de Vries Litigation
by Rebecca Studin
August 12th, 2024
Friends Turned Foes: Application of the Limitations Act on Informal Loans
Loans between family or friends is a common practice. These agreements are often free of the interest rates and nexus of paperwork attached to loans provided by financial institutions.
While the prospect of helping out a loved one may seem like an attractive opportunity, the informal nature of these loans carries the risk of non-payment.
For many friends or family advancing these loans, they rely on the goodwill of the borrower that they will be repaid.
However, goodwill is not a guarantee. Relationships change and goodwill can disappear. When the goodwill is gone and the loan remains outstanding, lenders may have to turn to legal claims to recoup their funds.
Most legal claims are subject to the two-year limitation period outlined in the Limitations Act, 2002. This period begins on the day that the claim was “discoverable.” In the context of informal loans, what does that mean? Does the limitation period begin once the loan is advanced or afterwards?
