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The Civil Code of the Russian Federation

(with the Additions and Amendments of February 20, August 12, 1996,
October 24, 1997, July 8, December 17, 1999, April 16, May 15,
November 26, 2001, March 21, November 14, 26, 2002,
January 10, March 26, November 11, December 23, 2003)

Part II
Section IV
Chapter 36
Gratuitous Use

Chapter 36. Gratuitous Use

Article 689. Contract for Gratuitous Use


1. Under the contract for gratuitous use (loan agreement) one party (lender) shall undertake to transfer a thing or transfers it in gratuitous use by the other party (borrower), while the latter shall undertake to return the same thing in the condition in which it received it with due account for normal depreciation or in the condition stipulated by the contract.
2. The rules of Article 607, Item 1 and Paragraph 1 of Item 2 of Article 610, Items 1 and 3 of Article 615, Item 2 of Article 621, Items 1 and 3 of Article 623 of this Code shall be accordingly applicable to the contract for gratuitous use.

Article 690. The Lender


1. The right of transferring a thing in gratuitous use shall belong to it owner and other persons authorized therefor by the law or by the owner.
2. A non-profit organization shall have no right to transfer property in gratuitous use by the person who is its founder, partner, manager, member of its management or control bodies.

Article 691. The Giving of a Thing in Gratuitous Use


1. The lender shall be obliged to give a thing in the condition that corresponds to the terms of the contract for gratuitous use and its purpose.
2. A thing shall be given for gratuitous use with all its accessories and related documents (instructions on its use, technical certificate, etc.), unless otherwise stipulated by the contract. If such accessories and documents have not been given, and without them the thing can not be used according to its designation or its use is largely responsible for the loss of its value for the lender, the latter shall have the right to demand such accessories and documents or the cancellation of the contract and the indemnity for the real loss.

Article 692. The Consequences of Failure to Give a Thing in Gratuitous Use


If the lender fails to give a thing to the borrower, the latter shall have the right to demand the cancellation of the contract for gratuitous use and the indemnity for the real loss.

Article 693. Liability for the Defects of the Thing Given for Gratuitous Use


1. The lender shall be liable for the defects of the thing which he deliberately or because of gross negligence did not specify during the conclusion of the contract for gratuitous use. In case of discovery of such defects the borrower shall have the right to demand from the lender at his option the gratuitous removal of the defects of the thing or the reimbursement of his expenses on the removal of the defects of the thing, or the anticipatory cancellation of the contract and the indemnity for the real loss.
2. The lender, being informed about the claims of the borrower or about his intention to eliminate the defects of the thing at the expense of the lender, may replace without delay the faulty thing by another similar thing in a proper condition.
3. The lender shall not be liable for the defects of the thing which were specified by him during the conclusion of the contract or had been known in advance to the borrower, or should have been discovered by the borrower during the inspection of the thing or the verification of its good condition during the conclusion of the contract or the transfer of the thing.

Article 694. The Rights of Third Persons to the Thing Transferred for Gratuitous Use


The transfer of a thing for gratuitous use shall not be a ground for the alteration or termination of the rights of third persons to this thing.
During the conclusion of a contract for gratuitous use the lender shall be obliged to warn the borrower about all the rights of third persons to this thing (servitude, the right of the pawning of the thing, etc.). Default on this obligation shall entitle the borrower to demand the dissolution of the contract and the indemnity for the real loss.

Article 695. The Obligation of the Borrower to Maintain a Thing


The borrower shall be obliged to maintain the thing received for gratuitous use in a good condition, including to effect minor and major repairs and to bear all the expenses on its maintenance, unless otherwise stipulated by the contract for gratuitous use.

Article 696. The Risk of Accidental Destruction of, or Accidental Damage to, the Thing


The borrower shall bear the risk of accidental destruction of, or accidental damage to, the thing received for gratuitous use, if the thing has been destroyed or become faulty in view of the fact that he used it out of accordance with the contract for gratuitous use or its purpose, or has transferred the thing to a third person without the lender's consent. The borrower shall also bear the risk of accidental destruction of, or accidental damage to, the thing, if with due account of actual circumstances he could prevent its destruction or damage by sacrificing his thing but has preferred to preserve his thing.

Article 697. Liability for the Harm Inflicted on the Third Person As a Result of the Use of a Thing


The lender shall be liable for the harm inflicted on the third person as a result of the use of a thing, unless he proves that the harm was caused in consequence of intent or gross negligence on the part of the borrower or the person who is in possession of this thing with the lender's consent.

Article 698. The Cancellation of the Contract for Gratuitous Use Short of the Term


1. The lender shall have the right to demand that the contract for gratuitous use should be cancelled short of the term in cases where the borrower: uses the thing out of accordance with the contract or with its designation;
fails to discharge the obligation of keeping the thing in good condition or of maintaining it;
substantially worsens the condition of the thing;
has handed over the thing to a third person without the lender's consent.
2. The borrower shall have the right to demand to anticipatory cancellation of the contract for gratuitous use in the following cases: if defects have been discovered that makes impossible or burdensome the normal use of the thing and, moreover he did not know about them and could not know about them at the time of the conclusion of the contract;
if the thing proves to be in a condition unsuitable for its use by reason of circumstances for which he is not answerable;
if during the conclusion of the contract the lender did not warn him about the rights of third persons to the thing being handed over to them;
if the lender has failed to discharge the obligation of handing over the thing or its accessories and related documents.

Article 699. Repudiation of the Contract for Gratuitous Use


1. Each party to the contract shall have the right to repudiate at any time the contract for gratuitous use, concluded without an indication of its validity term, by informing the other party one month in advance, unless the contract stipulates a different date of notification.
2. Unless otherwise stipulated by the contract, the borrower shall have the right to repudiate at any time the contract, concluded with an indication of its validity term, in the procedure, envisaged by Item 1 of this Article.

Article 700. The Change of the Parties to the Contract for Gratuitous Use


1. The lender shall have the right to alienate a thing or to hand it over for lucrative use to a third person. In this case, the new owner or user shall receive the rights under the contract for gratuitous use, concluded earlier, while his rights to the thing shall be encumbered with the rights of the borrower.
2. In case of the lender's death or the reorganization or liquidation of the lending legal entity, the rights and obligations of the lender under the contract for gratuitous use shall pass on to the heir (legal successor) or to the other person to whom the right of ownership of the thing or another right, on the basis of which the thing was handed over for gratuitous use, has been transferred. In case of the reorganization of the lending legal entity its rights and obligations under the contract shall pass to the legal entity which is its legal successor, unless otherwise stipulated by the contract.

Article 701. The Termination of the Contract for Gratuitous Use


The contract for gratuitous use shall cease in case of the borrower's death or the liquidation of the borrowing legal entity, unless otherwise stipulated by the contract.

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