What is the legal document that outlines the terms of a commercial transaction or loan?

The legal document that outlines the terms of a commercial transaction or loan is a contract. A contract serves as a formal agreement between parties, which specifies the rights and obligations of each party involved. It typically includes critical details such as the amount of the loan, interest rate, repayment schedule, and any conditions that must be met by both parties.

Contracts are legally binding, meaning that if one party fails to fulfill their part of the agreement, the other party can seek legal remedies. This attribute provides security and clarity, making contracts essential for establishing trust in business transactions.

While an agreement may also refer to a mutual understanding between parties, it does not necessarily carry the same legal enforceability unless it meets the criteria of a contract. A memorandum often serves as a written record or a note regarding a discussion or agreement but lacks the comprehensive detail required for a commercial transaction. A policy statement outlines guidelines or principles but does not govern specific transactions or loans. Thus, the defining nature of a contract makes it the correct choice in this context.