Picture this - a loved one needs some financial assistance and you’re in the position to help so you offer to loan them some money. They solemnly promise to repay you and you believe them. They’re family so you don’t think there’s any need to get legal documents drawn up – and besides, you trust that they will do the right thing. But what happens if they don’t?
There have been some recent court cases which have highlighted this very issue. In one instance, a couple lent their son substantial amounts of money. He agreed that these were loans and there were emails from him advising that he would pay the money back. Despite many requests, the son did not repay the money, the parent’s circumstances changed and in the end the parents filed a breach of loan agreement claim against their son.
Sounds pretty straightforward doesn’t it? The facts were that money was lent and there was an email confirming that it would be repaid.
But no, unfortunately, these emails weren’t considered a legally binding document – and the court ruled that while the son might have had a moral obligation to repay his parents, there was no binding loan agreement in place.
Lending money to family members isn’t a rare occurrence. We see this happen quite often – and 9 times out of 10 things end well. But all it takes is for a relationship breakdown or financial tragedy and things can change in an instant. So how do you protect yourself? It’s simple really - we recommend that ALL loans have a loan agreement in place.
Is this ringing alarm bells for you? If so, contact our office or your solicitor to discuss what your options are.