The Loan Settlement Agreement is utilized when parties wish to formally document the terms of settling an existing loan obligation in Nigeria. This document becomes necessary when the original loan terms are being modified, typically through a reduced settlement amount, revised payment schedule, or both. The agreement must comply with Nigerian banking regulations, contract law, and financial legislation, particularly the Central Bank of Nigeria Act 2007 and the Banks and Other Financial Institutions Act (BOFIA). It provides comprehensive details about the original loan, the agreed settlement terms, payment schedule, and conditions for final discharge of the debt. This agreement is crucial for both lenders and borrowers as it provides legal certainty and protection while establishing clear parameters for loan settlement.
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1. Parties: Identifies and defines all parties to the agreement, including the lender and borrower
2. Background: Recitals explaining the context of the original loan and the reason for the settlement agreement
3. Definitions: Defines key terms used throughout the agreement for clarity and consistency
4. Acknowledgment of Debt: Confirms the original loan amount and current outstanding balance
5. Settlement Terms: Details the agreed settlement amount and any discount from the original debt
6. Payment Terms: Specifies the payment schedule, method of payment, and payment details
7. Release and Discharge: Outlines the terms of release from the original debt upon completion of settlement payments
8. Default Provisions: Specifies consequences of failing to comply with the settlement terms
9. Representations and Warranties: Standard declarations by both parties regarding their capacity and authority
10. Governing Law and Jurisdiction: Specifies Nigerian law as governing law and establishes jurisdiction for disputes
11. Notices: Details how formal communications between parties should be made and delivered
12. Entire Agreement: Confirms this agreement supersedes all previous agreements regarding the loan settlement
1. Security Provisions: Include when the settlement agreement requires new or maintains existing security arrangements
2. Guarantee: Include when a third party is guaranteeing the settlement payments
3. Confidentiality: Include when parties wish to keep the settlement terms confidential
4. Tax Provisions: Include when there are specific tax implications that need to be addressed
5. Insurance Requirements: Include when specific insurance must be maintained during the settlement period
6. Assignment: Include when either party needs the right to assign their rights under the agreement
7. Force Majeure: Include when parties want provisions for unforeseen circumstances affecting settlement performance
1. Schedule 1 - Original Loan Documentation: Copies or details of the original loan agreement and related documents
2. Schedule 2 - Payment Schedule: Detailed breakdown of settlement payment amounts and due dates
3. Schedule 3 - Calculation of Settlement Amount: Detailed calculation showing how the settlement amount was determined
4. Schedule 4 - Security Details: Details of any security arrangements that will continue or be released
5. Schedule 5 - Release Documentation: Forms of release documents to be executed upon completion of settlement
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