Daily Law Tips (Tip 776) by Onyekachi Umah, Esq., LL.M,
ACIArb(UK)
![image](/2020/10/lawreport.jpg")
Introduction:
There are several seasons in life and so are there several seasons
in the finance of men. When a person is in need, he/she will most
probably request for support from his/her family, friends and
associates. Often the financial support from family and friends
could be a gift (there are given freely and never to be repaid).
However, in some cases, the financial support from family and
friends are not gift but loan/debt (they are freely given but to be
repaid). Repaying for loan/debt from family and friends could be
with or without interest. And, a loan from family and friend can be
a friendly loan, not because it is from friends but because of its
nature. This leads to the need for a definition and nature of a
friendly loan under the Nigerian laws. When will the Nigerian
courts declare a debt to be a friendly loan?
![image](/2021/01/payne-alex.jpg")
Nature of Friendly Loans:
There is really no fixed term as a “friendly loan” rather, it is
the circumstances of a loan that will determine whether the loan is
a friendly one or not. The Court of Appeal in Nigeria has had an
opportunity to explain the nature of a friendly loan in its
judgment in the case of; CHAMPION BREWERIES PLC v. SPECIALTY LINK
LTD & ANOR (2014) LPELR-23621(CA). In that case, Justice Mbaba,
held that;
“A friendly loan, as the name implies, is a loan from a friend
to a friend, which makes no room for usury or interest or penalty.
It connotes a lifeline thrown by a friend to a friend, to bail him
out of trouble and does not contemplate profiting from the gesture,
financially. I looked at the Black Law Dictionary and other English
dictionaries for the meaning of “friendly loan” I did not see in
the ones I consulted. But I saw the meaning of the adjective
“friendly” to mean – “kind; behaving as a friend, relating to, or
typical of a friend, being a colleague, helper partner etc” In the
sense of that word a “friendly loan” therefore does not admit of
interest, or any thing that detracts from kindness, friendship,
help and partnership, which charging of interest or usury is likely
to cause. See First Bank of Nigeria v. I.A.S. Cargo Airlines Nig.
Ltd (2011) LPELR- 9827(CA) where Salawa, JCA held: “However, where
the Plaintiff happens to be a private person, or the loan is stated
to be a “friendly loan” and no interest charge is fixed at the time
of entering into the loan agreement, the Court is precluded from
awarding interest in such circumstances.” See UBN v. SAX Nig Ltd
(1994) 8 NWLR (Pt. 361) 150; UBN v. OZIGI (1994) 3 NWLR (Pt. 363)
385; Hausa v. First Bank of Nigeria Plc CA/J/295/981 unreported
decision of this Court delivered on 12/4/2000; UBN v. SALAMI (1998)
3 NWLR (Pt. 538) See also IDAKULA v. RICHARD (2001) FWLR (Pt. 693)
111 where AKPABIO, J.C.A. (of blessed memory) said: “… The Court
will readily award a pre-judgment interest, where the plaintiff is
a Commercial Bank, and the rate of interest fixed at the inception
of the loan or over draft transaction; whereas, if the plaintiff
was a private person; or the loan stated to be a “friendly loan”
and nothing said about interest charges at the time of entering
into the loan agreement, the Court will not award interest in such
circumstances.”
The Supreme Court of Nigeria is not left out in this issue. The
apex court has in the case of DIAMOND BANK LTD v. PARTNERSHIP
INVESTMENT CO LTD & ANOR (2009) LPELR-939(SC), held that; “…the
general rule at Common Law, is that interest is not payable on a
debt or loan in the absence of express agreement or some course of
dealing or custom to that effect. See London Chattam and Dover
Railway v. South Eastern Railway (1893) A.C 249. Thus, interest
will however, be payable where there is an express agreement to
that effect and such an agreement, may be inferred from a course of
dealing between the parties. See Re-Duncan and Co, (1905) 1 Ch. 307
or where an obligation to pay interest arises from the common or
usage of a particular trade or business and I add like in banking.”
