What are my rights if I loaned money to someone but they failed to fully disclose their finances to me?

Get Legal Help Today

 Secured with SHA-256 Encryption

What are my rights if I loaned money to someone but they failed to fully disclose their finances to me?

I loaned a friend 50K interest free to start a new business to be paid back in 3 years and 10% of the net profit in perpetuity. However, I recently discovered she had 100K that she did not disclose to me when she asked for the loan. I would not have loaned her money if I knew that. Is this illegal? I could have used that money for a different investment.

Asked on May 15, 2015 under Business Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

It would only be illegal if either she affirmatively lied to you about her finances (e.g. she came out, without prompting, and said, "I don't have any money") or if you asked her and she lied in her response. In those case, IF you could show that the information about her finances was material (important) in making the investment decision, you may be able to rescind the agreement due to fraud--that would undue the agreement from the start, and she'd have to return the money (and you'd return any interest or profit you'd received from her). But again, there has to have been an actual lie or misrepresentation--she is under no legal duty to voluntarily disclose all her finances to you, so only in the event of a lie (not merely a failure to disclose her finances) might this be fraud. And even if that were the case, you'd have to show that the lie was critical to your investment decision, which may be very difficult to do if you did not ask her about whether she had money (since how important could the information have been, if you did not ask about it?). And you'd have to sue her and go through the cost of a lawsuit to rescind the transaction as well (assuming she did voluntarily return the money).


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption