Money often changes hands within families, parents helping children to buy homes, siblings lending for business ventures, or spouses supporting each other financially. These arrangements are usually based on trust rather than formal agreements. But when relationships break down, or someone later insists, “That was a loan, not a gift,” what began as an act of support can turn into a complex legal dispute.

 

When family and finance collide

 

Take a familiar example: a parent transfers £40,000 to help their son or daughter onto the property ladder. Years later, when circumstances change, perhaps after a divorce, or the parent needs the funds back, the parties disagree about what was agreed. Was there an obligation to repay, or was it a gift given out of generosity?

 

These disputes are emotionally charged and legally nuanced because family arrangements often blur the line between personal trust and legal enforceability.

 

What the law says

 

The courts have long recognised that family and social agreements are not always intended to have legal force. The leading case, Balfour v Balfour [1919] 2 KB 571, involved a husband’s promise to pay his wife an allowance while they were apart. When he stopped paying, she sued, but the court held there was no binding contract because there was no intention to create legal relations. It was, in essence, a domestic understanding, not a commercial deal.

 

That principle still resonates today. In family lending disputes, the court starts from the presumption that a loan made in a close relationship between spouses, parents and children, or other relatives, may not have been intended as a legally enforceable agreement. However, that presumption can be overturned by evidence of clear terms, repayment expectations, or behaviour consistent with a genuine loan.

 

In Barry v Barry [2024] EWHC 1661 (KB), for instance, parents advanced substantial sums to their adult son. When repayment was disputed, the High Court found that, unlike in Balfour, there was clear evidence of legal intention,  the money was a loan, not a gift. The son was ordered to repay it.

 

By contrast, in P v Q (Financial Remedies) [2022] EWFC B9, the court described similar intra-family loans as “soft debts”: obligations that existed on paper but were never realistically expected to be enforced.

 

Why things go wrong

 

These cases illustrate a recurring theme: informality breeds uncertainty. Without a written agreement or consistent conduct, for example, setting repayment terms, charging interest, or making regular payments, it can be difficult to prove that both sides intended a binding loan. Over time, memories fade, family relationships change, and what once seemed clear becomes murky. The result can be costly litigation, strained relationships, and outcomes no one expected.

 

How we can help

 

Our experienced litigation team can help you:

• Assess the strength of your position, whether you are seeking repayment or defending a claim.
• Gather and present evidence to prove (or challenge) the intention behind a payment.
• Negotiate or mediate a resolution / issue or defend proceedings.

We understand that these disputes often involve both legal complexity and family emotion. Our role is to give you clear, pragmatic advice, and to protect your financial and personal interests with sensitivity and precision.

 

Contact us

 

If you are involved in a disagreement over whether money was a loan or a gift, or need advice on how to recover or defend a family loan, contact our team at Muldoon Britton for expert guidance. Early advice can often make all the difference in achieving a fair and cost-effective outcome.