ENEB Legal Business Environment Assignment Sample

Commercial Loan Agreement: ENEB Legal Business Environment Assignment

Agreement Date: September 15, 2016

Parties to the Agreement

Lender

Don Manuel García Ferrer
Business: Air Conditioner Installation Services
Address: Calle del Aire, 12, Madrid, Spain
National ID: X12345678M

Borrower

Mr. Antonio López Hernández
Business: Accounting and Taxation Firm
Address: Avenida de la Contabilidad, 45, Barcelona, Spain
National ID: Y87654321N

Guarantor

Mr. Luis López Pérez
Address: Paseo de la Garantía, 23, Valencia, Spain
National ID: Z45678901P

Recitals

• WHEREAS, the Borrower requires a loan of €40,000 to establish and operate his accounting and taxation business;
• WHEREAS, the Lender agrees to provide the said loan amount under the terms and conditions specified herein;
• WHEREAS, the Guarantor agrees to guarantee the full repayment of the loan in the event of default by the Borrower;
• NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

Article 1: Loan Terms

• 1.1 Principal Amount: The Lender shall provide a loan of €40,000 (Forty Thousand Euros) to the Borrower.
• 1.2 Disbursement: The loan amount shall be disbursed via bank wire transfer to the Borrower's designated bank account on September 15, 2016.
• 1.3 Interest Rate: The loan shall accrue interest at a fixed rate of 4% per annum, calculated on the outstanding principal balance.
• 1.4 Loan Term: The loan term shall be four (4) years, commencing on September 15, 2016, and concluding on September 15, 2020.
• 1.5 Repayment Structure: The Borrower shall repay the loan in four (4) equal annual installments, combining principal and accrued interest.

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Article 2: Repayment Schedule & Interest Calculation

Loan Summary

Payment Schedule

Note: Each annual installment of €11,019.60 includes both principal repayment and accrued interest, calculated using the annuity method to ensure equal periodic payments.

Article 3: Form of Payment

3.1 Bills of Exchange: The Borrower shall issue four (4) bills of exchange to facilitate annual installment payments to the Lender.

3.2 Due Dates: The maturity dates for each bill of exchange are as follows:

• Bill 1: €11,019.60 – Due September 15, 2017
• Bill 2: €11,019.60 – Due September 15, 2018
• Bill 3: €11,019.60 – Due September 15, 2019
• Bill 4: €11,019.60 – Due September 15, 2020

3.3 Endorsement of Bill 1: On October 1, 2016, the Lender endorsed Bill 1 to Doña Alicia Martínez Castro as payment for the purchase of a used vehicle. Consequently, Doña Alicia Martínez Castro became the rightful holder of the first installment.

Article 4: Guarantee

• 4.1 Guarantor's Obligation: Mr. Luis López Pérez, as the Borrower's father, serves as the Guarantor of this loan. He assumes joint and several liability with the Borrower for the full repayment of the loan.
• 4.2 Joint Liability: The Guarantor is equally responsible alongside the Borrower for repaying the entire loan amount, including principal, interest, penalties, and any legal costs incurred.
• 4.3 Right of Recovery: In the event of non-payment by the Borrower on any due date, the Lender has the right to demand immediate payment from the Guarantor for any outstanding amounts.

Article 5: Default and Penalties

• 5.1 Late Payment Penalty: A penalty of 2% per month shall be applied to any overdue installment from the date of default until full payment is made.
• 5.2 Acceleration Clause: If the Borrower fails to make two (2) consecutive installment payments, the Lender may declare the entire outstanding loan balance immediately due and payable.
• 5.3 Legal Costs: The Borrower and Guarantor shall be responsible for all legal costs, attorney fees, and court expenses incurred by the Lender in enforcing this Agreement or recovering any outstanding amounts.

Article 6: Early Repayment

• 6.1 Prepayment Right: The Borrower has the right to make early repayment of the loan, either in full or in part, at any time without incurring prepayment penalties.
• 6.2 Interest Savings: Early repayment shall result in a proportional reduction of future interest charges based on the reduced principal balance.

Article 7: Applicable Law and Jurisdiction

• 7.1 Governing Law: This Agreement shall be governed by and construed in accordance with the laws of Spain.
• 7.2 Jurisdiction: The courts of Madrid, Spain, shall have exclusive jurisdiction over any disputes arising from or relating to this Agreement.

Article 8: Final Provisions

• 8.1 Entire Agreement: This Agreement constitutes the entire understanding between the parties and supersedes all prior negotiations, representations, or agreements, whether oral or written, relating to the subject matter herein.
• 8.2 Amendments: No modification or amendment to this Agreement shall be valid unless made in writing and signed by all parties.
• 8.3 Original Copies: This Agreement is executed in three (3) original copies, one for each party.

Signatures

The undersigned parties hereby acknowledge that they have read, understood, and agree to be bound by the terms and conditions of this Commercial Loan Agreement.

Executed on September 15, 2016

Lender:

Don Manuel García Ferrer
National ID: X12345678M
Date: _______________

Borrower:

Mr. Antonio López Hernández
National ID: Y87654321N
Date: _______________

Guarantor:

Mr. Luis López Pérez
National ID: Z45678901P
Date: _______________

Bill of Exchange No. 1

Date of Issue: September 15, 2016
Maturity Date: September 15, 2017
Amount: €11,019.60

Payee (Lender): Don Manuel García Ferrer
Drawee (Borrower): Mr. Antonio López Hernández
Guarantor: Mr. Luis López Pérez

Declaration

On the maturity date specified above, I, the undersigned, promise to pay the sum of Eleven Thousand Nineteen Euros and Sixty Cents (€11,019.60) to the order of Don Manuel García Ferrer or to the bearer of this bill.

