A loan agreement can have the strength of a legally binding contract when signed by both parties; however, three things can make this agreement null and void.
To protect yourself and your finances, any loan agreement entered into must not run the risk of being legally declared null and void. Any loan agreement that can be declared voidable is not legally enforceable, which means a borrower may run into difficulty recovering their money.
Void agreements
1. A loan agreement will outline its subject. This will include the agreement to provide a loan and a signature confirming acceptance. A loan agreement becomes void if the subject is illegal; for example, a loan for the purpose of organised crime or money laundering will not be valid.
2. A loan agreement will contain considerations, which will include details of what each party receives. An agreement is void if there is a lack of consideration; for example, you cannot legally agree to do something you have already done (a past consideration).
3. A contract is voidable if fraud was involved and a party concealed or failed to disclose all the facts, resulting in obtaining an agreement under false pretences.
Loan agreements
A valid loan agreement benefits both parties by establishing absolute certainty regarding arrangements, detailing the finer terms of the loan, and acting as a point of reference in the event of a dispute.
Always seek advice from a legal professional about new loan agreements or checking the validity of existing ones. For specialised advice on loan agreements, choose a reputable company such as https://www.parachutelaw.co.uk/loan-agreement.
It is recommended that loans should never be taken or given without a loan agreement prepared by a skilled professional. You should fully understand its terms and complexities before signing.