Oral Loans: When does the Statute of Limitations Begin to Run?

Loan money a long time ago and never get paid back? Never ask for the money back? If you answered yes to both questions, you may still have a case.

When does the limitations period begins to run on an oral loan that either does not contain repayment terms or is payable on demand? Section 95.11(3)(k), Florida Statutes (2001), provides that “[a] legal or equitable action on a contract, obligation, or liability not founded on a written instrument” shall be brought within four years.

However, the issue often times is when the four-year limitations period begins to run.

Section 95.031, Florida Statutes (2001), provides that “the time within which an action shall be begun under any statute of limitations runs from the time the cause of action accrues.” Section 95.031(1), provides that “[a] cause of action accrues when the last element constituting the cause of action occurs.”

Therefore, the dispositive issue is when the cause of action accrues, where the oral loan does not contain explicit terms for repayment.

The Supreme Court of  Florida has settled this issue and has held that in Florida, the limitations period for bringing an action on an oral loan payable upon demand begins to run only after there has been a breach by the debtor, the debtor has refused to repay the loan at the time the creditor demands repayment.  See  Mosher v. Anderson, 817 So. 2d 812, (Fla. 2002). 

Seemingly, Florida Law puts the stop watch in the hand of the lender in a collection action on such oral loans, as only such party’s demand for repayment starts the clock on the statute of limitations.  Does such plaintiff need to act reasonably and demand repayment within a reasonable period of time? The dissent argued as much, but No.

In these cases of long forgotten oral loans is there then a Statute of Frauds issue? Unlikely, once the loan was made there was full performance by the lender and therefore such agreement is  outside the reach of the Statute of Frauds.

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