Per OGBUAGU ,J.S.C ( Pp. 29-30, paras. D-A ).
Also, in the case of ISHOLA v. SOCIETE GENERALE BANK (NIG) LTD
(1997) LPELR-1547(SC), the Supreme Court, held that “But where
there is no express agreement as to the rate of interest payable,
it seems that the bank is entitled to charge interest rate on the
basis that there is now an established custom to that effect or
that the customer has impliedly consented where, without protest,
he allows his account to be debited with such interest. See
Barclays Bank of Nigeria Ltd v. Alhaji Maiwada Abubakar (1977) 10
SC 13.” Per IGUH ,J.S.C ( P. 53, paras. B-c )
Conclusion:
From the above judgments of the courts, it is safe to conclude that
a friendly loan is a loan that was given out of kindness and
without any intention to receive interest from or on the loan. The
courts in Nigeria will often not allow an interest to be received
on a loan that was given out of kindness by a private person
without any agreement as to payment of interest on the loan (it is
a friendly loan).
However, where a loan is given by a bank or a corporate body in
the business of moneylending or with the custom of collecting
interest on loans, even where there is no agreement as to interest,
the courts will most probably believe that it was the intention of
parties that interest should be paid on the loan. For example,
having in mind the nature of the business of banks and
moneylenders, one cannot convince a court of law that it received a
friendly loan from a commercial bank, unless there is a signed
agreement or proof that the loan is a friendly one.
My authorities, are:
1. The judgment of the Supreme Court of Nigeria in the case of
DIAMOND BANK LTD v. PARTNERSHIP INVESTMENT CO LTD & ANOR (2009)
LPELR-939(SC)
2. The judgment of the Supreme Court of Nigeria in the case of
ISHOLA v. SOCIETE GENERALE BANK (NIG) LTD (1997) LPELR-1547(SC)
3. The judgment of the Court of Appeal in the case of HAMPION
BREWERIES PLC v. SPECIALTY LINK LTD & ANOR (2014)
LPELR-23621(CA)
4. Onyekachi Umah, “No Bank In Nigeria Can Unilaterally Change
/Vary Interest Rate In Its Agreement With A Customer”
(LearnNigerianLaws.com, 23 August 2018) accessed 15 April 2021
5. Onyekachi Umah, “Duty of Care Owed By Banks in Nigeria.”
(LearnNigrianLaws.com, 1 April 2021) accessed 15 April 2021
6. Onyekachi Umah, “It Is An Offence To Sell A Vehicle Purchased
With Unrepaid Bank Loan” (LearnNigerianLaws.com, 2 October 2018)
