A few months ago, I found myself in a difficult situation when a close friend approached me for financial help. He was in urgent need of money, and out of goodwill and trust, I lent him a significant sum. We agreed verbally that he would repay the money within three months. There was no written agreement, as I believed our friendship and his word were sufficient.
Unfortunately, now that the agreed repayment period has elapsed, my friend has refused to pay me back. He insists that because we are friends and the agreement was not put in writing, there is no binding obligation on him to repay the loan.
This situation has left me deeply troubled. Beyond the financial loss, it is placing immense strain on our friendship. I am unsure of my legal position and do not know whether I can take legal action without a written contract. Do verbal agreements carry any legal weight? Can I sue a friend to recover my money under these circumstances? What practical steps can I take to protect my interests while minimising further damage to our relationship?
Your guidance would be immensely appreciated.
Samuel Simpson, Cape Coast
Dear Samuel,
Your predicament is an unfortunate but common one, and it raises important questions about contracts, trust, and the intersection between personal relationships and the law. While written agreements are always preferable, it is important to understand that the law does recognise verbal agreements, provided certain legal requirements are met.
Validity of Verbal Agreements
A contract, whether written or oral, is generally considered valid and enforceable if it contains the following essential elements:
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Offer and Acceptance
A contract begins when one party makes an offer and the other party accepts it. In your case, you offered to lend money to your friend, and he accepted that offer with a clear promise to repay it within a specified period. This exchange satisfies the requirement of offer and acceptance. -
Intention to Create Legal Relations
For an agreement to be legally binding, both parties must intend that it should have legal consequences. In purely domestic or social arrangements—such as agreements between friends or family—the law often presumes that there was no intention to create legal relations.However, this presumption is not absolute. It can be rebutted by evidence showing that the parties intended the agreement to be taken seriously and honoured as a legal obligation. Factors such as the amount of money involved, the clear repayment timeline, and the circumstances under which the loan was made may persuade a court that the agreement went beyond a casual social understanding.
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Capacity to Contract
Both parties must have legal capacity to enter into a contract. This typically means that they are adults of sound mind and not under any legal disability. Assuming this is the case for both you and your friend, this element poses no difficulty. -
Consideration
Consideration refers to something of value exchanged between the parties. In loan agreements, the money advanced by the lender constitutes consideration for the borrower’s promise to repay. Your act of lending the money clearly satisfies this requirement.
Domestic or Social Agreements
As you rightly suspect, the fact that the agreement was made between friends places it within a domestic or social context, where courts are often cautious. Generally, such agreements are presumed not to be legally enforceable. However, courts will look closely at the facts to determine whether that presumption should stand.
Where an agreement has a commercial or serious financial character, courts have been willing to infer an intention to create legal relations. A helpful illustration is the English case of Simpkins v Pays, where an agreement made in a domestic setting was nonetheless enforced because it involved a joint financial arrangement with a clear expectation of benefit.
In your situation, the agreed repayment period of three months and the seriousness of the transaction suggest that this was not a casual favour, but a loan both parties reasonably expected to be repaid. This significantly strengthens your position and may rebut the presumption against legal enforceability.
Your Legal Options
Based on the facts you have provided, you may have a viable cause of action to recover your money through the courts, provided you can demonstrate:
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That the loan was indeed made
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That there was a clear agreement on repayment
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That your friend has failed or refused to honour that agreement
Evidence such as bank transfer records, mobile money receipts, text messages, WhatsApp chats, or witnesses who were aware of the agreement can be extremely helpful in proving your case.
Preserving the Friendship
That said, legal action should often be the last resort, especially where personal relationships are involved. If you still value the friendship and wish to avoid further damage, you may consider:
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Engaging a neutral and respected third party, such as a family elder, religious leader, or mutual friend, to mediate the dispute
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Proposing a revised repayment plan, which may ease your friend’s financial pressure while still protecting your interests
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Clearly communicating, calmly and respectfully, the seriousness of the matter and your intention to pursue legal remedies if necessary
Conclusion
In summary, verbal agreements can indeed be legally binding, even between friends, if the essential elements of a contract are present. While the social nature of your relationship introduces complexity, the specific facts of your case suggest that you are not without legal recourse. Whether through mediation or litigation, you have options to pursue recovery of your money.
I trust this explanation helps clarify your rights and the steps available to you as you navigate this difficult situation.
