My partner took out a loan so I could buy a motorbike – now she’s told me to pay her back in full or hand over the bike, what are my options?

By Rebecca Rutt for thisismoney.co.uk

Two years ago my partner took out a loan so I could use the money to buy a new motorbike.

I bought the bike and we agreed I would pay the money back on a monthly basis and I’ve been doing this ever since.

I also increased the loan amount by £100 every month as requested to try and clear the balance sooner.

Now she has asked me to either pay the full balance off or she said she will take the motorbike off me in payment.

Can she do this? What are my options given that until now I’ve made all the payments and done everything she’s asked? H.B, via email

Rebecca Rutt, of This is Money, replies: One of the most common emails we are sent in by readers is to do with a loan agreement being arranged between friends or partners which has then turned sour.

Often it’s the case that the agreement was made on the premise of paying the money back over a set period but official paperwork or even an oral agreement wasn’t made when it was arranged.

In your case you have agreed to the loan payments so far and therefore you are now left in a difficult situation if you’re unable to pay off the balance of the loan to your partner.

These situations can be confusing and stressful especially if there’s no written agreement in place and either the borrower or the lender wants to change the terms of the loan.

We got in touch with two legal experts to find out where you stand.

George Masefield and Jasmin Crilly, solicitors at A City Law Firm, reply:

It appears from your question that you made a simple loan agreement.

You borrowed money from your partner on the understanding that the loan would be repaid in monthly installments.

So far you’ve complied with the repayment terms including increasing the payments by an extra £100 per month.

Your partner is now asking for the money or the bike. However, even if you had breached the terms of the loan arrangement, your partner does not have any specific claim over the motorbike.

In fact the only way they would have a claim for it was if they had bought the motorcycle as this would mean they would own it outright, no matter how it was paid for.

The loan agreement you have made with your partner does not seem to be a secured loan, and therefore there is no underlying asset to protect your partner’s money if you don’t pay her back.

If this was a bank lending money to a borrower to pay for a new house, for example, the underlying asset would be the property which could be seized if you were unable to pay the loan.

However, in your case, your partner has no entitlement to take the motorcycle from you.

The point at which this changes is if you were to breach the repayment terms. Say you miss a payment or are late paying for example, then your partner would have the right to bring a claim against you for the money you owe them.

They may also be able to claim for any associated losses such as time spent trying to get the money back and interest on the loan.

However, you have said that in this case, you have complied with the agreement and as long as you continue to do so, your partner does not have a valid claim.

With these types of loans, it’s important to document the terms of an agreement even between friends and relations.

Having documents written up when the loan is made – even if these aren’t done officially by a legal expert – will help you if there is a dispute in the future because it makes it establish what the understanding was between the parties.

If you have evidence of the loan agreement being made, it would speed the process up should a claim go to court.

If, like many couples do, terms are agreed verbally and there is no written evidence of a contract, a judge would need to consider whether a valid oral contract exists or whether for example the sums have been gifted.

In legal terms, what’s called the ‘Certainty’ of an agreement is a fundamental principle of contract law. With a written contract its certainty can be assessed by its content, however with verbal agreements certainty can only be evidenced by the actions of the people involved and supporting documents such as text messages, emails and other evidence.

This note does not constitute legal advice and is intended as general information only. Specific legal advice should be taken before acting on any of the topics covered.

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