accessed 15 April 2021
7. Onyekachi Umah, “Creditors, Debtors And The Covid-19 Lockdown?”
(LearnNigerianLaws.com, 21 April 2020) accessed 15 April 2021
8. Onyekachi Umah, “The Supreme Court Has Warned Efcc And Police
Against Recovering Debts And Investigating Disputes From Civil
Transactions” (LearnNigerianLaws.com, 26 October 2019) accessed 15
April 2021
9. Onyekachi Umah, “When, Why And How Can A Guarantor/Surety Be
Held Liable For Debt Guaranteed” (LearnNigerianLaws.com, 25 July
2019) accessed 15 April 2021
10. Onyekachi Umah, “EFCC Cannot Recover Debts”
(LearnNigerianLaws.com, 25 July 2018) accessed 15 April 2021
11. Onyekachi Umah, “Conditions for Assignment of Burden or Benefit
of Debt” (LearnNigerianLaws.com, 30 March 2021) accessed 15 April
2021
12. Onyekachi Umah, “Owing Debts And Refusing To Pay Is Not An
Offence In Nigeria” (LearnNigerianLaws.com, 14 December 2019)
accessed 15 April 2021
13. Onyekachi Umah, “You Cannot Be Arrested For Breach Of
Contract/Refusal To Pay Debt” (LearnNigerianLaws.com, 15 October
2018) accessed 15 April 2021
14. Onyekachi Umah, “It Is An Offence For Hospitals/Creditors To
Detain Patients/Debtors For Debts” (LearnNigerianLaws.com, 26 July
2018) accessed 15 April 2021
15. Onyekachi Umah, “It Is Not a Crime to Be a Debtor In Nigeria”
(LearnNigerianLaws.com, 20 June 2018) accessed 15 April 2021
16. Onyekachi Umah, “Nigerian Police Cannot Be Used For or Be Part
for Debt Recovery” (LearnNigerianLaws.com, 28 May 2018) accessed 15
April 2021
17. Onyekachi Umah, “Tips On Recovery of Debt’
(LearnNigerianLaws.com, 10 March 2016) accessed 15 April 2021
18. Onyekachi Umah, “How to Recover Property Wrongly Seized by
Court” (LearnNigerianLaws.com, 9 March 2021) accessed 15 April
2021
19. Onyekachi Umah, “Does Police Have Powers To Settle Civil
Disputes In Nigeria?” (LearnNigerianLaws.com, 13 May 2020) accessed
15 April 2021
20. Onyekachi Umah, “A Guarantor/ Surety And A Witness Are Not
Same” (LearnNigeriansLaws.com, 12 May 2020) accessed 15 April
2021
21. Onyekachi Umah, “Minimum Period For Defence Of Undefended List
Case In Abuja” (LearnNigerianLaws.com, 25 February 2020) accessed
28 March 2021
22. Onyekachi Umah, “Bounced Or Dud Cheque And Its Legal
Consequence In Nigeria.” (LearnNigerianLaws.com, 5 March 2016)
accessed 15 April 2021
Sabi Law Projects:
#SabiLaw
#DailyLawTips
#SabiBusinessLaw
#SabiElectionLaws
#SabiHumanRights
#SabiLawOnTheBeatFm
#SabiLawLectureSeries
#CriminalJusticeMonday
#SabiLawVideoChallenge
Speak with the writer, ask questions or make inquiries on this
topic or any other via onyekachi.umah@gmail.com,
info@LearnNigerianLaws.com or +2348037665878 (whatsapp). To receive
free Daily Law Tips, join our free WhatsApp group via
https://chat.whatsapp.com/L7h4f1exItZ38FeuhXG4WN or Telegram group,
via the below link: https://t.me/LearnNigerianLaws
To keep up to date on all free legal awareness projects of Sabi
Law Foundation, follow us via
Facebook Page:@LearnNigerianLaws,
Instagram:@LearnNigerianLaws,
Twitter: @LearnNigeriaLaw,
YouTube: Learn Nigerian Laws,
WhatsApp Groups via
(https://chat.whatsapp.com/L7h4f1exItZ38FeuhXG4WN),
Telegram Group: (https://t.me/LearnNigerianLaws),
Facebook group:
(https://www.facebook.com/groups/129824937650907/?ref=share)
or visit our website: (www.LearnNigerianLaws.com)
Please share this publication for free till it gets to those
that need it most. Save a Nigerian today! NOTE: Sharing, modifying
or publishing this publication without giving credit to the author
or Sabi Law Foundation is a criminal breach of copyright and will
be prosecuted. This publication is the writer’s view not a legal
advice and does not create any form of relationship. You may reach
the writer for more information.
This publication is powered by www.LearnNigerianLaws.com {A Free
Law Awareness Program of Sabi Law Foundation, supported by the law
firm of Bezaleel Chambers International (BCI).} Sabi Law Foundation
is a Not-For-Profit and Non-Governmental Legal Awareness
Organization based in Nigeria. For sponsorship and partnership,
contact: sponsorship@learnnigerianlaws.com, sabilaw.ng@gmail.com or
+234 903 913 1200.
