Personal Contract / Loan / Service

A. What is a Personal Contract?

A personal contract is a contract that binds a single individual and not the group, entity, or company that the individual represents. Nor does it bind the individual's heirs or assignees because the contract requires the individual to perform without a suitable substitute.

B. Examples of Personal Contracts

1. Personal Service Contracts - for example, unless expressly agreed otherwise, a movie contract entered into by an actor would not bind the actor’s estate if the actor died, nor the actor’s heirs or assignees.
2. Contracts signed outside of a Company - Companies are legal entities separate from their directors and shareholders. If a director of the company wishes to sign a contract outside the company, they will sign a personal contract to prevent legal issues from his / her responsibility to the company.
3. Contracts relating to Personal / Movable Properties – Personal properties are properties not related to real estate, in other words, movable properties. Contracts to buy or sell personal properties are generally personal contracts.
4. Royalties – Gold, oil, gas, and other natural resources royalty contracts
5. Insurance - Property insurance policies.

Personal contracts tend to be less formal than commercial contracts. They can be an agreement between two friends to transfer properties, which is more of a written record of the transaction. Even if it is less formal, a written personal contract can help encourage both parties to act professionally and ethically in fulfilling their contractual obligations, rather than relying purely on a gentlemen’s agreement.

C. What is a Personal Loan?

A personal loan agreement is a legal document that is completed by the lender and borrower to determine the terms and conditions of the loan. This document is a contract, and it may or may not be a personal contract depending on the terms (the person's estate is generally responsible for the repayment). The borrower shall comply with its terms, conditions, and applicable laws. Payments must be made on time and as directed by the agreement.

A personal loan is a sum of money borrowed by a person and can be used for any purpose. The borrower will be responsible for repaying the loan and paying interest. Interest is the cost of a loan, calculated on an annual basis. The lender can be a bank, financial institution, or individual-the loan agreement that is legally binding in any case.

Unlike business loans or car loans that specify how funds are used, personal loans can be used by borrowers for any purpose. Because personal loans are more flexible and not tied to a specific purchase or purpose, they are often unsecured. This means that debt is not related to any assets, such as home mortgages or car loans. If additional securities or guarantees are needed for personal loans, they should be specified in the agreement.

D. Terms of Personal Loan Agreement

Personal loan agreements are generally simpler than commercial loan agreements. A personal loan agreement would typically include the following:

1. Amount Borrowed.
2. Repayment Schedule including the final repayment date.
3. Rate of interest.
4. Any collateral, guarantee, or security provided.