DISTINGUISHING BETWEEN PROPERTY LOAN CONTRACTS AND PROPERTY BORROWING CONTRACTS

1. Overview of Property Loan Contracts

According to Article 463 of the Civil Code 2015, a property loan contract is an agreement between parties whereby the lender delivers property to the borrower; when the loan becomes due, the borrower must return to the lender property of the same kind, quantity, and quality, and must pay interest only if so agreed or if prescribed by law.

Legal Characteristics:

• Object: Money or consumable assets (fungible property).

• Rights: The borrower has the right to possess, use, and dispose of the property.

• Obligation: Obligation to repay; interest may arise.

• Legal Basis: Article 463, Article 466 of the Civil Code 2015.

Article 463. Contracts for loan of property Contracts for loan of property means an agreement between parties whereby a lender delivers property to a borrower; when the loan becomes due, the borrower must return to the lender property of the same kind, quantity and quality, and must pay interest only if so agreed or if provided by law.

Article 466. Repayment obligation of borrower

1. If the property lent is a sum of money, the borrower must repay the loan in full when due; if the property is a generic object, the borrower must return an object of the same kind, quantity and quality, unless otherwise agreed.

2. If the borrower is not able to return the object, he/she may pay the value of the borrowed object in money as at the place and time of repayment, if the lender agrees.

3. The place of repayment is the place of residence or head office of the lender, unless otherwise agreed.

4. If a loan is interest-free and the borrower fails to repay the loan in whole or in part when due, the lender has the right to demand interest on the late payment amount at the rate prescribed in Clause 2, Article 468 of this Code corresponding to the period of late payment, unless otherwise agreed or provided by law.

5. If a loan bears interest and the borrower fails to repay the loan in whole or in part when due, the borrower must pay interest as follows: a) Interest on the principal as agreed in the contract corresponding to the loan term that has not been paid; if payment is late, the borrower must also pay interest at the rate prescribed in Clause 2, Article 468 of this Code; b) Overdue interest on the principal is equal to 150% of the interest rate agreed in the contract corresponding to the period of late payment, unless otherwise agreed.

2. Overview of Property Borrowing Contracts

According to Article 494 of the Civil Code 2015, a property borrowing contract is an agreement between parties whereby the lender delivers property to the borrower for use without payment; the borrower must return that specific property upon the expiry of the borrowing term or when the purpose of the borrowing has been achieved.

Legal Characteristics:

• Object: Non-consumable assets (non-fungible property).

• Rights: The borrower only has the right to use.

• Interest: No interest arises (gratuitous nature).

• Legal Basis: Article 494, Article 496, Article 499 of the Civil Code 2015.

Article 494. Contracts for borrowing of property Contracts for borrowing of property means an agreement between parties whereby a lender delivers property to a borrower for use within a period of time without paying a fee, and the borrower must return such property upon the expiry of the borrowing period or when the purpose of the borrowing has been achieved.

Article 496. Obligations of borrower of property

1. To preserve and take care of the borrowed property, not to change the condition of the property arbitrarily; if the property suffers ordinary damage, it must be repaired.

2. Not to sublease the property to any other person without the consent of the lender.

3. To return the borrowed property on the due date; if there is no agreement on the time for return of the property, the borrower must return the property immediately after the purpose of the borrowing has been achieved.

4. To compensate for damage if the borrowed property is lost or damaged.

5. The borrower of property shall bear the risk of the borrowed property during the period of late return.

3. Distinguishing between Property Loan Contracts and Property Borrowing Contracts

These two types of contracts have fundamental differences regarding the object, the right of disposal, and the repayment obligation.

• Loan of Property (Vay): Return property of the same kind.

• Borrowing of Property (Mượn): Return the exact same property that was borrowed.

• Legal Basis: Article 463 and Article 494 of the Civil Code 2015.

4. Legal Validity of "Money Borrowing Papers" in Trial Practice

The name of the transaction does not determine its legal nature. The determination of a transaction must be based on the content, purpose, and true intent of the parties.

• Legal Basis: Article 121, Article 124 of the Civil Code 2015.

Article 121. Interpretation of civil transactions

Where a civil transaction has unclear or confusing contents, or can be understood in different meanings and is not covered by Clause 2 of this Article, the interpretation of such civil transaction shall be carried out in the following order:

a) According to the true intent of the parties at the time of establishing the transaction;

b) According to the meaning consistent with the purpose of the transaction;

c) According to the custom where the transaction is established.

The interpretation of contracts shall be carried out in accordance with Article 404 of this Code; the interpretation of the contents of wills shall be carried out in accordance with Article 648 of this Code.

Article 124. Civil transactions invalid due to falsity

1. When parties establish a civil transaction falsely to conceal another civil transaction, the false civil transaction is invalid, while the concealed civil transaction remains valid, unless such transaction is also invalid under the provisions of this Code or other relevant laws.

2. If a false civil transaction is established to evade obligations to a third party, such civil transaction is invalid.

5. Is it correct for the Court to identify a "Money Borrowing Paper" dispute as a Property Loan Contract?

Money is a consumable asset; the recipient of money has the right of disposal and the obligation to return money of the same kind. Therefore, the Court's determination of the dispute relationship as a "Property Loan Contract" is appropriate.

• Legal Basis: Article 463, Article 466, Article 468 of the Civil Code 2015.

Example: Ms. A creates a "money borrowing paper" to borrow 100 million VND from Ms. B with a repayment deadline. When due, Ms. B refuses to pay. Ms. A files a lawsuit requesting the Court to force Ms. B to repay the money. The Court identifies this case as a "Property Loan Contract Dispute".

• Applicable Legal Basis: Article 463, Article 466 of the Civil Code 2015; Clause 3, Article 26 of the Civil Procedure Code 2015.

6. Conclusion

In cases of borrowing money, which is essentially loaning money, the Court's acceptance and resolution under the legal relationship of "Property Loan Contract Dispute" is legally correct and consistent with the nature of the transaction.

• General Legal Basis: Civil Code 2015; Civil Procedure Code 2015.

The information contained in this article is general and intended only to provide information on legal regulations. DB Legal will not be responsible for any use or application of this information for any business purpose. For in-depth advice on specific cases, please contact us.

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