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“[[Simple contract]]” is not defined, but the context of a [[Limitation Act]] puts it in contrast to:
Under the [[Limitation Act 1980]] a “'''[[Simple contract]]'''” is one that is neither a “[[specialty]]”<ref>A written document like a [[security deed]] that has been sealed, delivered and given as security for the payment of a specific debt.</ref> nor an [[insurance contract]]<ref>Perhaps not “simple” because of the implied duty of [[utmost good faith]] — who knows?</ref> nor a  “[[contract of loan]]” which has no fixed repayment date, where repayment is not [[Condition precedent|conditional]] on a demand, ''[warning:strap yourselves in for this next bit]''  
*'''[[Insurance contract]]s''': payment claims under [[insurance contract]]s — perhaps not simple because of the duty of [[utmost good faith]] implied in them — who knows? —
{{quote|
*'''[[Contract of loan]]s''': any “[[contract of loan]]” which:
“except where, in connection with taking the loan, the debtor enters into any [[collateral]] obligation to pay the amount of the debt or any part of it (as, for example, by delivering a [[promissory note]] as [[security]] for the [[debt]]) on terms which would exclude the application of this section to the [[contract of loan]] if they applied directly to repayment of the [[debt]].”}}
:''(a) does not provide for repayment of the [[debt]] [[on or before]] a fixed or determinable date; [[and]] <br>
:''(b) does not effectively (whether or not it purports to do so) make the obligation to repay the debt conditional on a demand for repayment made [[by or on behalf]] of the creditor or on any other matter;
:''except where in connection with taking the loan the debtor enters into any [[collateral]] obligation to pay the amount of the debt or any part of it (as, for example, by delivering a [[promissory note]] as [[security]] for the [[debt]]) on terms which would exclude the application of this section to the [[contract of loan]] if they applied directly to repayment of the [[debt]].


Now for a short piece of text this is bloody hard to decipher. There are no explanatory notes to the Limitation Act 1980 — in the good old days, you were just meant to figure it out — but for help we do have that Law Commission bunker buster which says “section 6 does not apply where the debtor enters into a collateral obligation to pay the amount of the debt or any part of it on a fixed or determinable date or conditional on a demand for repayment (or other condition).” So if the promissory note itself is a demand loan, but it is pledged as collateral for another debt which isn’t, then it counts as having a payment date. That's the best I can do.
We quote that last bit in full because, for a short extract, it is ''bloody'' hard to decipher. There are no explanatory notes to the [[Limitation Act 1980]], but for help we have that Law Commission bunker buster which says:
{{quote|“Section 6 does not apply where the debtor enters into a collateral obligation to pay the amount of the debt or any part of it on a fixed or determinable date or conditional on a demand for repayment (or other condition).”}}
So if the [[promissory note]] itself is a demand loan, but it is pledged as collateral for another debt which isn’t, then it counts as having a payment date. That’s the best I can do. <br>


“[[Contract of loan]]”? I think we can safely assume this applies to any [[Money|monetary]] transaction having that effect regardless of form, the handing over of money instantly creating a liability as it does — so including [[Deposit|deposits]], [[debt securities]] and so on. But what of the [[loan]] of ''property'', the transfer of which doesn’t confer [[Title transfer|title]]? If I lend you my car and forget to ask you for it back, does it become yours after six years? No, because you never own it in the first place. But my ability to sue you for rental income on it might.
Note: “repayment on a stated maturity date, conditional upon demand by the creditor”, sounds a lot like the process for redeeming a bond — at least when held in physical, definitive form. Thus, definitive debt securities are ''not'' simple contracts.


And what about things that we call loans, but which economically don’t resemble loans? [[Stock loan]]s for example? here title ''is'' automatically transferred, and there is no obligation to return, absent a demand. It could seem odd if these would suddenly by extinguished if undemanded after six years. On the other hand, liabilities may arise under a [[stock loan]] contract — to [[Manufactured payments in respect of Loaned Securities - GMSLA Provision|manufacture a dividend]] for example — which ''are'' payable on a fixed or determinable date.<ref>Namely, the day they are paid by the underlying issuer — see Section {{gmslaprov|6.2}}.</ref> are these not time barred either, simply because the stock loan repayment itself is time barred?
Whether this is true of electronically cleared debt securities — that is, ahhh — all of them, these days — is a an interesting question, as these are paid out automatically to account holders in [[clearing system]]s.

Latest revision as of 10:51, 2 November 2023

Under the Limitation Act 1980 a “Simple contract” is one that is neither a “specialty”[1] nor an insurance contract[2] nor a “contract of loan” which has no fixed repayment date, where repayment is not conditional on a demand, [warning:strap yourselves in for this next bit]

“except where, in connection with taking the loan, the debtor enters into any collateral obligation to pay the amount of the debt or any part of it (as, for example, by delivering a promissory note as security for the debt) on terms which would exclude the application of this section to the contract of loan if they applied directly to repayment of the debt.”

We quote that last bit in full because, for a short extract, it is bloody hard to decipher. There are no explanatory notes to the Limitation Act 1980, but for help we have that Law Commission bunker buster which says:

“Section 6 does not apply where the debtor enters into a collateral obligation to pay the amount of the debt or any part of it on a fixed or determinable date or conditional on a demand for repayment (or other condition).”

So if the promissory note itself is a demand loan, but it is pledged as collateral for another debt which isn’t, then it counts as having a payment date. That’s the best I can do.

Note: “repayment on a stated maturity date, conditional upon demand by the creditor”, sounds a lot like the process for redeeming a bond — at least when held in physical, definitive form. Thus, definitive debt securities are not simple contracts.

Whether this is true of electronically cleared debt securities — that is, ahhh — all of them, these days — is a an interesting question, as these are paid out automatically to account holders in clearing systems.

  1. ↑ A written document like a security deed that has been sealed, delivered and given as security for the payment of a specific debt.
  2. ↑ Perhaps not “simple” because of the implied duty of utmost good faith — who knows?
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