In Hamlet a father warns his son about making and taking loans from friends and family members.
Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
Act I, Scene III
The advice is as good today as it was in Shakespeare’s time.
It’s almost impossible to sit through a session of small claims court and not see at least one person suing a friend or family member for an unpaid loan.
Unfortunately the vast majority of plaintiffs in such cases fail to succeed at trial because they are unable to provide the court with documentation of the loan.
If you’re lending money then it’s ideal to have the terms of the loan written down and signed to by both parties.
The agreement should contain, at the very least, the following terms:
- the name of the lender and borrower
- the amount of the loan
- the date the loan was made
- the date when the loan must be paid back
If the amount of the loan is small and the terms of repayment are simple, then it may not be necessary to hire a lawyer to draft the agreement.
However, if you’re lending a substantial amount of money, it may be worth the extra time and expense to employ an attorney to draw up a contract.
If you have questions about contract law or collecting a delinquent debt, please feel free to contact me via email at firstname.lastname@example.org.