In Ohio, finance agreements, also called financial contracts or loan agreements, are legally binding documents that contain the terms and conditions of the financial transaction made between two parties. Usually, these two parties are a creditor, or lender, and a borrower, or debtor.
Contract laws provide that finance agreements outline the rights and responsibilities of the parties and establish the framework for the debtor to repay the borrowed funds. Finance agreements often relate to business plans because they are often used to secure the required funds to execute business plans.
Finance agreements can provide the financial resources that a business needs to achieve its goals and objectives that are outlined in the business plan.
Ohio-Specific Finance Agreement Requirements
The State of Ohio has specific finance agreement requirements, including:
- The agreement must be in writing
- The buyer has to receive a copy of the contract
- The contract has to include an itemization of costs, including:
- The cash price
- The down payment amount
- The unpaid balance
- The cost of any insurance
- Finance charges
- The total amount that is owed
- The number of installment payments to be paid as well as the amount and due date of each of the payments
For the same of motor vehicles in Ohio, there are also specific requirements, including:
- Being in writing
- Include specific details regarding the vehicle, including the vehicle identification number (VIN) and the odometer mileage
- Include details of the purchase, such as:
- The sales price
- Any trade-in amount
- Finance charges
- Insurance amounts
- Any other charges
- The net balance that is due
- The payment terms for the purchase
It is important to be aware that there are some prohibited charges in finance agreements in Ohio, including attorneys fees or excessive finances charges for document services. To find out more about the finance agreement laws in the state, it is important to consult with an Ohio lawyer.
Types of Finance Agreements Recognized in Ohio
In Ohio, different types of finance agreements are recognized. These include retail installment sales contracts, promissory notes, and seller-financing instruments, such as land contracts. Ohio also recognizes loan agreements.
Finance agreements must contain the required legal elements, including an offer, acceptance, consideration, and a lawful purpose. For more information on the finance agreements that are recognized in the state and what they have to contain, it is important to schedule an Ohio lawyer consultation.
What Is Contained in a Finance Agreement?
Finance agreements contain numerous key elements that define the relationship between the creditor and the borrower. Typically, finance agreements will include the following:
- Loan Amount: This is the principal sum of money that is borrowed.
- Interest Rate: This is the percentage that is charged on the loan amount over time.
- Repayment Schedule: This is the timeline the borrower has to follow to repay the loan, which includes the frequency and amount of payments.
- Collateral or Security: Assets that are used by the borrower to secure the loan.
- Creditors may seize these assets if the borrower defaults.
- Covenants: Conditions and restrictions that are imposed on the borrower’s activities, which may include maintaining certain financial ratios or not taking on additional debt.
- Default Provisions: The circumstances under which the borrower will be in default and the consequences of a default.
- Representations and Warranties: These are statements made by the borrower about their financial position and their ability to repay the loan.
- Governing Law: This is the jurisdiction’s laws that will govern the interpretation and enforcement of the finance agreement.
What Are Some Legal Issues Associated With a Finance Agreement in Ohio?
There can be different types of legal issues that are associated with finance agreements in Ohio. Examples of these issues can include signing a finance agreement under circumstances such as duress, fraud, unconscionability, or illegal provisions.
Duress
When one of the parties to a finance agreement is forced or threatened to sign a finance agreement, the agreement can be deemed invalid because of duress. It can be helpful to review an example to understand how duress works.
Suppose Joe needs a loan to expand his business. He is approached by a lender who offers him a loan that has high interest rates and unfavorable terms.
Suppose, initially, Joe declines the offer. The potential lender then threatens to harm Joe’s children if he does not sign the agreement. If Joe then signs the agreement, it can be invalidated based on duress because Joe signed it under threat of harm.
Fraud
When a party intentionally misrepresents a material fact or conceals information in order to make the other party sign the finance agreement, it can be considered fraud and void the contract. Suppose that Jane is looking for a loan to start a new business.
Suppose that a lender offers her what seems like a good finance agreement. In this agreement, however, the lender intentionally misrepresents the interest rate on the loan by stating that it will be a fixed rate for the duration of the loan.
Suppose the fine print of the document states that the interest rate is variable instead and may increase over time. If Jane signed the agreement based on the representation that the rate was fixed, it may be voidable because of the lender’s fraudulent misrepresentation of the interest rate.
Unconscionability
Finance agreements can be deemed unconscionable when the terms are grossly oppressive or unfair to one of the parties. Suppose that Bob, an entrepreneur, needs funds to launch his startup.
A lender offers Bob a finance agreement that has an extremely high interest rate as well as many hidden fees that were not disclosed. In addition, it contains a provision that allows the lender to seize all of Bob’s personal assets if he defaults, even though the loan is relatively small.
Because he was desperate for funds, Bob signs the agreement without understanding the terms. This agreement may be deemed unconscionable if the court determines its terms are grossly oppressive or unfair to Bob.
Illegal Provisions
When a finance agreement has provisions that violate the law, they may be unenforceable or may render the whole agreement void. Suppose Mary entered into a finance agreement with a lender to fund her cannabis business.
Even though the sale and use of cannabis is legal in the state, it is still illegal under federal law. The agreement has provisions that require Mary to use the proceeds exclusively for the cannabis business, which effectively requires her to violate federal law. The provisions related to the use of the funds may not be enforceable or may render the whole agreement void because of its illegal nature.
Is a Damages Award Available?
Damages awards may be available when a party breaches the finance agreement or suffers a loss because of another party’s wrongful conduct, for example, misrepresentation or fraud.
For example, if an interest rate is intentionally misrepresented, the injured party may be able to request a damages award to compensate them for financial harms they suffered because of the lender’s conduct. Depending on the circumstance of the case, this may include the lost profits from the contract, the additional interest paid, and any other consequential damages that were suffered by the business as a result of the lender’s misrepresentation.
Do I Need a Lawyer for a Financial Agreement in Ohio?
If you have any type of question, concern, or dispute related to a financial agreement in Ohio, it is essential to consult with an Ohio contract lawyer. Your lawyer will help you draft, review, and negotiate the terms of your financial agreement, ensure your rights are protected, and that the agreement complies with all applicable laws.
LegalMatch provides no-cost legal matching services online that can connect you with an experienced Ohio attorney in your area. The online platform allows clients to submit their legal question or issue and obtain responses from multiple attorneys who can help with the case.
