Questions & Answers
Liability of a partner for breaching loan agreement and loss of profits
Q1- A loan agreement was signed between P1 and P2 for a fund to be put in a trading as a favour from P2 to P1. P2 changed his mind and did not release the fund.
Trading proceeded with another fund and the return during the agreed period was substantial.
Is P2 liable to P1 for the earnings which could have been realized?
Q2- A trading fund was in operation based on an agreement between P1 and P2. P1 owed P2 $X to be paid over 18 months. P1 funded the P2 account for the entire loan plus interest.
P2 allowed P1 to trade with the fund as long as the loan liability is covered and loan payment is paid from proceeds, it was agreed that additional profit over the loan payments can be withdrawn by P1.
P2 had full control over the funds but not the trading. P2 changed his mind and added 20% buffer to remain in the account as added security. The trading hit a downturn and fund got liquidated.
Is P2 liable for the loss of the 20% additional buffer which he required to keep in the trading fund?
Q1) Based on the information provided, I would advise that P2 could be held liable for his breach of contract and may be legally compelled to compensate you for at least the loan amount if not the realised profits.
However, to be able to provide you with more definitive advice we will need to be able to review the loan agreement.
Q2) With respect to your second question, the sequence of events will need to be reviewed in more detail, particularly investigating the most significant cause of the trading loss before alleging that P2 was liable for the liquidation.
I hope this information was useful. Please note that our first consultation is free of charge should you wish to receive more detailed advice on your matter.
