June 2025

Decision of the Athens Multi-Member Court of First Instance on the Annulment of a Payment Order Due to Invalid Termination of a Loan Agreement

The Decision No. 1390/2025 of the Athens Multi-Member Court of First Instance was published, annulling a payment order amounting to approximately €300,000 due to an invalid termination of a loan agreement. Specifically, it was held that the extrajudicial notice of termination was not validly served on the principal debtor (a limited liability company), as it was not delivered to its legal representative but instead to the residence of another partner who had no authority to represent the company. As a result, the termination was deemed legally ineffective, and therefore the outstanding loan balance did not become due and payable by virtue of the purported termination but in accordance with the original contractual schedule. This change in the maturity timeline affected the applicable interest rate and ultimately the total amount claimed.

The opposing party, in an effort to prove the termination of the agreement, submitted, in addition to the original termination notice, another extrajudicial declaration which was served much later to the guarantors. However, the Court ruled that the initial alleged termination was the relevant one, as it was this that supposedly triggered the debt. In particular, from the moment of this alleged original termination, even the then-unmatured loan installments became due, resulting in an increase of the total outstanding debt, composed of both already-due and then-outstanding amounts, now subject to default interest. Thus, the opposing party applied the higher default interest rate even on installments that were to mature in the future, as opposed to the contractual rate that would have applied in the absence of termination. This amount was then compounded semi-annually using the default interest rate to reach the final figure cited in the annulled payment order.

Moreover, the bank, in its submitted documentation, merely referenced the prior, invalid termination without issuing a new statement of intent.

The court concluded: "[...] the delivery of the extrajudicial notice dated 23-11-2009 under the above circumstances constitutes a complete lack of valid service to the legal entity of the principal debtor, and therefore the declaration of termination produced no legal effects—not only with respect to the principal debtor but also to the guarantors, including the claimant, as their liability is accessory. Consequently, the contractual clause giving the bank the right, after termination, to render the entire loan due and demand immediate payment from both the borrower and the guarantors was not triggered. As such, the claim of €300,214.99, on which the challenged payment order was based, was not substantiated by the documents submitted by the respondent."

It is noted that, in the context of a loan agreement with amortization, the absence of a valid termination means that each installment of principal and interest retains its autonomy and becomes due as per the contract, subject to a five-year statute of limitations under Article 250 of the Greek Civil Code. Although this is not explicitly stated, the court’s recognition of the invalid termination, combined with the fact that the final installments became due in 2011, implies a tacit acknowledgment that all related claims have likely become time-barred.

For further information on the above legal issues, see here and here.