Private Loan Due and Payable, Rules Court

Making private financial arrangements with friends and family can seem like a good idea at the time the transactions are undertaken, but they have a discouraging tendency to end in dispute unless professional advice is taken to ensure that the arrangements are put on a proper legal footing and correctly documented.

A recent case involving an Oxfordshire couple who borrowed £225,000 from a businessman friend to fund their purchase of a farmhouse illustrates the point. The couple have failed to avoid liability to repay the loan after the High Court rejected claims that their signatures on crucial documents were forgeries.

The couple had bought the £650,000 property with the benefit of a mortgage which they topped up with the loan from the businessman. The loan was recorded in a deed and a further deed placed a charge over the property to secure the debt. Both documents apparently bore the couple's signatures.

In upholding the businessman's claim for repayment of the loan in full, the Court rejected the couple's plea that their signatures had been forged. Their alternative arguments that they had been subjected to undue influence, that the nature of the arrangement had been misrepresented to them and that they had misunderstood the effect of the documents were all dismissed.

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