In the event of non-payment, legal proceedings may be initiated in accordance with applicable commercial law.

Signatures:

Mr. Antonio López Hernández (Drawee/Borrower)

Mr. Luis López Pérez (Guarantor)

Endorsement: This bill was endorsed to Doña Alicia Martínez Castro on October 1, 2016, as payment for the purchase of a used vehicle.

Bill of Exchange No. 2

Date of Issue: September 15, 2016
Maturity Date: September 15, 2018
Amount: €11,019.60

Payee (Lender): Don Manuel García Ferrer
Drawee (Borrower): Mr. Antonio López Hernández
Guarantor: Mr. Luis López Pérez

Declaration

On the maturity date specified above, I, the undersigned, promise to pay the sum of Eleven Thousand Nineteen Euros and Sixty Cents (€11,019.60) to the order of Don Manuel García Ferrer or to the bearer of this bill.

In the event of non-payment, legal proceedings may be initiated in accordance with applicable commercial law.

Signatures:

Mr. Antonio López Hernández (Drawee/Borrower)

Mr. Luis López Pérez (Guarantor)

Bill of Exchange No. 3

Date of Issue: September 15, 2016
Maturity Date: September 15, 2019
Amount: €11,019.60

Payee (Lender): Don Manuel García Ferrer
Drawee (Borrower): Mr. Antonio López Hernández
Guarantor: Mr. Luis López Pérez

Declaration

On the maturity date specified above, I, the undersigned, promise to pay the sum of Eleven Thousand Nineteen Euros and Sixty Cents (€11,019.60) to the order of Don Manuel García Ferrer or to the bearer of this bill.

In the event of non-payment, legal proceedings may be initiated in accordance with applicable commercial law.

Signatures:

Mr. Antonio López Hernández (Drawee/Borrower)

Mr. Luis López Pérez (Guarantor)

Bill of Exchange No. 4

Date of Issue: September 15, 2016
Maturity Date: September 15, 2020
Amount: €11,019.60

Payee (Lender): Don Manuel García Ferrer
Drawee (Borrower): Mr. Antonio López Hernández
Guarantor: Mr. Luis López Pérez

Declaration

On the maturity date specified above, I, the undersigned, promise to pay the sum of Eleven Thousand Nineteen Euros and Sixty Cents (€11,019.60) to the order of Don Manuel García Ferrer or to the bearer of this bill.

In the event of non-payment, legal proceedings may be initiated in accordance with applicable commercial law.

Signatures:

Mr. Antonio López Hernández (Drawee/Borrower)

Mr. Luis López Pérez (Guarantor)

Key Features of Bills of Exchange

1. Legal Enforceability

Each bill of exchange constitutes a legally binding instrument supported by the guarantee of Mr. Luis López Pérez. In the event of non-payment on the maturity date, the payee or lawful holder may initiate legal proceedings to enforce payment under commercial law provisions.

2. Negotiability

Bills of exchange are negotiable instruments that can be transferred to third parties through endorsement. As demonstrated, Bill 1 was endorsed to Doña Alicia Martínez Castro on October 1, 2016, for payment toward a used vehicle purchase, illustrating the flexibility and transferability of these financial instruments.

3. Fixed Payments

The structured payment schedule ensures equal annual installments of €11,019.60, providing predictability for both parties. Over the four-year term, the total payment of €44,078.40 includes €4,078.40 in interest charges at the fixed 4% annual rate.

4. Security for the Lender

The bills of exchange, coupled with the Guarantor's backing, provide substantial security for Don Manuel García Ferrer's investment. In case of default, the Lender has legal recourse against both the Borrower and the Guarantor to recover outstanding amounts.

5. Structured Repayment

The annuity method ensures that each payment contributes to both interest and principal reduction, with the principal component increasing over time as the interest portion decreases proportionally.

Analysis and Benefits

For the Borrower

The structured repayment plan allows Mr. Antonio López Hernández to manage his financial obligations predictably while establishing his accounting and taxation business. The option for early repayment without penalties provides flexibility should his financial situation improve.

For the Lender

Don Manuel García Ferrer benefits from a secure investment with guaranteed returns backed by bills of exchange and a personal guarantee. The 4% interest rate provides reasonable compensation for the risk undertaken, and the legal framework ensures enforceability.

For the Guarantor

While Mr. Luis López Pérez assumes significant liability, his guarantee enables his son to access necessary business financing that might otherwise be unavailable through traditional banking channels.

REFERENCES

• Belovski, V., Majhosev, A., & Dujovska, I. (2018). The bill of exchange as a means of payment and security. Journal of Process Management. New Technologies, 4(3), 39–49. https://doi.org/10.5937/jouproman4-11436
• European Central Bank. (2024). ESCB Legal Conference 2024. https://www.ecb.europa.eu/press/legconf/pdf/ecb.legconf202412.en.pdf
• Gulesci, S., & Madestam, A. (2023). Repayment Flexibility and Risk Taking: Experimental Evidence from Credit Contracts. The Review of Economic Studies. https://doi.org/10.1093/restud/rdad107
• Priem, R. (2020). Distributed ledger technology for securities clearing and settlement: benefits, risks, and regulatory implications. Financial Innovation, 6(1). https://doi.org/10.1186/s40854-019-0169-6
• World Trade Organization. (2019). The General Agreement on Tariffs and Trade (GATT 1947). https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm