Unsecured Loans and Private Financing Agreements

Unsecured Loans and Private Financing Agreements

What are unsecured loans and private financing agreements?

An unsecured loan is a loan that does not require collateral to be pledged by the borrower. Instead, the lender provides funds to the borrower based solely on the borrower’s creditworthiness and ability to repay the loan. Private financing agreements may take the form of an unsecured loan. Also, in private financing agreements, the parties typically arrange the agreements without the involvement of an intermediary. The agreement can be customized to meet the specific needs of the borrower and lender and can include details such as interest rates and payment schedules.

These loans and agreements can take many forms, such as written contracts and promissory notes. The actions a lender may take in the event of nonpayment by the borrower vary depending on the instrument used. Even without a formal, written agreement, a lender may still have a money lent claim against the borrower to pursue payment.

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What legal issues typically arise related to unsecured loans and private financing agreements?

The following disputes are among the most common to unsecured loans and private financing agreements:

• Contract formation: Sometimes, it is not always obvious when or if the parties formed a contract. Under Florida law, a plaintiff proves the existence of a contract by showing that the parties had a “meeting of the minds” as to the contract’s essential terms.
• Contract interpretation: When the alleged nonperformance does not violate any contract term, an action for breach will not succeed. Therefore, it becomes essential to understand the terms of the contract and interpret any ambiguities to understand if and when a breach occurred.
• Provisions limiting remedies: Florida law allows parties to a contract to contractually limit the remedies available in the event of a breach. However, these provisions are not consistently enforced depending on the facts of a particular case.
• Intent: For money lent claims in particular, disputes commonly arise over whether the capital lent was intended as a loan or a gift.
• Usury: Florida law generally prohibits the interest rate on a loan from exceeding 18% per annum, either directly or indirectly. A dispute may arise as to whether additional charges by the lender constitute an increase in the loan’s interest rate above the legally allowed limit.

What are relevant laws related to unsecured loans and private financing agreements in Florida?

Much of Florida law related to actions for nonpayment of unsecured loans and private financing agreements comes from common law, or case law, based on the previous judicial decisions of Florida courts. Florida courts can decide how to interpret a contract, whether and when an agreement will be enforced, and whether specific provisions of a contract will be enforced, as well as many other breach of contract issues.

Statutorily, chapter 687 of Florida Statutes outlines the usury laws in Florida. Chapter 673 contains Florida’s Uniform Commercial Code and is particularly relevant for those claims based upon a promissory note. In addition, the Florida Consumer Collection Practices Act and the federal Fair Debt Collection Practices Act govern consumer debt collection practices in Florida. Finally, section 95.11 outlines the relevant statute of limitations. An action based on an oral contract must commence within four years. An action based on a written agreement must commence within five years.

What is required to prove a case of nonpayment of unsecured loans or private financing agreements in Florida?

For a claim based on a breach of contract, the plaintiff must satisfy four elements:

• The existence of a valid contract;
• A material breach of the contract by the other party;
• Damages suffered by the non-breaching party as a result of the breach; and
• The plaintiff’s performance of their obligations under the contract or a legal excuse for any nonperformance.

To bring an enforcement action based on a promissory note, the plaintiff must prove, with some exceptions, that they are the note holder. A “holder” of a note is “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” F.S. 671.201(21)(a). In other words, to be a holder, the instrument must be payable to the person in possession or endorsed in blank.

To bring a common law claim for money lent, the plaintiff must satisfy three elements:

• The plaintiff delivered the money to the defendant;
• The plaintiff intended the money as a loan; and
• The defendant has not repaid the loan.

When a set of facts is appropriate to meet the requirements of a claim for nonpayment of unsecured loans and private financing agreements, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies, such as:

• Expectation damages
•  Specific performance
• Awards for pre-judgment interest

To see what actions may be available for your unique situation, please contact our office to set up your initial consultation.

What are common defenses to claims for nonpayment of unsecured loans and private financing agreements in Florida?

The primary defenses to unsecured loans and private financing agreements in Florida include the following:

• Contract formation: The defendant may argue that one of the three core elements of a contract is absent or insufficiently proven by the defendant.
• Statute of frauds: The maker or drawer of a promissory note must sign it for the note to be a negotiable instrument under Article 3 of the Uniform Commercial Code. Under Florida’s UCC, a person is not liable for an instrument unless the person or the person’s authorized representative has signed the instrument.
• Statute of limitations: The defendant may argue that the statute of limitations, typically four to five years depending on the circumstance, bars the claim.
• Usury: A defendant may escape liability for all interest under a loan agreement if they show that the imposed interest rate was usurious.

To see what defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Have more questions about an unsecured loan-related situation?

Crucially, this overview of unsecured loans and private financing agreements does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.