Conditions of Gratuitous Use of Property
Loan for Use (Gratuitous Use of Property) – is a right granted by the lender to the borrower to possess and use property free of charge for an agreed period of time. Under a loan-for-use agreement, one party (the lender) transfers a non-consumable item to another party (the borrower) for temporary and gratuitous possession and use, while the borrower undertakes to return the item in the condition in which it was received, taking into account normal wear and tear, or in the condition specified in the agreement.
A loan for use is a gratuitous transaction, as no remuneration (payment) is received. The right to transfer an item for gratuitous use to another person belongs only to the owner of the item or to other persons authorized by law or by the owner of the item. Failure to fulfill a promise to transfer an item for gratuitous use without sufficient justification entitles the borrower to claim compensation for expenses incurred in accepting the item under the terms of the loan for use.
The lender must hand over the item to the borrower in a condition that complies with the terms of the agreement and is suitable for the intended use of the item. The item shall be delivered to the borrower together with its accessories and relevant documents (such as user manuals, technical certificates, etc.), unless otherwise provided in the agreement. If the accessories and documents are not delivered, and the borrower cannot use the item as intended without them, or the use of the item loses its purpose without the accessories and documents, the borrower shall have the right to demand that the lender provide the accessories and documents or to terminate the agreement and claim damages.
Liability of the Lender
The lender is liable for any defects of the item transferred for gratuitous use that were not disclosed at the time of concluding the agreement, either intentionally or due to gross negligence, and for any damage caused to the borrower as a result of such defects. Upon discovering such undisclosed defects, the borrower has the right, at their discretion, to demand that the lender eliminate the defects free of charge, compensate the costs of defect removal, or terminate the agreement and claim direct damages. If the lender is informed of the borrower’s demands or their intention to remove the defects at the lender’s expense, the lender has the right to immediately replace the defective item with a similar item of proper quality. The lender is not liable for defects that were disclosed at the time of the agreement, nor for defects that were known to the borrower before the agreement was concluded or which the borrower should have discovered during the transfer, inspection, or testing of the item when the agreement was made.
Liability of the Borrower
The borrower must maintain and safeguard the item transferred under the agreement and perform both routine and capital repairs, as well as cover all maintenance costs of the item, unless otherwise provided in the agreement. The borrower must use the item only for the intended purpose as specified in the agreement. Without prior written consent from the lender, the borrower is not entitled to allow a third party to use the item. The borrower assumes the risk of accidental loss or damage to the item if such loss or damage occurs due to use not in accordance with the agreement or if the item was transferred to a third party without prior written consent from the lender. The borrower also assumes the risk of accidental loss or damage if they continue using the item after the expiry of the loan-for-use agreement or if, under the circumstances, the borrower could have saved the item by using their own resources but failed to do so. If the borrower destroys or allows destruction of their own property in order to preserve the item received, they are entitled to request reimbursement of the necessary and urgent expenses incurred to preserve the item from the lender. The borrower is not liable for the accidental loss or damage of the item occurring during its normal use in accordance with the intended purpose specified in the agreement.
The lender has the right to demand early termination of the agreement if the borrower:
- Uses the item contrary to its intended purpose;
- Fails to maintain and preserve the item;
- Substantially deteriorates the condition of the item;
- Transfers the item to a third party without the lender’s consent;
- In the event of unforeseen and extraordinary circumstances, the item becomes urgently and unavoidably needed by the lender themself (e.g., in Lithuania, during natural disasters or government requisition).
The borrower has the right to demand early termination of the agreement if:
- Defects are discovered that make normal use of the item impossible or significantly difficult, and the borrower was not aware and could not have been aware of them at the time of concluding the agreement;
- Due to circumstances beyond the borrower’s control, the item becomes unusable for its intended purpose;
- The lender failed to inform the borrower about third-party rights to the item at the time of concluding the agreement;
- The lender did not provide the item’s accessories or documentation necessary for proper use.