Several questions about suing for personal loan

[rnkellylynn6]

Colorado:

Hello and thanks to all who respond. I'm looking for information about suing in small claims for personal loan repayment.
Facts:
Original loan 7 years ago of $2000 (by check) with verbal agreement for repayment within 2 years. That was verbally extended for another 2 years. At that point, I gave another loan of $1500 (by check). Over the years, I have recollected all but $1700 of these two loans. Now I'm sick of getting $25 every several months only when I complain. I want repayment.

Qs:
Did the small payments stop the tolling on the statute of limitations, or did I have to file something to stop the tolling? (Last payment was July). Since it was all verbal, and since cancelled checks that old might not be recoverable, can I use many emails from her agreeing about the loan and balance due as evidence? I also have record of some of the repayments being made in Paypal.

Thanks in advance for all your advice,
kELLY

 

[tranquility]

Generally, contracts which will be performed over a year need to be in writing under the Statute of Frauds. I'm not sure any part of your deal will be enforced because of the lack of writing. Was the part performance enough to take it out of the statute? I don't know, but I don't think so as it does not evidence the agreement. Certainly it would not be evidence of any duty to pay more than the $25 dollars a month that he has been paying.

Did the small payments stop the tolling on the statute of limitations, or did I have to file something to stop the tolling?

The statute of limitations is not your problem. I wouldn't use the term tolling as that means stop the statute from running, it's just not your problem.

Since it was all verbal, and since cancelled checks that old might not be recoverable, can I use many emails from her agreeing about the loan and balance due as evidence?

Maybe, it depends. That would count as a writing, but the wording would be important and you would need to make sure the important terms were supplied. If you're only missing a thing or two, the courts will sometimes apply a reasonable standard.

 

[rnkellylynn6]

Tranquility, thank you for your help in this matter. As a nurse, I'm reminded that my patients may not understand me when I am using what I think are simple medical terms, lol. I'm not sure what you mean by needing the appropriate wording from the emails. The loanee specifies in the emails exactly what the balance is that she owes me, that she should have paid me back long ago, and that she will begin paying at a rate of $100 a month (which she does not).

You lost me a bit more in the terminology regarding the time frame. Is it your thought that she could escape the repayment by nature of having no written contract, or by the passage of 7 years despite partial performance? Is it your belief that I might prevail due to the courts applying a reasonable standard? Or does it look grim.

Thank you,
Kelly

 

[tranquility]

It's difficult to put out a contract law primer as there are many and, but, or's involved. I speak only generally.

A contract (like an agreement to loan money and get paid back) generally needs the amount, time of performance, identity of parties and any interest involved to be a valid contract. Many agreements are more nebulous and courts will sometimes make a reasoned guess to any item missing, but it is not something they like to do. The key will be, did the writing accurately reflect the parties' intentions? With e-mail, you have an additional problem. Proving it up. You can't just bring in a printing of an e-mail and say look at what he said--especially when you are using it for the truth of what it contains. If you are talking about a small claims court, you may get past things because of the general informality, but you may not. Also, what will it prove? It is not a guarantee that it will suffice to be a writing, especially when such a writing to satisfy the statute of frauds needs to be signed by the party to be enforced against. Did he sign the e-mail? Again, because of the informality of small claims and the surrounding facts having an indicia of reliability, you may win. MAY.

IF there is found to be a contract and IF it is a contract to be performed over the years, the breach occurred when he failed to live up to the terms. That is the time the statute of limitations begins. So, I wouldn't worry too much about that.

Another problem gets to what you sue for. Let's say the court will find a contract for a loan of $X amount of dollars to be paid back $25 a month. This is reasonable as you (and he) have the checks to prove this schedule and even if the true contract was for a greater amount per month, you probably waived that amount by accepting this lower amount. You won't be able to sue for the entire amount, just the payments which were missed. That is why banks have an "accelleration clause" in their loan documents. If you miss a payment (Obviously, its more complex.) the entire amount is now due. Did you have one of those? This lack means you will sue him for $25 this month, and if he misses, $25 next month. And, so on until the contract is fullfilled.

No one knows how a court will find. I would bang on the facts as much as possible while he will bang on the law. The court will do what it will do. Legally, I'd go with him. Equitably, I'd go with you. I'd try to make a deal with the guy, get it in writing and move on from there. Forgive a few hundred to get it done. Negotiate and come up with a solution. I don't think the court is the place you want to be over this amount.

 

[BoredAtty]

Generally, contracts which will be performed over a year need to be in writing under the Statute of Frauds.

But remember: Once a party accepts the benefit of the contract, the Statute of Frauds can be tossed out the window. In this case, the other party accepted the loan money.

[The emails] would count as a writing, but the wording would be important and you would need to make sure the important terms were supplied.

I don't think the email that the OP describes could qualify as a written contract itself. Instead, they would be used as evidence that a contract existed (an admission). The email was sent long after the contract was formed. It, therefore, cannot be the contract itself.

