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Optic Globe (Nothing)     14 September 2014

Legal validity of bank loan agreement

A Bank Loan Agreement begins as follows :

............IN FAVOUR OF..............
...........XYZ BANK LTD. "

The first Clause of the Agreement begins as follows :


Even though Borrower signed this Loan Agreement, none
of the Bank Officials signed this Agreement.

Could the validity of this Loan Agreement be questioned
under Indian Contract Act,on following grounds ?

(1)This is Unilateral Contract. There is no provision for
Unilateral Contract in Contract Act.

(2)Even though Bank has made express promise to grant Loan,
Bank did not sign contract. Hence contract void.

(3)Borrower cannot enforce by Law promise made by Bank to
grant Loan,as Bank did not sign Contract.Hence Contract
void,as enforceability is not available to all parties in
the Contract.

PLEASE NOTE : Generally, all Agreements are written as
BY AND BETWEEN all concerned parties,with all concerned
parties signing the Agreement. But the aforestated
Agreement is drafted differently as shown above, surprising
the Borrower.


 4 Replies

Sunil S Nair (lawyer)     16 September 2014

Drafting is not a problem clauses of the agreement and acceptance of the terms to the contract by both contracting party is must otherwise it does not have legal validity and has the above agreement is one sided it is unenforceable in law 

1 Like

narendra.s.p (Chief Manager(Law))     24 September 2014

Borrower's agreements are executed "In favour of" the Bank and signed by the Borrower and not  the Bank.

Only Terms and conditions letter [proposal] addressed to the borrower is signed by the Bank and accepted by the borrower by signing "in acceptance" which is a binding agreement. All clauses in the agreement are obligations undertaken by the borrower. It is the same for "Sale Deed" where the vendor who undertakes all the obligations signs the sale deed and not the purchaser.There is no requirement for the Bank to sign the Loan agreement. If an agreement contains any clause requiring the Bank to discharge a specific obligation, then such an agreement is required to be signed by both the parties [i.e. Bank and Borrower] Eg. Lease Deed of Branch premises. In such agreement the agreement is "Between" the Bank "And"  the Party.

1 Like

ujjawal tiwari   17 July 2018

Should state what are the essential requisite of loan agreement in India by discussing the statutory Provision 

WARRIOR 4 RIGHT (Consultant)     18 July 2018

The picture of your query is not clear on the following points:

1. What exactly is your problem?

2. Whether loan granted or the borrower not?

3. Whether agreed conditions are fulfilled by the bank or not?


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