Libro Quinto Título VIII. Del mutuo

By the contract of mutuum, one person delivers to another money or other fungible things, with the charge that an equal quantity of the same kind and quality be returned to him.

The thing that is the object of the mutuum is transferred to the borrower for consumption, and any improvement, deterioration, depreciation or destruction occurring thereafter shall be borne by him.

The lender is liable for the damage suffered by the borrower due to the poor quality or hidden defects of the thing loaned, if he knew of the defects and did not give him timely notice.

Those defects that the borrower could have known by himself are not deemed hidden defects.

If the lender was unaware of the hidden defects of the thing, the lender is only obliged to bear the proportional reduction of its value.

Unless otherwise stipulated, the debtor shall pay interest to the creditor and, in the absence of agreement, it shall be presumed that the parties accepted the legal interest.

Legal interest is equal to the weighted average of the published active interest rates of the banks of the system on the day prior to the date of its determination, reduced by two percentage points. In the absence of its publication or in case of doubt or discrepancy, a report shall be requested from the Superintendency of Banks, which shall be definitive.

The parties may agree upon such interest as they see fit. When the agreed interest rate is manifestly disproportionate in relation to the current interest in the market, the judge may reduce it equitably, taking into account the rate indicated in Article 1947 and the circumstances of the case.

The capitalization of interest is prohibited. Banking institutions are excepted, which shall be subject to what the Monetary Board establishes on this matter.

If no time limit has been fixed in the contract for the restitution of what was lent, it shall be understood to be that of six months if the loan consists of money; and if what was lent were cereals or other agricultural products, the return shall be made at the next harvest of the same or similar fruits or products.

In money loans, payment of overdue interest or of interest incurred after the expiry of the time limit shall not imply an extension thereof.

If fungible things other than money have been lent, an equal quantity of the same kind and quality shall be returned, even if the price thereof has fallen or risen.

If the things were appraised at the time of the contract, the debtor is obligated to satisfy the value given to them, even if they are worth more or less at the time of payment.

If it is not possible for the borrower to restitute in kind, the borrower may pay the value that the loaned thing has on the day on which it should be returned.

A loan of money shall be governed, as to restitution, by what is established in Articles 1395 and 1396.

The debtor of a sum of money may pay in advance, but covering the respective interest for all the time remaining until the expiry of the time limit.