
On what objects does the loan fall?
The object of the simple loan is always a fungible thing, and among all, the most typical is money, hence the Civil Code, in articles 1740 , 1753 and 1754 , refers to money or another fungible thing. It is not essential that the fungible thing be consumable, though ordinarily it will be (thus the money assumption).
As a general rule, the principle of freedom of form of articles 1278 and following of the Civil Code governs .
As it is a unilateral contract, the lender does not have an obligation, in reciprocity, with the borrower.
The delivery of the fungible thing to the borrower is incumbent on the lender, which may be verified in various ways, either by direct delivery (thus in the case of money by delivery in cash or by bank transfer), either mediately or indirectly. when it is made by transferring the lender to the borrower a credit that it has against a third party, or by means of endorsement of an exchange title (in such cases, as indicated in article 1170 of the Civil Code , the loan will only be understood to have been made with the effective delivery to the borrower), and by lastly, by giving an object as a loan with the authorization to sell it and receive the price as borrowed money.
The obligation of the borrower (who acquires the property) is the return of the same amount of the same kind and quality within the stipulated period, thus article 1753 of the Civil Code provides: “he who receives money or another fungible thing on loan, acquires his property, and is obliged to return to the creditor as much of the same kind and quality”.
The Civil Code, regarding this obligation, distinguishes according to whether what is delivered is money or something else fungible ( article 1754 of the Civil Code ). In the case of money, it will be governed by the provisions of article 1170 of the Civil Code , that is, the return must be made in the agreed kind, and if not possible, in the currency of legal tender at the time the payment is made. . Now, if the loan is something else fungible, or an amount of non-coined metal, the debtor owes an amount equal to that received and of the same kind and quality, even if its price changes.
When does the loan expire?
All contracts will be extinguished for general reasons, especially when dealing with a temporary contract, the mutual or simple loan will be extinguished upon expiration of the stipulated term ( article 1125 of the Civil Code ) and if not stipulated, it must be set by the Courts for the purposes of article 1128 of the Civil Code
What are consumer loans?
Law 16/2011, of June 24, regulates consumer credit contracts and its article 1 contains a definition of these contracts:
“1. Through the consumer credit contract, a lender grants or undertakes to grant a consumer a credit in the form of deferred payment, loan, opening of credit or any equivalent means of financing. 2. Credit contracts will not be considered For the purposes of this Law, those that consist of the supply of goods of the same type or the continued provision of services, provided that within the framework of those, the consumer has the right to pay for such goods or services in installments during the period of its duration.”
Are usurious loans legal?
As we have previously established, the Civil Code does not establish limits regarding the amount of agreed interest, and does not prohibit the so-called anatocism. However, this does not mean that there is absolute freedom, since the Law of July 23, 1908, on Usury , also called “Azcárate Law” , has as a specific field, as derived from its articles, the loan contract, and its primary purpose is to prevent compensation from being established with respect to what is received, which is higher than normal money, either in the specific form of interest, or with any other procedure.
It provides for the concept of usurious loan and declares its partial nullity.
The current Civil Procedure Law repealed articles 2, 8, 12 and 13, given their procedural nature.
In article 1 of the Usury Law, the usurious loan is defined in a triple dimension, by establishing: ” Any loan contract that stipulates an interest notably higher than the normal rate of money and manifestly disproportionate with the circumstances of the case or in such conditions that it turns out that leonine, having reasons to consider that it has been accepted by the borrower because of his distressing situation, his inexperience or his limited mental faculties. The contract in which it is assumed that a greater amount has been received than that actually delivered, regardless of the entity and circumstances of the contract, will be equally null and void. The renunciation of his own jurisdiction, within the population, made by the debtor in this class of contracts will also be null.
