Lecture Notes: Challenging Loan Contracts and the Concept of Consideration

Introduction

• The lecture discusses the legal concept of consideration in contracts, particularly in loan agreements.
• Banks may violate this concept, potentially making loan contracts voidable.
• The content is for educational purposes and not legal advice.

Key Concepts

Consideration in Contract Law

• Definition: Something of value exchanged between parties in a contract.
• Ensures a contract's enforceability.
• Can be a promise, action, or property.
• If no consideration is present, the contract is not valid.

Role of Signature

• The signature allows banks to engage in commerce and create loans.
• Banks must provide real value in return.

Legal Framework

Restatement (Second) of Contracts, Section 71

• Consideration involves a performance or return promise that must be bargained for.
• Must involve a legal relation (create, modify, or destroy).

Negotiable Instruments

• A promissory note becomes a negotiable instrument.
• Under UCC 3-104, it is an unconditional promise to pay a fixed amount.

Modern Money Mechanics

• Banks create money upon receiving negotiable instruments (promissory notes).

Argument Against Banks

• Banks may not provide real money but create credit based on promissory notes.
• The argument: Consumers fund their loans through negotiable instruments.

Finance Charge and Truth in Lending Act (TILA)

• Finance Charge: Total cost of consumer credit expressed in dollar amounts (interest, fees, etc.).
• Must be clearly disclosed.
• Misrepresentation can lead to a loan being challengeable.

Right of Rescission

• Under 15 USC 1635, consumers can rescind a loan within three days.
• Lack of proper rescission notice can extend this period.

Steps to Challenge a Fraudulent Loan

Process for Rescission

1. Notice of Rescission: Cite lack of lawful consideration.
2. Affidavit of Truth: Declare facts under penalty of perjury.
3. Send documents via certified mail.
4. Notice of Fault: If ignored, give the opportunity to cure.
5. Notice of Default and Dishonor: Follow up if no response received.

Conditional Acceptance

• Request proof of consideration from the lender.

Best Practices

• This process is most effective for unsecured loans, mortgage agreements, and auto loans.
• Builds a foundation for legal disputes, not instant debt cancellation.

Mindset and Legal Rights

• Understand the importance of self-education and belief in legal rights.
• Know that you have the right to challenge fraudulent contracts.

Conclusion

• Encouragement to engage with the content, educate oneself, and assert rights.

Additional Resources

• Referral to complete debt guides and one-on-one mentorships for further learning.

Note: Always consult with a legal professional for personalized legal advice. This content is for educational purposes only.