A very common situation is:
“I lent him money, but we never signed an agreement. Can I still recover it?”
The absence of a written loan agreement does not necessarily mean that you have no claim.
But it may make another question much more important:
How are you going to prove that the money was actually a loan?
“We were friends. I gave him the money on trust.”
Many informal loans happen between friends, relatives or business associates.
At the time the money is given, neither side expects a dispute.
There may be no written agreement, no receipt and sometimes not even a clear discussion about when the money should be repaid.
The problem usually arises later, when the person who received the money says:
“That wasn’t a loan.”
or:
“I don’t owe that amount.”
This is why the surrounding evidence becomes important.
Look beyond a written agreement
Even if there is no formal loan agreement, there may be other evidence showing what actually happened.
For example:
- a bank transfer or deposit slip;
- WhatsApp or SMS conversations;
- emails;
- a handwritten acknowledgment;
- a cheque given towards repayment;
- a promissory note;
- messages asking for more time to pay; or
- a witness who was personally involved in the transaction or repayment discussions.
No single item should automatically be treated as decisive.
The question is what these pieces of evidence show when considered together.
A bank transfer does not necessarily prove a loan
Suppose you transferred Rs. 500,000 into another person's bank account.
That is useful evidence that the payment took place.
But the recipient may say:
“It was a gift.”
“It was an investment.”
“It was payment for something else.”
The bank record alone may not explain why the money was paid.
Now imagine that, several months later, the recipient sends you a WhatsApp message saying:
“I know I still have to return your Rs. 500,000. Please give me another month.”
That message may help explain the purpose of the earlier bank transfer.
This is why the whole story matters.
What about a mutual friend who knows everything?
A witness can be useful, but there is an important difference between someone who personally saw or heard what happened and someone who only knows the story because you later told them about it.
If another person was present when the money was handed over, participated in the discussion, or personally heard the borrower acknowledge the debt, that may be relevant.
Do not wait simply because the borrower keeps promising to pay
People sometimes wait for years because they continue hearing:
“Next month.”
“After this business deal.”
“Give me a little more time.”
That can be dangerous.
Under Sri Lankan prescription law, an action for money lent without written security is generally subject to a three-year period calculated from the time the cause of action arises.
Determining exactly when that period began can depend on the particular facts of the transaction. Therefore, if an informal loan has remained unpaid for a considerable period, do not assume that you can wait indefinitely.
So, can you recover a loan without a written agreement?
Potentially, yes.
The absence of a formal agreement does not automatically end the matter.
But the dispute may depend heavily on whether you can establish that money was given, why it was given, how much was given, and that it was supposed to be repaid.
So if you lent money without documentation, start by collecting the evidence that already exists.
Sometimes there is no single document proving the loan. The proof may lie in the complete picture created by several pieces of evidence together.
Legal framework: section 7 of the Prescription Ordinance addresses actions for money lent without written security. See Seylan Bank Limited v. Intertrade Garments (Private) Limited on LawNet.
General information only. Whether a particular loan can be recovered, the evidence required and the applicable prescription period depend on the facts and circumstances of each case. Reading this guide does not by itself create an Attorney-at-Law/client relationship.