I don't think the OP's claim is as legally insufficient as you.

Thoughts?

 

[tranquility]

But remember: Once a party accepts the benefit of the contract, the Statute of Frauds can be tossed out the window. In this case, the other party accepted the loan money.

As Cardozo said [From a Contracts hornbook], "performance which alone and without the aid of words of promise is untelligible or at least extraordinary unless as an incident of ownership, assured if not existing * * *. [W]hat is done must itself supply the key to what is promised. It is not enough that what is promised may give significance to what is done." What is the promise when one gives money to another? Is it a gift? Is it a loan? What are the terms of the loan? That is the problem the statute of frauds tries to prevent. Can a loan be proven from money changing hands?

Better would be an argument that there *was* a loan, and it *could* have been paid off in less than a year. However, even if we remove it from the Statute, we have other problems. The main one being the OP doesn't want to wait for her money any longer. She has accepted $25 sporadically for a while. Now she wants it all. Can you think of a way for her to prove the other party breached so it's all now due? What are the usual terms of a loan between friends which was not well documented? The best I think she will get is missed $25payments.

Even if we don't have a contract, we do have an unjustified enrichment which could be compensated for. She could win with some such claim. There are many claims she could win with, but I don't think she'll be able to make out a good claim without a lot of time studying.

As I wrote, I'd try to make a deal with the guy, get it in writing and move on from there. Forgive a few hundred to get it done. Negotiate and come up with a solution. I don't think the court is the place she wants to be over this amount when the contractual rights are not so clear.

 

[rnkellylynn6]

You guys are so great. I thought I had a pretty good case, but I'm glad I came here to ask about it, instead of making myself look stupid in court with my assumptions. There is value in knowing both points of view. You are all so generous in giving your free information. I learned the value of the attourney when I was attempting to buy a house at the age of 23. I had made an offer on a house, and the seller made a counter offer in writing which said on paper that it would become contract, if I gave notice of acceptance before such a time on such a date. It was faxed to my realtor. I received this paper 4 hours before the deadline due to some questionable behavior of my own realtor. I telephoned the seller's realtor, on time, to accept the counter offer. He said it was too late and they had accepted another, higher offer. I said I would seek a lawyer, and he laughed at me. I barely knew how to wipe my own nose, but I found just the right attourney. He wasn't convinced of my ability to prevail, but wrote up a brilliant demand of performance to the seller's realtor. We won the house. We sold it for $100k more than we bought it for 5 years later. The $200 for the lawyer to dictate a badass letter was the best money I EVER spent. I'd like to have seen how they weaseled out of the 2nd contract. I digress, but wanted you to know that the knowledge you share is not taken for granted, and the advice is golden.

 

[BoredAtty]

As Cardozo said [From a Contracts hornbook], "performance which alone and without the aid of words of promise is untelligible or at least extraordinary unless as an incident of ownership, assured if not existing * * *. [W]hat is done must itself supply the key to what is promised. It is not enough that what is promised may give significance to what is done." What is the promise when one gives money to another? Is it a gift? Is it a loan? What are the terms of the loan? That is the problem the statute of frauds tries to prevent. Can a loan be proven from money changing hands?

I don't see how the Cardozo quote is relevant. Yes, the SoF tries to prevent problems of proof, but that doesn't mean it always bars a party from proving that an oral contract existed. For example, if the loan were to be repaid within one year, by your own admission the SoF would not apply, even though she'd still have the problem of proof that you mention above. Similarly, if one party accepts the benefit of a contract, the SoF will not apply, notwithstanding any problems proving that a contract exists.

Better would be an argument that there *was* a loan, and it *could* have been paid off in less than a year.

Why is that better? She still has the problem of proof. Cardozo's quote is as relevant here as it is if she simply tells the truth.

However, even if we remove it from the Statute, we have other problems. The main one being the OP doesn't want to wait for her money any longer. She has accepted $25 sporadically for a while. Now she wants it all. Can you think of a way for her to prove the other party breached so it's all now due? What are the usual terms of a loan between friends which was not well documented? The best I think she will get is missed $25payments.

I think that if the OP can prove that a contract exists, it will be up to the other party to prove that she is only required to pay $25 per month. I see no reason for a judge to assume on his own that $25 monthly is a term in the contract. He may just as easily (and I think more easily) assume that specific monthly payments were not a term, but rather just the defendant's attempt to repay what is owed.

Even if we don't have a contract, we do have an unjustified enrichment which could be compensated for. She could win with some such claim. There are many claims she could win with, but I don't think she'll be able to make out a good claim without a lot of time studying.

As I wrote, I'd try to make a deal with the guy, get it in writing and move on from there. Forgive a few hundred to get it done. Negotiate and come up with a solution. I don't think the court is the place she wants to be over this amount when the contractual rights are not so clear.

That's probably sound advice. The OP can offer to knock off $300 if the debtor will sign something in writing. Then, she will have an easier time suing if she is not repaid when promised.