Template:Simplecontract

“Simple contract” is one that is not a “specialty” — a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt, such as a deed — and Limitation Act also puts it in contrast to:

• Insurance contracts: payment claims under insurance contracts — perhaps not “simple” because of the duty of utmost good faith implied in them — who knows?
• Contract of loans: any “contract of loan” which:

(a) does not provide for repayment at a fixed or determinable date; and

(b) does not make the repayment obligation conditional on a repayment demand by the creditor (or on any other matter);

[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 piece of text, it 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 for yourself — 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.

The covenant to pay

Hence why the covenant to pay in the terms of a secured note issue is also repeated in the security trust deed — it converts itself from a simple contract to a specialty. This is a bity of a cheeky run-around, in our view, but still.