UKC

A few years ago a friend of mine lent a substantial sum of money to some body. A formal loan agreement was drawn up by friends brother - now deceased. Unfortunately nobody now knows where the loan agreement is. The only aspect that friend remembers is that the borrower had to pay him interest but it seems that there was no sort of time limit on the return of the capital.

The thing is my friend now desperately need the capital but all requests to the borrower have been in vain - although he continues to pay the interest. Friend is getting desperate and is convinced he won;t see the capital again. He even said to me the other day that he thought that the borrower did not have to repay the capital. I told him that was a bit daft because ALL loans HAVE to be repaid eventually.

Does anyone know if there are likely to be any circumstances in which the capital does not have to be repaid.

I've told him to see his solicitor.

In reply to FesteringSore:

If you Lend money to a Friend, you should always just consider it a gift. If it comes Back, it does.

In reply to Choss: I should have made clear, the borrower was known by the late brother through business dealing. He (the borrower) is not personally a friend of the lender.

In reply to Choss:
I asked the question from a legal angle not a sentimental one.

In reply to FesteringSore:

Not all loans have maturity dates.

For example a perpetual bond.

In reply to FesteringSore:

If there is no loan agreement then there is no loan

In reply to FesteringSore:


Isn't it game over from that point on?

In reply to Sharp:

Yes, it's going to be tricky without paperwork.

In reply to FesteringSore: If the guy has been paying a calculatable amount of interest, on a regular basis, then it wouldn't be too difficult to infer that there is a contract in place.

The problem that your frined is going to face is whether or not the provision of credit was intended to be for a term of over 12 months, and whether it can been seen to be a commercial agreement, which given that there's a formal agreement it's arguable. If it is, then the contract should have been goverened by the Consumer Credit Act, if your friend doesn't have a consumer credit license, then you are going to struggle to get a Court to enforce it.

Similarly, without the loan agreement, and the terms it contains, anything else about getting the money back is pure guess work.

I would imagine that there is likely to have been a date for the expiration/redemption of the loan, but possibly not, and there's no telling when that is.

I would recommend going to a Solicitor, but not to expect too much.

In reply to I'd rather be climbing: The trouble is he's been depending so far on the good will of the borrower which, now he needs the money back, has apparently disappeared.

In reply to FesteringSore: if there's no contract I'd be glad to be receiving the interest paid, surely the terms of the contract wouldn't have allowed a demand for the whole repayment anyway?

In reply to SARS:

Which is a Bond not a loan, by the definition of 'loan' but then we don't have the document, so the lender may have been under the impression that he had 'loaned ' the money, he may or may not , have done so, only the agreement paperwork would confirm that one way or another.

I would have thought that the lender has been a bit negligent in not obtaining , or retaining his copy of the loan agreement, the borrower probably has his, but may not release it to the lender.

The only thing NOT to do, is let the borrower know that the lender does not have the agreement, as he may stop paying even the interest.

In the lenders position, I would invite the borrower to renegotiate the loan, and draw up a new agreement releasing at least some of the capital back to the borrower, but on rather favourable terms to the borrower to tempt him in.
( I would try and do it in front of a solicitor this time)

If the borrower does not play ball, then it may be a lost cause, sounds like a bit of bluffing is needed.

In reply to Jim C:

Well a bond is just an unsecured loan in another name.

1. I agree the lender has been negligent
2. Agree it wouldn't be wise to let it be known that he's lost his documentation
3. An alternative is that if the interest he's receiving is high enough, he could go to a bank and get an unsecured loan then use the repayments he's receiving to pay off the bank. When this loan matures he can roll it over ad infinitum

In reply to SARS:

Fair enough, I tend to use retention bonds, but accept that there are bonds that operate similar to loans .

Risky, but possible, might be another option to my also risky bluff strategy.

I once loaned a friend money to attend a football match ( that his wife would not have agreed to) There was an verbal agreement to pay back regularly from a given date ( clear when it would be paid off, no written agreement( as we were friends)

He started to miss payments, would pay odd sums, and generally started to confuse the situation. I kept my own record of payments and offered him receipts ( which he refused ) He was always 'forgetting' that he had missed a payment , and was always sure he was more up to date than he was. Eventually, I just agreed that it was fully paid, rather than risk the friendship. We are still friends, 30 years on, but I never loaned him( or anyone else money again)

In reply to FesteringSore:

Shame that there is no paperwork! the fact that the debtor is paying regular interest stands in your favour as hints to an agreement. If you can't find paperwork what i would suggest would be to put something in writing now to the debtor outlining how much is owed and a terms for paying it back. include a statement of what has been paid in interest so far. If the debtor does not agree to the terms you could take him to small claims court and let the judge decide. the cost of this depends on the value of the loan. If you are successful the debtor would be liable for court fees.

Another route would be to issue a letter detailing the loan and terms as before and following up with a statutory demand. This would give the debtor 21 days to either settle or make an arrangement. Once 21 days are up you can start bankrupcy proceedings

Often the threat of these things will be enough to start getting payment.

https://www.gov.uk/statutory-demands

In reply to Jim C:
>...There was an verbal agreement... He started to miss payments... We are still friends, 30 years on, but I never loaned him( or anyone else money again)

Good story, honest and helpful, thanks.

No doubt many have been burnt lending money to friends and family, no reason not to do it, but as someone said above, it can hurt.

In reply to abseil:

Thats why i said earlier. If you Lend money between Friends, always treat it as a gift, not a loan.