Bilateral Loans Agreement Essay Example | Topics and Well Written Essays - 1250 words

Bilateral Loans Agreement - Essay Example It should be noted that in loans transactions, the terms and conditions must be put in writing for it to be enforceable, including the duration of the, the securities required and the amount of interest which should be imposed on top to the principal amount of the loan. The fact that the contract is unvaried at the time it is entered into by the parties, it shall remain unvaried until otherwise amended by the parties1. The loan contract may include provisions for securities such as mortgage and negative pledges. These two types of securities differ in the sense that mortgage requires that a title to specific properties of the client be given as collateral of the loan while negative securities require no bodily pledging of properties but rather a prohibition on the part of the client not to use any property thereon as securities for other obligations. In other words, it is â€Å"a promise between the borrower and the lender that the borrower will not encumber its property, including present and future property, to secure the loan of another creditor which would give the subsequent creditor priority†.2 There are many forms of restrictions available against the properties of the clients but these should be used with caution so as not to restrict the business transactions of the client. In drafting restriction clauses, due care should be taken not to confer blanket restrictions which will have an effect of freezing the total assets of the client. For instance, a blanket restrict on the manufacturing company may have the effect of prohibiting the client for selling its assets. As the manufactured goods are part of the assets of the client, a blank restriction would in effect prohibit the client from selling its manufactured goods.