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As soon as a CHF loan agreement is declared invalid, the problem of mutual settlements between the borrower and the bank arises. Courts adjudicate on the mutual obligations of the parties according to the balance theory or the two-conditional theory. The fact which of them will become the basis for the settlement is of great importance for the borrowers. Today we present the characteristics of the balance theory.

The balance theory is based on the assumption that, despite the fact that the judge declares the contract invalid, the claim for payment is dismissed in whole or in part, depending on whether the borrowers have already repaid more or less of what they received from the bank when concluding the contract. As a consequence, the parties are obliged to return the benefits they provided in performance of the contract in the proceedings initiated by the borrower. Therefore, the judge compares the amount of the capital paid out by the bank with the sum of the installments paid by the borrower and makes a set-off. The borrower is awarded the difference between the loan disbursed and the sum of benefits paid. However, if the borrower has paid less than he received, the claim must be dismissed. 

The theory of balance has been criticized as inconsistent with the provisions on unjust enrichment (Civil Code Art.405 rather indicates a unilateral obligation). Moreover, the acceptance of a set-off claim, when the bank has not filed such clain, is an adjudication over the demand. Using the balance theory, it is also unfavorable for borrowers that the court does not take into account the limitation period for claims due to a credit institution for the repayment of the loan.

For the benefit of borrowers, the Supreme Court in the resolution of February 16, 2021 (which was also confirmed by today’s resolution – file number III CZP 6/21) decided that there is no legal justification for the application of the balance theory, and therefore the borrower is entitled to a claim for reimbursement benefits regardless of what part of the loan has been repaid. However, we still expect a resolution of the full composition of the Civil Chamber of the Supreme Court, which is to finally settle the fundamental issues regarding settlements between the parties to an invalid contract.