Therefore, there are three types of usurious loans:
- 1. The loan in which an interest is stipulated that is notably higher than normal for money and manifestly disproportionate to the circumstances of the case, for which reason the specific case must be followed, to derive the lack of freedom of the borrower for its acceptance, taking into account the moment of perfection of the contract, to the socioeconomic reality of each moment, to commercial uses, etc. All this based on abundant jurisprudence, as well as the Judgments of October 21, 1911, March 24, 1942, December 13, 1958, December 15, 1965, October 18, 1968 and December 19, 1974, which are collected in the Judgment of the Supreme Court (First Chamber , of the Civil), No. Judgment 738/2001 , of July 12, 2001, No. appeal 1668/1996 .
- 2. That which has been perfected in such conditions that it is leonine , having reasons to estimate that it has been accepted by the borrower because of his distressing situation, his inexperience or his limited mental faculties. In determining whether or not it is a leonine loan, it will have to be examined in each specific case.
- 3. The contract in which it is assumed that a greater quantity has been received than that actually delivered, regardless of its entity and circumstances. This only requires falsehood regarding the amount delivered.
The Usury Law is applicable not only to the loan contract, both civil and commercial, but also to any operation substantially equivalent to a money loan, whatever the form of the contract and the guarantee that has been offered for its fulfillment. ( article 9 of the Usury Law ).
Concealed usury can give rise to a civil offense when it is intended to mask the user loan under the guise of another contract.
In this regard, it is worth mentioning the Judgment of the Supreme Court of February 21, 2003, Rec. Article 2 of the Law of 1908 and the jurisprudence of this Chamber on its flexible effects in the formal and general requirements of the appeal ( Sentences of the Supreme Court of November 24, 1984 , November 6, 1992 , March 31, 1997, Rec. 1243/1993 and July 12, 2001, Rec. 1810/1996), the conclusions could not be other than those of the appealed Judgment, since the formal articulation of the sale for a price much lower than the value of the property and almost coinciding with the capital guaranteed by the mortgage constituted on it, followed by a lease as extremely atypical and with a no less atypical purchase option, with manifestly leonine penalties in both one and the other, it not only has great similarities with one of the formulas on which the jurisprudence has repeatedly ruled as possibly concealing usurious loans , the sale with a retrospective agreement, but almost coincides with that of the case examined by this Chamber in its Judgment of December 12, 1999,consisting of taking advantage of the situation by whoever provides the money to those who need it and guarantees the repayment of the capital and high interest by first signing two deeds of sale for a price similar to the borrowed capital and the payment of high interest with the subsequent lease, all this without including in the deeds the agreement of retro to avoid suspicions but fulfilling its same purpose with a lease and a sale in a private document”.
Regarding the effects of declaring the loan as a usurer, article 3 of the Usury Law provides: “once the nullity of a contract is declared in accordance with this law, the borrower will be obliged to deliver only the amount received; and if had paid part of it and the overdue interest, the lender will return to the borrower what, taking into account the total amount received, exceeds the borrowed capital.
Article 7 of the Usury Law provides for the Central Registry by establishing: “for the purposes of what is provided in article 5 of this law, the Ministry of Grace and Justice, in view of the information that the Courts must send, will form a Central Registry of declared invalid loan contracts, with expression in each case of the lender against whom the Judgment was issued.The General Directorate of Registries will issue the certifications that the Courts, ex officio or at the request of the inscriptions of the Central Registry expressed part”.
- In the loan contract, one of the parties delivers money or another fungible thing to the other, with the condition of returning the same amount of the same kind and quality, which may be free or with an agreement to pay interest.
- Governs the principle of freedom of form, the parties being able to choose the same, and understanding perfected with the delivery of the thing.
- Consumer loans are a type of loan characterized by the commitment to grant a consumer credit in the form of deferred payment, loan, credit opening or any equivalent means of financing.
- The Usury Law prohibits loans that stipulate an interest notably higher than normal money, that are perfected in such conditions that they are leonine and in which it is assumed that a greater amount has been received than that actually delivered.