Person Z
07-15-2010, 05:38 PM
The problem is as follows.
There was a loan of money made from Person A to Person B and/or Person B’s company. There is now a disagreement about the loan repayment, and the interpretation of the original loan agreement. Person A thinks that Person B is not fulfilling the agreement. Person B thinks that Person A misunderstands the agreement and that he (Person B) has done nothing wrong.
The loan agreement and some of the communications between Persons A and B about this are below. Who is correct, Person A, Person B, both or neither ?
This is from an email from Person B to Person A where the original loan agreement was discussed :
>>>
That will make a total of $XXXX which I am treating as your investment in [Person B’s company], and which I will return XXX% on within 60 days, making you a profit of $XXXX.
<<<
According to the viewpoint of Person A, this was a personal loan to his friend, Person B. When Person A recently mentioned this to Person B, Person B said this :
>>>
If you go back and review our exchanges as I invited you to do, you will find that you agreed to invest money in a business – [Person B’s company], a corporation that is its own entirely separate legal entity -- and that [Person B’s company’s] business activities were supposed to return your principal plus profit inside a certain period. Within that time, however, the business hit a series of unexpected and unforeseeable roadblocks that made it impossible to pay you back as originally intended. That situation persists. [Person B’s company] has never prospered, but has instead continued to struggle to make enough to continue existing.
<<<
There is more to the loan agreement that the single sentence shown above. There is also this guarantee made by Person B to Person A :
>>>
There is no risk, aside from the possibility that both [Person B’s business partner] and I [Person B] might die in the next month. (In which case our wills could take care of you).
Furthermore, I would personally guarantee your investment and pay it back from income ahead of all other expenses.
So...no real risk, killer deal, you'll know inside two weeks if the thing is working, REAL benefit for you if it does (not the least of which benefits would be learning a bit about the difference between a good business deal and a bad one), a solid safety net if it doesn't, and a chance to do an extraordinarily good deed at a critical moment.
<<<
From Person A’s viewpoint, the above guarantee is one of the things that lead him to believe this was a personal loan to his friend, and not an investment in a business. If Person A had known that this was an investment in a risky business venture, and that there was no certainty of getting this money back in the time stated, Person A would never have lent the money in the first place. Person A only lent the money because his friend Person B personally guaranteed its repayment as stated above. Person B also said “I will return XXX% on within 60 days”. “I” will return, not Person B’s company will return. In Person A’s opinion, this suggests a personal loan or a personal guarantee of this loan. In other words, that Person B is personally involved in this loan. Person B states that he is not personally liable for this loan and that only Person B’s company is liable.
The repayment of this loan obviously has not happened. While it was supposed to be paid back in 60 days, it has now been 5 years. A small percentage of this loan was paid back, probably about 2 or 3 years after the loan was made. This single payment was made in a one time lump sum. This was, as stated, very late, was therefore a surprise, and was only a fraction of the agreed upon repayment. No other payments have been made.
Person A asked Person B about this personal guarantee (and sent the exact quote from Person B where he stated the guarantee) and why the repayment still has not been made, and Person B said :
>>>
I obviously wasn't able to do that. Rent, food, utilities, and the cost of keeping the business afloat came first, and my personal income wasn't large enough to do more. It still isn't.
<<<
Person B, as stated, maintains that he has done nothing wrong. Person A thinks that Person B did not live up to the agreement. Person A thinks that Person B should have paid this money back, regardless of the lack of profit Person B’s company was supposed to make, and did or did not make. Person B stated that the repayment would be guaranteed by him personally, and that it would be paid back from income before all other expenses. Certainly rent, food, utilities and the like are all expenses that were paid, yet the loan to Person A was not paid ahead of these expenses as agreed.
So who’s wrong here ?
Thanks in advance for any replies.
There was a loan of money made from Person A to Person B and/or Person B’s company. There is now a disagreement about the loan repayment, and the interpretation of the original loan agreement. Person A thinks that Person B is not fulfilling the agreement. Person B thinks that Person A misunderstands the agreement and that he (Person B) has done nothing wrong.
The loan agreement and some of the communications between Persons A and B about this are below. Who is correct, Person A, Person B, both or neither ?
This is from an email from Person B to Person A where the original loan agreement was discussed :
>>>
That will make a total of $XXXX which I am treating as your investment in [Person B’s company], and which I will return XXX% on within 60 days, making you a profit of $XXXX.
<<<
According to the viewpoint of Person A, this was a personal loan to his friend, Person B. When Person A recently mentioned this to Person B, Person B said this :
>>>
If you go back and review our exchanges as I invited you to do, you will find that you agreed to invest money in a business – [Person B’s company], a corporation that is its own entirely separate legal entity -- and that [Person B’s company’s] business activities were supposed to return your principal plus profit inside a certain period. Within that time, however, the business hit a series of unexpected and unforeseeable roadblocks that made it impossible to pay you back as originally intended. That situation persists. [Person B’s company] has never prospered, but has instead continued to struggle to make enough to continue existing.
<<<
There is more to the loan agreement that the single sentence shown above. There is also this guarantee made by Person B to Person A :
>>>
There is no risk, aside from the possibility that both [Person B’s business partner] and I [Person B] might die in the next month. (In which case our wills could take care of you).
Furthermore, I would personally guarantee your investment and pay it back from income ahead of all other expenses.
So...no real risk, killer deal, you'll know inside two weeks if the thing is working, REAL benefit for you if it does (not the least of which benefits would be learning a bit about the difference between a good business deal and a bad one), a solid safety net if it doesn't, and a chance to do an extraordinarily good deed at a critical moment.
<<<
From Person A’s viewpoint, the above guarantee is one of the things that lead him to believe this was a personal loan to his friend, and not an investment in a business. If Person A had known that this was an investment in a risky business venture, and that there was no certainty of getting this money back in the time stated, Person A would never have lent the money in the first place. Person A only lent the money because his friend Person B personally guaranteed its repayment as stated above. Person B also said “I will return XXX% on within 60 days”. “I” will return, not Person B’s company will return. In Person A’s opinion, this suggests a personal loan or a personal guarantee of this loan. In other words, that Person B is personally involved in this loan. Person B states that he is not personally liable for this loan and that only Person B’s company is liable.
The repayment of this loan obviously has not happened. While it was supposed to be paid back in 60 days, it has now been 5 years. A small percentage of this loan was paid back, probably about 2 or 3 years after the loan was made. This single payment was made in a one time lump sum. This was, as stated, very late, was therefore a surprise, and was only a fraction of the agreed upon repayment. No other payments have been made.
Person A asked Person B about this personal guarantee (and sent the exact quote from Person B where he stated the guarantee) and why the repayment still has not been made, and Person B said :
>>>
I obviously wasn't able to do that. Rent, food, utilities, and the cost of keeping the business afloat came first, and my personal income wasn't large enough to do more. It still isn't.
<<<
Person B, as stated, maintains that he has done nothing wrong. Person A thinks that Person B did not live up to the agreement. Person A thinks that Person B should have paid this money back, regardless of the lack of profit Person B’s company was supposed to make, and did or did not make. Person B stated that the repayment would be guaranteed by him personally, and that it would be paid back from income before all other expenses. Certainly rent, food, utilities and the like are all expenses that were paid, yet the loan to Person A was not paid ahead of these expenses as agreed.
So who’s wrong here ?
Thanks in advance for any replies.