No signature on loan deed: still valid?

Can a debtor invoke the fact that he did not sign a deed (or that the signature on the deed is not his)? This was the main issue in recent court proceedings about the dissolution of a loan agreement The agreement that one party allows a third party to use an item without financial consideration under the condition that that party will return the item.
» Meer over loan agreement loan agreement. Dutch contract lawyer Hidde Reitsma discusses the court ruling.

Drawing up a deed of loan

The claimant in this case provided two loans to the respondent. For these loans loan deeds were drawn up, which were both signed by the respondent. The interest percentages were respectively 6% and 8.3%. The respondent is in default with the payment of the redemption and the interest. After consultation between the parties, a new agreement is drawn up. In this deed (hereinafter: the agreement) the two earlier loans are ‘reformalized’. The outstanding amount is set at over €180,000 and a lower interest is agreed. Neither party signs this agreement.

Extrajudicial dissolution due to breach of contract

The respondent then falls behind in the redemption. The claimant’s lawyer sends the respondent a notice dissolving the agreement due to breach of contract. In the collection proceedings the respondent argues that no new agreement had been concluded between him and the claimant. According to the respondent, although there were negotiations, no consensus was ever reached. The court points out that the (outstanding) amount of €180,000, as stated in the agreement, is also mentioned in the respondent’s annual reports and accounts, as well as e-mail correspondence. That also applies to the interest rate referred to in the agreement, which is lower than the initially agreed interest rates.

Court: actions indicate execution agreement

Furthermore, the respondent made a payment after the last deed was concluded, that is equal to the first instalment of the payment obligation from the agreement. In all, the court finds that a consensus was in fact reached. The fact that the respondent did not sign the document in writing, does not negate its existence. Because the respondent failed to comply with the agreement, the claimant dissolved the agreement extrajudicially for good reason. The respondent is sentenced to pay the outstanding amount as well as the expired interest terms.

Signature required for concluding an agreement?

This case might lead one to assume that the lack of a signature on a contract does not make much difference for the existence of that agreement. In principle that is true. An agreement is concluded by offer and acceptance Offer and acceptance is the main requirement for the formation of a contract under Dutch contract law.
» Meer over offer and acceptance offer and acceptance. If an offer is accepted, this is called consensus between the parties. An agreement can also be concluded orally. However, a signature under a contract is usual for agreements for more than the sale of a milk carton (this transaction is also an agreement). This means both parties know exactly what was agreed.

Lawyer for drawing up a loan agreement

A signed contract is intended to prevent evidentiary problems (about the contents and the existence of the agreement) afterwards. But a signature is not a requirement for the existence of an ordinary agreement. If a contract is not signed and a party contests the existence thereof, in principle the other party has the burden of proof. Based on other circumstances the existence of the agreement can then be proven, as in this case.