Personal Loan "Agreements"

[adventuress]

My question involves collection proceedings in the State of: California

A friend generously offered to lend me $4,000 four years ago for purchase of a computer for my new business. In her contract, she stated that the funds must be used for the equipment and not for other purposes, and that repayment would be $50 per month, with an unspecified due date in the original contract. The computer was purchased immediately, utilizing the entire sum, and I gave her a copy of the receipt to show that is what the funds were used for. I also asked if it would be ok to pay her on the 15th of every month. She agreed.

Unfortunately, the friendship ended about 8 months ago due to personality differences, but I have continued to make regular monthly payments. Up until those 8 months ago, she was flexible on that due date of the 15th, but now I have received an email from her stating that I've been 1-6 days late on 8 different occasions, and that while this would "allow" her to request the remaining balance in full, she'll be "nice" and accept a minimum of $100 per month from this point on, and that she can request that because I no longer am in business (for which the computer was intended), and have used my own money for "unessential" living expenses like my recent gym membership, which she could "classify" as misuse of the loaned funds.

So, I have the following questions:

1) If the loaned amount was used for the contracted purposes and a receipt provided, can she claim that I am in breach of contract or demand the full balance for using my own money on other things?

2) Can she demand the full balance for being 1-6 days late on the 8 occasions?

3) Can she demand a higher monthly payment, citing those reasons?

4) If I continue to pay her according to the original terms, can she even take me to court?

Thanks for any advice you can provide. I actually do want to pay her off as quickly as possible so I no longer have to communicate with her, but I would also like to protect myself at the same time.

Thanks.

[Mr. Knowitall]

If she has forgiven past late payments, she has forgiven the lateness. You have not indicated that the loan agreement gives her any right to accelerate, let alone to unilaterally modify the payment schedule. Obviously we have no access to the contract and are thus not in a position to know anything more than what you tell us.

She can, of course, take you to court - the question is whether she would win. If she goes to court with the agreement and says to the court, "I've received payments per the agreement every month, but over the past four years eight were late and I now want to make an issue out of that and collect the entire remaining balance," based upon what you've told us so far the court is likely to tell her that there has not been a material breach of the contract.