Daily Law Tips (Tip 776) by Onyekachi Umah, Esq., LL.M,
ACIArb(UK)
Introduction:
There are several seasons in life and so are there several seasons
in the finance of men. When a person is in need, he/she will most
probably request for support from his/her family, friends and
associates. Often the financial support from family and friends
could be a gift (there are given freely and never to be repaid).
However, in some cases, the financial support from family and
friends are not gift but loan/debt (they are freely given but to be
repaid). Repaying for loan/debt from family and friends could be
with or without interest. And, a loan from family and friend can be
a friendly loan, not because it is from friends but because of its
nature. This leads to the need for a definition and nature of a
friendly loan under the Nigerian laws. When will the Nigerian
courts declare a debt to be a friendly loan?
Nature of Friendly Loans:
There is really no fixed term as a “friendly loan” rather, it is
the circumstances of a loan that will determine whether the loan is
a friendly one or not. The Court of Appeal in Nigeria has had an
opportunity to explain the nature of a friendly loan in its
judgment in the case of; CHAMPION BREWERIES PLC v. SPECIALTY LINK
LTD & ANOR (2014) LPELR-23621(CA). In that case, Justice Mbaba,
held that;
“A friendly loan, as the name implies, is a loan from a friend
to a friend, which makes no room for usury or interest or penalty.
It connotes a lifeline thrown by a friend to a friend, to bail him
out of trouble and does not contemplate profiting from the gesture,
financially. I looked at the Black Law Dictionary and other English
dictionaries for the meaning of “friendly loan” I did not see in
the ones I consulted. But I saw the meaning of the adjective
“friendly” to mean – “kind; behaving as a friend, relating to, or
typical of a friend, being a colleague, helper partner etc” In the
sense of that word a “friendly loan” therefore does not admit of
interest, or any thing that detracts from kindness, friendship,
help and partnership, which charging of interest or usury is likely
to cause. See First Bank of Nigeria v. I.A.S. Cargo Airlines Nig.
Ltd (2011) LPELR- 9827(CA) where Salawa, JCA held: “However, where
the Plaintiff happens to be a private person, or the loan is stated
to be a “friendly loan” and no interest charge is fixed at the time
of entering into the loan agreement, the Court is precluded from
awarding interest in such circumstances.” See UBN v. SAX Nig Ltd
(1994) 8 NWLR (Pt. 361) 150; UBN v. OZIGI (1994) 3 NWLR (Pt. 363)
385; Hausa v. First Bank of Nigeria Plc CA/J/295/981 unreported
decision of this Court delivered on 12/4/2000; UBN v. SALAMI (1998)
3 NWLR (Pt. 538) See also IDAKULA v. RICHARD (2001) FWLR (Pt. 693)
111 where AKPABIO, J.C.A. (of blessed memory) said: “… The Court
will readily award a pre-judgment interest, where the plaintiff is
a Commercial Bank, and the rate of interest fixed at the inception
of the loan or over draft transaction; whereas, if the plaintiff
was a private person; or the loan stated to be a “friendly loan”
and nothing said about interest charges at the time of entering
into the loan agreement, the Court will not award interest in such
circumstances.”
The Supreme Court of Nigeria is not left out in this issue. The
apex court has in the case of DIAMOND BANK LTD v. PARTNERSHIP
INVESTMENT CO LTD & ANOR (2009) LPELR-939(SC), held that; “…the
general rule at Common Law, is that interest is not payable on a
debt or loan in the absence of express agreement or some course of
dealing or custom to that effect. See London Chattam and Dover
Railway v. South Eastern Railway (1893) A.C 249. Thus, interest
will however, be payable where there is an express agreement to
that effect and such an agreement, may be inferred from a course of
dealing between the parties. See Re-Duncan and Co, (1905) 1 Ch. 307
or where an obligation to pay interest arises from the common or
usage of a particular trade or business and I add like in banking.”
