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If I invest a sum of money to a self employed individual for their project can I sue them for the return of the investment if they meet the following general points:

  • can't or won't show me what they've used the funds for
  • can't or won't show me progress that has been made, and
  • seem to be living extravagantly

What is the risk that the funds can being used for personal indulgences instead of the earmarked project by a self employed individual?

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    Please suggest better tags if you know of them.
    – David S Phillip
    Jul 15, 2015 at 0:17

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The first thing you need to do is establish if the arrangement that you have with the person is a contract or not. In summary a contract requires:

  • Intention to create legal relations. Note: social and family agreements are presumed not to have this intention. If you have given money to a friend or relation, then the onus is on you to show that you both intended to be legally bound; otherwise the money is legally a gift.
  • Agreement
  • Consideration
  • Legal Capacity
  • Genuine Consent
  • Legality of Objects

If you do not have a contract then your best course of action is to write the money off and get on with your life.

If you do have a contract then, depending on the amount of money, your best course of action may be to write the money off and get on with your life.

If you decide not to do this then you need to determine what the terms of the contract are. That is, what did you agree to do and when and what did they agree to do and when.

If you do not have these written down in a signed document then your best course of action is to write the money off and get on with your life. Verbal contracts are as legally binding as written ones but it is a bugger to determine what was actually agreed.

If you can determine what the terms of the contract are; has the other person broken any of them? For example, unless the contract says they must:

  • show you what they've used the funds for
  • show you the progress that has been made, and
  • not live extravagantly (this would possibly be void term anyway for uncertainty or meaninglessness)

then they do not have to!

If they have (or there is a reasonable belief that they will) breach the contract then you can:

  • Affirm that the contract continues
  • Terminate the contract
  • Repudiate the contract (i.e. there never was a contract)
  • Seek an order for Specific Performance
  • Seek an injunction
  • Seek damages
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