The loan agreement according to Bulgarian law

The loan agreement is governed in Articles 243 to 249 of the Bulgarian law of obligations and contracts. According to Article 234 of this law, with the loan agreement, the lender obligates himself gratuitously to the borrower one chattel for temporary use and the borrower assumes the obligation to return it. This contract is not a formal one and its conclusion requires only the factual transfer/ handing over of the object.

The loan is an intuito personae agreement – the lender’s personality is essential. Consequently, the lender’s decease is a reason for the termination of the agreement.

The object of the agreement are individually defined objects that are not consumable – it is the borrower’s obligation to return the same object to the lender.

Legal characteristics of the agreement

As the loan agreement is a unilateral contract, only the borrower is subject to obligations and only he acquires rights here under.

The borrower must take due care of the chattel, giving higher priority to its preservation than to the preservation of his own belongings.

Furthermore, he is obligated to use the object as contractually agreed and may not (unless something else has been agreed upon) hand it to third parties.

In case of non-fulfillment of his obligations, he also has to pay compensation for the damages for which he is not responsible unless he proves that the damage would have occurred as well if he acted according to his obligations. If the object has been borrowed to several persons, they are jointly liable.

Regarding any liability for damages caused culpably by the borrower the rules for the lease contracts apply accordingly (Article 248 refers to Article 233 of the law of obligations and contracts). The borrower owes a compensation for damages that have been caused by the usage of the object unless he proves that he is not responsible for their occurrence. Further, he owes compensation for damages that have been caused by people living with him.

The borrower has to pay the usual costs of maintenance, conservation and usage of the borrowed object.

If not otherwise agreed, the borrower has to return the yields of the object as well.

In respect of Article 245 and 247 of the law of obligations and contracts, the loan agreement may develop into a bilateral contract. Firstly, the borrower is entitled to claim from the lender the extraordinary expenses if they have been necessary and urgent. Secondly, the lender is obliged to pay compensation for the damages that were caused to the borrower in result of the hidden defects of the loaned chattel if he deliberately or because of negligence has failed to report them to the borrower. This provision is a special rule for the lender’s recklessness and not part of the tortuous liability according to Article 50 of the law of obligations and contracts.

End of the contract

The loan agreement may be concluded for a specific period and is terminated with its expiration. Same applies accordingly if the contract has been concluded for a specific purpose. If the duration of the contract is not determined by a certain period of time or a specific purpose, the lender may claim the object back at any time.

The lender may claim the object back earlier if he needs it urgently, under unexpected circumstances, in case of the borrower’s decease or non-fulfillment of the obligations according to Article 244 of the law of obligations and contracts.