Per OGBUAGU ,J.S.C ( Pp. 29-30, paras. D-A ).
Also, in the case of ISHOLA v. SOCIETE GENERALE BANK (NIG) LTD
(1997) LPELR-1547(SC), the Supreme Court, held that “But where
there is no express agreement as to the rate of interest payable,
it seems that the bank is entitled to charge interest rate on the
basis that there is now an established custom to that effect or
that the customer has impliedly consented where, without protest,
he allows his account to be debited with such interest. See
Barclays Bank of Nigeria Ltd v. Alhaji Maiwada Abubakar (1977) 10
SC 13.” Per IGUH ,J.S.C ( P. 53, paras. B-c )
Conclusion:
From the above judgments of the courts, it is safe to conclude that
a friendly loan is a loan that was given out of kindness and
without any intention to receive interest from or on the loan. The
courts in Nigeria will often not allow an interest to be received
on a loan that was given out of kindness by a private person
without any agreement as to payment of interest on the loan (it is
a friendly loan).
However, where a loan is given by a bank or a corporate body in
the business of moneylending or with the custom of collecting
interest on loans, even where there is no agreement as to interest,
the courts will most probably believe that it was the intention of
parties that interest should be paid on the loan. For example,
having in mind the nature of the business of banks and
moneylenders, one cannot convince a court of law that it received a
friendly loan from a commercial bank, unless there is a signed
agreement or proof that the loan is a friendly one.
My authorities, are:
1. The judgment of the Supreme Court of Nigeria in the case of
DIAMOND BANK LTD v. PARTNERSHIP INVESTMENT CO LTD & ANOR (2009)
LPELR-939(SC)
2. The judgment of the Supreme Court of Nigeria in the case of
ISHOLA v. SOCIETE GENERALE BANK (NIG) LTD (1997) LPELR-1547(SC)
3. The judgment of the Court of Appeal in the case of HAMPION
BREWERIES PLC v. SPECIALTY LINK LTD & ANOR (2014)
LPELR-23621(CA)
4. Onyekachi Umah, “No Bank In Nigeria Can Unilaterally Change
/Vary Interest Rate In Its Agreement With A Customer”
(LearnNigerianLaws.com, 23 August 2018) accessed 15 April 2021
5. Onyekachi Umah, “Duty of Care Owed By Banks in Nigeria.”
(LearnNigrianLaws.com, 1 April 2021) accessed 15 April 2021
6. Onyekachi Umah, “It Is An Offence To Sell A Vehicle Purchased
With Unrepaid Bank Loan” (LearnNigerianLaws.com, 2 October 2018)
