What is a loan agreement and when to use it

A loan agreement is a contract where the lender temporarily transfers a fungible item (typically money) to the borrower, who undertakes to return an equivalent item of the same kind.
Unlike a loan for use, the borrower returns a different but equivalent item.

Typical examples:

• loans of money between individuals,

• loans of raw materials or supplies,

• friendly loans instead of bank loans.

Legal framework

The loan agreement is governed by the Czech Civil Code (Sections 2390 to 2394).
Key features:

• transfer of fungible goods,

• obligation to return an equivalent,

• the loan may be interest-bearing or interest-free,

• interest must be expressly agreed.

Written form is not mandatory, but for loans over CZK 10,000, written proof is strongly recommended.

Mandatory elements of a loan agreement

• Identification of the lender and borrower

• Specification of the fungible item

• Amount and terms of return

• Agreement on interest (if applicable)

• Date and signatures

Most common mistakes in practice

• No written agreement for higher amounts

• Failure to set a repayment term

• Lack of clarity regarding interest

• Unclear method of repayment

• Difficulty proving the existence of the loan

Recommendations for lenders and borrowers

Lender:

• Always document the loan in writing for significant amounts.

• Clearly specify repayment terms and any sanctions for default.

Borrower:

• Clarify repayment terms in advance.

• Ensure evidence of agreed interest rates.

Tip from practice

Many lawsuits for loan repayment fail simply due to the lack of written proof of the loan and its conditions.
Even among friends, it is advisable to have a short written contract.

Basic loan agreement template – available for a symbolic fee

If you need a simple loan agreement template (money or goods), I can send it by e-mail for a symbolic fee.

This template is suitable for standard loans and serves as a working draft.
For more complex loans (larger amounts, installment payments, security), I am happy to prepare a customized agreement for you.

If interested, please contact me via e-mail, contact form, or message. We will arrange everything quickly and easily.

FINAL THOUGHTS – WHAT NOW?

A loan agreement isn’t just a formality – it’s a legal shield, if drafted properly. And a trap, if not.

Do you want to be sure your contract will hold up even in a crisis? Get in touch and let’s schedule a meeting.