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A Personal Loan Contract Between Friends is essential when individuals in Pakistan wish to formalize a lending arrangement within their personal relationship. This document becomes particularly relevant when friends or acquaintances agree to a loan that exceeds casual lending amounts and requires proper documentation for legal protection. The contract adheres to Pakistani legal requirements, including the Contract Act 1872 and Islamic banking principles, while maintaining accessibility for non-legal parties. It typically includes loan amount, repayment terms, profit/interest arrangements (compliant with Islamic principles), default provisions, and witness requirements. This type of agreement helps prevent misunderstandings and provides legal recourse while preserving the friendly nature of the relationship.

1. Parties: Identifies and provides full details of the lender and borrower including full legal names, addresses, and CNIC numbers

2. Background: Brief context of the relationship between parties and purpose of the loan

3. Definitions: Defines key terms used throughout the agreement

4. Loan Amount and Purpose: Specifies the principal amount being lent and its intended use

5. Disbursement: Details of how and when the loan amount will be provided to the borrower

6. Repayment Terms: Specifies repayment schedule, installment amounts, and payment method

7. Profit/Interest Rate: Defines any profit sharing or interest arrangement, ensuring compliance with Islamic principles

8. Default and Consequences: Defines what constitutes default and the consequences thereof

9. Representations and Warranties: Basic promises made by both parties about their capacity to enter into the agreement

10. Termination: Conditions under which the agreement can be terminated and consequences

11. Governing Law: Confirms Pakistani law governs the agreement

12. Dispute Resolution: Process for resolving any disagreements

13. Signing Page: Space for signatures, witnesses, and date of execution