It is not uncommon for a loan to be made (eg from a parent to a child, to buy a home or improve it) which is repayable when the borrower sells their home.

It is also not uncommon for this loans to come into dispute because the borrower does not sell their home for various reasons.

Recently the Queensland District Court considered that kind of arrangement, finding that the loan contract itself was not enforceable given that the repayment was at the discretion of the borrower. The result was that the borrower’s agreement to repay was “illusory”, resulting in the failure of the loan as a binding contract. Given that failure, the loaned amount was immediately repayable in restitution.

It is interesting (to some of us with not much going on in our lives) to draw a distinction between this situation – where the repayment date is certain but in the absolute discretion of the borrower – and concepts of uncertainty, where the repayment date cannot be determined because of uncertainty (eg by a formula which does not work). If the repayment date was uncertain, then the loan may be treated as being repayable on demand, and that might have consequential issues with limitation periods.

As this issue does pop up frequently, it is worth reading that part of the decision that deals with the legal issues – pages 13 – 17.

Please contact our lawyers for advice in relation to debts and loans.