Chawla v Hare

A loan is repayable even where no express repayment date is agreed. In the absence of an express term, the law ordinarily treats it as immediately repayable, although the lender may alternatively give reasonable notice requiring repayment. A borrower cannot convert an expected source of repayment into a contractual condition unless that term was agreed. Evidence of the parties’ subsequent communications and contemporaneous accounting records may be decisive in determining the loan’s terms. A proposed compromise is not binding if essential matters, such as the repayment programme, remain to be agreed. A settlement may record agreement in principle while leaving those matters open.

The claimant sought repayment of sums advanced to the defendant, his brother-in-law. The parties disputed whether the advances totalled £48,000 or £40,000, whether repayment was conditional on income from jointly developed software, and whether the loan was repayable on demand. The claimant alternatively relied on a May 2002 handshake agreement said to compromise the personal loan and inter-company debts for £60,000.

The defendant counterclaimed relief concerning software ownership, alleged conduct, development costs, an indemnity and lost sales forecasts. By the time of trial, several counterclaims had been amended or abandoned, and the company formerly asserting software rights was not separately represented.

1. Original loan. The loan amounted to £48,000, comprising four payments. The contemporaneous accountant’s spreadsheet treated the two later £4,000 payments as additional borrowings and showed interest accruing and being paid monthly from the outset.
2. The loan was not conditional on income from the Logistics or Courier software. The surrounding correspondence did not assert such a condition when opportunities arose to do so. The spreadsheet contained no reference to software income. The court also considered it commercially unrealistic that repayment should depend on an event substantially within the defendant’s control.
3. There was no express agreement that the loan was repayable on demand. Nevertheless, repayment is an essential incident of a loan. Where no repayment term is agreed, the ordinary legal presumption is immediate repayment, subject to the parties’ ability to agree otherwise. Alternatively, the lender had an implied right to give reasonable notice requiring repayment. The claimant’s emails of 1 and 3 July 2002, or alternatively that of 15 July 2002, constituted sufficient notice.
4. Compromise. The May 2002 handshake did not create a concluded unconditional compromise. The parties agreed in principle to increase the personal debt to £60,000, with interest to be agreed, but left the repayment programme unresolved. The subsequent emails and spreadsheets confirmed that essential terms remained open. The claim based on the compromise therefore failed.
5. Counterclaim. Claims relating to development costs, an indemnity and lost sales forecasts could not be maintained personally by the defendant and were dismissed. The unpressed injunction claim was also dismissed. The court made no order on software ownership because the remaining competing interest, that of the restored company, was not represented.
6. Judgment was entered for the claimant for £48,000, with interest at 8 per cent per annum from the dates on which the four payments were received. Costs were to be addressed separately.