accessed 15 April 2021
7. Onyekachi Umah, “Creditors, Debtors And The Covid-19 Lockdown?”
(LearnNigerianLaws.com, 21 April 2020) accessed 15 April 2021
8. Onyekachi Umah, “The Supreme Court Has Warned Efcc And Police
Against Recovering Debts And Investigating Disputes From Civil
Transactions” (LearnNigerianLaws.com, 26 October 2019) accessed 15
April 2021
9. Onyekachi Umah, “When, Why And How Can A Guarantor/Surety Be
Held Liable For Debt Guaranteed” (LearnNigerianLaws.com, 25 July
2019) accessed 15 April 2021
10. Onyekachi Umah, “EFCC Cannot Recover Debts”
(LearnNigerianLaws.com, 25 July 2018) accessed 15 April 2021
11. Onyekachi Umah, “Conditions for Assignment of Burden or Benefit
of Debt” (LearnNigerianLaws.com, 30 March 2021) accessed 15 April
2021
12. Onyekachi Umah, “Owing Debts And Refusing To Pay Is Not An
Offence In Nigeria” (LearnNigerianLaws.com, 14 December 2019)
accessed 15 April 2021
13. Onyekachi Umah, “You Cannot Be Arrested For Breach Of
Contract/Refusal To Pay Debt” (LearnNigerianLaws.com, 15 October
2018) accessed 15 April 2021
14. Onyekachi Umah, “It Is An Offence For Hospitals/Creditors To
Detain Patients/Debtors For Debts” (LearnNigerianLaws.com, 26 July
2018) accessed 15 April 2021
15. Onyekachi Umah, “It Is Not a Crime to Be a Debtor In Nigeria”
(LearnNigerianLaws.com, 20 June 2018) accessed 15 April 2021
16. Onyekachi Umah, “Nigerian Police Cannot Be Used For or Be Part
for Debt Recovery” (LearnNigerianLaws.com, 28 May 2018) accessed 15
April 2021
17. Onyekachi Umah, “Tips On Recovery of Debt’
(LearnNigerianLaws.com, 10 March 2016) accessed 15 April 2021
18. Onyekachi Umah, “How to Recover Property Wrongly Seized by
Court” (LearnNigerianLaws.com, 9 March 2021) accessed 15 April
2021
19. Onyekachi Umah, “Does Police Have Powers To Settle Civil
Disputes In Nigeria?” (LearnNigerianLaws.com, 13 May 2020) accessed
15 April 2021
20. Onyekachi Umah, “A Guarantor/ Surety And A Witness Are Not
Same” (LearnNigeriansLaws.com, 12 May 2020) accessed 15 April
2021
21. Onyekachi Umah, “Minimum Period For Defence Of Undefended List
Case In Abuja” (LearnNigerianLaws.com, 25 February 2020) accessed
28 March 2021
22. Onyekachi Umah, “Bounced Or Dud Cheque And Its Legal
Consequence In Nigeria.” (LearnNigerianLaws.com, 5 March 2016)
accessed 15 April 2021
Sabi Law Projects:
#SabiLaw
#DailyLawTips
#SabiBusinessLaw
#SabiElectionLaws
#SabiHumanRights
#SabiLawOnTheBeatFm
#SabiLawLectureSeries
#CriminalJusticeMonday
#SabiLawVideoChallenge
Speak with the writer, ask questions or make inquiries on this
topic or any other via onyekachi.umah@gmail.com,
info@LearnNigerianLaws.com or +2348037665878 (whatsapp). To receive
free Daily Law Tips, join our free WhatsApp group via
https://chat.whatsapp.com/L7h4f1exItZ38FeuhXG4WN or Telegram group,
via the below link: https://t.me/LearnNigerianLaws
To keep up to date on all free legal awareness projects of Sabi
Law Foundation, follow us via
Facebook Page:@LearnNigerianLaws,
Instagram:@LearnNigerianLaws,
Twitter: @LearnNigeriaLaw,
YouTube: Learn Nigerian Laws,
WhatsApp Groups via
(https://chat.whatsapp.com/L7h4f1exItZ38FeuhXG4WN),
Telegram Group: (https://t.me/LearnNigerianLaws),
Facebook group:
(https://www.facebook.com/groups/129824937650907/?ref=share)
or visit our website: (www.LearnNigerianLaws.com)
Please share this publication for free till it gets to those
that need it most. Save a Nigerian today! NOTE: Sharing, modifying
or publishing this publication without giving credit to the author
or Sabi Law Foundation is a criminal breach of copyright and will
be prosecuted. This publication is the writer’s view not a legal
advice and does not create any form of relationship. You may reach
the writer for more information.
This publication is powered by www.LearnNigerianLaws.com {A Free
Law Awareness Program of Sabi Law Foundation, supported by the law
firm of Bezaleel Chambers International (BCI).} Sabi Law Foundation
is a Not-For-Profit and Non-Governmental Legal Awareness
Organization based in Nigeria. For sponsorship and partnership,
contact: sponsorship@learnnigerianlaws.com, sabilaw.ng@gmail.com or
+234 903 913 1200.
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