Michigan finance agreement laws define finance agreements as legally binding contracts or documents that provide the details of the financial transaction between the parties involved. Finance agreements can also be called loan agreements or financial contracts.
Typically, creditors and debtors are the parties involved in a finance agreement. The creditor is often called a lender and the debtor is referred to as the borrower.
Under contract laws, a finance agreement provides information about the rights and responsibilities of the parties to the agreement. It also outlines the details about the repayment of the borrowed funds.
A finance agreement can also be included in a business plan because these agreements often provide the funds the business will need to execute the business plan. In other words, financial agreements commonly provide the monetary resources that the business will need to achieve its goals and objectives listed in the business plan.
Michigan-Specific Finance Agreement Requirements
In the State of Michigan, there are certain specific requirements for finance agreements. This includes that the document must be in writing and signed by both parties, especially if it cannot be performed within one year. The seller also has to provide written disclosures regarding the terms of the contract.
For real estate finance agreements, specifically, the agreement must include a legal description of the property, the purchase price, and the time of performance. All of the payment terms should be included, such as the down payment, monthly payments, the number of years, and any other details.
For a vehicle finance agreement, the number of payments, the amount of the payment, and when the payment is due must be included. Certain notices have to be included, such as a warning against signing the document before reading it and the right to receive a copy of the agreement. There may also be other requirements, such as insurance disclosures and requirements.
Certain finance documents have to be written in clear and plain language. This means avoiding long sentences and legal jargon.
A Michigan lawyer can explain the specific requirements for different types of finance agreements in the state and review any documents before an individual signs them.
Types of Finance Agreements Recognized in Michigan
There are various types of finance agreements recognized in Michigan. They are typically included in the broader categories of real estate, consumer agreements, and commercial contracts.
Because various types of finance agreements are likely to be recognized in the state, it is important to schedule a Michigan lawyer consultation to ensure that an agreement an individual is considering signing will be recognized.
What Is Contained in a Finance Agreement?
A finance agreement will typically contain a variety of key elements that define the relationship between the parties involved, including:
- Collateral or Security: These are the assets that a borrower uses to secure a loan that a creditor can seize when the borrower defaults.
- Repayment Schedule: This is the borrower’s timeline to repay their loan, including the amount of payments and the frequency of payments.
- Loan Amount: This is the principal sum of money that the debtor is borrowing.
- Interest Rate: This is the percentage that will be charged over time on the loan.
- Governing Laws: These name the laws of the jurisdiction that will govern the interpretation and enforcement of the agreement.
- Covenants: These are restrictions and conditions that a borrower has to follow, which may include maintaining certain financial ratios or not taking on any more debt.
- Default Provisions: These provisions explain the circumstances in which the borrower will be in default and what will occur.
- Representations and Warranties: These are statements that are made by the debtor about their ability to repay their loan and their financial information.
What Are Some Legal Issues Associated With a Finance Agreement in Michigan?
There are many different legal issues that may arise related to finance agreements, including duress, fraud, and illegal provisions.
Duress
When an individual signed an agreement because they were threatened or forced to do so, the agreement may be invalidated. Duress can include constraints, violence, threats, or other conduct that is meant to make someone do something against their better judgment or against their will.
For example, suppose Mariah wants to get a loan to expand her new business and a lender approaches her and offers a loan with very unfavorable terms as well as a very high interest rate. At first, Mariah does not take the offer.
The potential lender threatens Mariah’s sister if she does not sign the agreement offered. If Mariah does sign the agreement, it may be deemed invalid because it was signed under the threat of harm.
Fraud
If a party to a finance agreement purposefully conceals information or misrepresents a material fact to try and make the other party sign it, it may be deemed void. Fraud can occur in many ways, such as providing false information about income or assets.
Suppose that Joseph is seeking a loan to open a new business. Suppose a lender approaches Joseph and presents what looks like a good agreement but misrepresents the interest rate on purpose, stating that the rate will remain fixed for the entire loan.
The fine print of the agreement, however, states that the interest rate is actually variable and may increase significantly over time. Based on this representation, Joseph signs the agreement.
At a later date, when the rate goes up, he has problems making the payments. In this example, the finance agreement can be voided because the lender fraudulently misrepresented the interest rate.
Illegal Provisions
If provisions in a Michigan finance agreement are against the law, those specific provisions can be unenforceable or can make the entire agreement void. Suppose that Maria enters into a finance agreement with a lender to start a business selling cannabis.
Due to the fact that cannabis is illegal under federal law, if Maria uses the funds she receives only for her cannabis business, she will essentially be engaging in conduct that violates federal law. Because of this, the provisions of her agreement that cover the use of the funds can be unenforceable or can even make the whole agreement void due to the illegal provisions.
Is a Damages Award Available?
Damages awards may be available in Michigan when a party to a finance agreement breaches that agreement. The party who did not breach the agreement may be able to request compensation for the losses they suffered because of the breach, fraud, or misrepresentation.
A plaintiff, or party who files a lawsuit, may be able to request compensation for lost profits from other contracts and other related damages that the business suffered because of the other party’s conduct.
Do I Need a Lawyer for a Financial Agreement in Michigan?
Finance agreements and related issues, such as duress and fraud, usually require a consultation with a Michigan contract lawyer. The laws that govern finance agreements are broad and may be overwhelming to comprehend and follow.
Your Michigan attorney can explain all of the laws and rules that will apply to your specific agreement, make sure that your rights are protected, and help you with any disputes involving an agreement you have already signed. In as little as 15 minutes, you can get started finding a contract lawyer in your area of Michigan who is ready to help you.
LegalMatch does not charge for its lawyer matching services, which connect you to prescreened and licensed attorneys. You do not have any obligation to hire any lawyer that responds but you will likely be able to have a free or very low cost consultation to learn more about your issue.
