“I didn’t know what I was signing” maybe one of the commonest things for borrowers to raise when they fail to fulfill their obligations under a loan agreement. Accordingly, such borrowers seek to invalidate the entirety of the loan agreement on the grounds that since they were not actually aware of the terms of the loan, their obligations should be waived, and the agreement must be nullified.
Generally, the courts appear to require strong evidence to waive a loan agreement by reason of a signatory party claiming that they were unable to understand the language in which the relevant agreement was entered into. It can be observed from the court’s findings in Case No. 4004/2012 of the Larnaca District Court, (dated 31/1/2017) that, amongst others, the court will consider the following:
- If borrowers have sufficient knowledge of the Greek language in order to be able to communicate in Greek;
- Read through a text in Greek and understand what it is concerned with; and
- Any pre-existent relevant experience of the borrowers in similar type of arrangements/agreement with the Bank.
Furthermore, the court noted the importance of evidentiary documents that the borrowers’ lawyer indeed did explain to them the terms of the signed loan agreement. The importance of such documents is based upon the premise that the borrowers’ lawyer has no incentive to be a witness in favor of the bank, since he/she does not represent the bank.
In another relevant decision[1], the court highlighted that whenever a lawyer fully explains the terms and consequences of the agreements to the borrowers and the borrowers, at their own volition, sign the loan agreement after stating that they have fully understood those terms and consequences, then they cannot renege on the terms of the loan. In other words, the court will not accept an allegation by a borrower that the loan agreement should be nullified by reason of not understanding its terms, when a lawyer has explained the terms to a language that the borrower understands.
Thus, it may be observed that courts are particularly cautious of allegations raised by borrowers that they do not understand the Greek language. If the conduct of the parties before and upon signing the loan agreement reveals that they were fully made aware of the terms and its implications, then such claims are bound to fail.
This is evidenced in yet another case where the in-court statements made by a signatory party to a loan agreement that she did not understand Greek well enough were deemed untrustworthy.[2] More specifically, the court noted that a wife of a Cypriot citizen (with whom she had lived together for four years in Greece before coming back to Cyprus) that had spontaneously responded in court in Greek to questions which hadn’t being translated to her yet, was evidence that the witness aimed at deliberately creating a sense of doubt regarding her ability to understand Greek. Her ulterior motive, the court continued, was to prove that she indeed was not aware of the meaning of some of the documents signed, which was not an accurate representation of the truth. The fact that she also made inconsistent statements as to whether she understood the documents that she signed was also pivotal in rendering her testimony untrustworthy which the court could not rely upon in relation to the disputed issues.
Overall, the courts approach the issue in a heavily cautious manner. If the claims of the borrowers that they were unable to understand Greek when signing the loan agreement remain largely unsubstantiated by the evidence presented during court proceedings, then the agreement will not become void. Particular focus is also placed as to whether there is evidence that the borrowers’ lawyer did indeed explain the terms of the agreement to a language understood by them. Hence if such claims are totally without any merit, then they are bound to fail.
[1] Case No 770/2012 of Larnaca District Court, dated 31/8/2017
[2] Case 134/2014 of Supreme Court, dated 28/9/2021
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