Getting Repaid With No Written Repayment Agreement

Although we know it’s not good practice, and not a good idea, it happens to a lot of very savvy business people: They end up loaning money to people, with no written repayment agreement. Perhaps the borrower is  a friend, or a business associate, or someone you just trust will pay the money back. But when they don’t or can’t repay the money, you may be left wondering if you ever have any legal right to repayment, if you never had a written loan or credit agreement.

There are legal theories that will allow people to get paid back for money loaned, even if there is no written agreement between them and the borrower.

Open Account

The first is called open account. With open account, you don’t need to show any written credit agreement. You simply can show your own books are records, in order to document that the money was provided to the borrower.

All you need to prove is that you opened an “account” and paid money to someone, and that money was never paid back. You can also use open account for providing services, such as when you do something in return for payment, but are never paid for your work.

You do need to show some proof of the debt, the money borrowed, the services provided, and the agreement to get paid or repaid. But you are allowed to do that in any way you can–you don’t need an actual credit agreement.

Account Stated

The other cause of action which is commonly used is an account stated. All you need to show is that there is a debt that is owed to you by the borrower and that the borrower did, at some point, promise to pay the debt back (that is, the money given was not a gift).

The promise to repay can be expressly made verbally, or just assumed or implied. Like open account, you will need some proof–but you don’t need to show an actual credit agreement, or the terms of the repayment. 

Use Written Agreements

Although both of these causes of action can be helpful to you in getting repaid an unpaid debt in the absence of a credit agreement, they should never be substitutes for an actual, written loan, debt or repayment agreement, which has all the terms and conditions of your understanding with the other side.

These legal theories often will help you get repaid, but unlike a written agreement, you may not be able to collect the interest that you anticipated collecting. You also may not be able to get attorneys fees for winning your case.

Additionally, if there are disputes about vital terms to the loan, you will have to handle proving those terms, in the absence of a written credit agreement, if you rely on these legal causes of action.

Call the West Palm Beach business litigation attorneys at Pike & Lustig today for help if you are owed money and need to enforce your rights in court.

Resource:

edca.1dca.org/DCADocs/2017/3112/173112_1284_11302018_09415244_i.pdf