Chapter III: Interest-bearing loans.

It is permissible to stipulate interest for simple loans either of money, commodities, or other movable things.

A borrower who has paid interest that was not stipulated may neither repeat it nor set it off against the capital.

Interest is legal or conventional. Legal interest is fixed by law. Conventional interest may exceed that of the law, whenever the law does not prohibit it. The rate of conventional interest must be fixed in writing.

Receipt of capital given without reservation of interest shall presume payment thereof and operate discharge.

Interest may be stipulated in return for a capital sum that the lender refrains from demanding. In this case, the loan is known as “annuitisation”.

This annuity can be set up in two ways, as a perpetual or life annuity.

The annuity constituted in perpetuity is essentially redeemable. The parties may only agree that redemption shall not be made before a period which may not exceed ten years, or without giving notice to the creditor at the term in advance which they shall have determined.

The debtor of an annuity constituted in perpetuity may be forced to surrender: 1° If he ceases to fulfil his obligations for two years; 2° If he fails to provide the lender with the security promised by the contract.

The capital of the annuity constituted in perpetuity also becomes payable in the event of the bankruptcy or insolvency of the debtor.

The rules concerning life annuities are set out in the section entitled “Random contracts”.