She Paid for Everything and Called It an Investment; He Called It a Favour

The situation

'If this thing actually takes off, does Tarek owe me anything, or did I just buy him a business?' Saskia asked that question almost as a joke in her first call with our office, but she had clearly been turning it over for weeks before she picked up the phone.

Saskia worked as an auto body technician, taking on jobs as an independent contractor around Elora, and had known Tarek, an early childhood educator, since they were children growing up on the same street. When Tarek came to her with an idea for a small specialty business, a mobile equipment repair and rental service aimed at local tradespeople, Saskia believed in it and had savings Tarek did not. Over the following year, she put in roughly 58,000 dollars, covering equipment, a used van, insurance, and permits, while Tarek contributed his time, his trade contacts, and the day-to-day work of running jobs and managing clients.

Nothing about the arrangement had ever been written down. There was no partnership agreement, no promissory note, no clarity on whether Saskia's money was a loan, an investment earning her a share of the business, or simply a gift between old friends helping each other out. They had talked about it in the loose way friends talk about plans, agreeing it was 'fair' that Saskia would get something back once the business was steady, without ever pinning down what that meant in dollars or in ownership. Tarek, for his part, had never suggested he intended to keep Saskia's money without giving her anything for it; the gap was one of avoidance, not bad faith, which was part of why neither of them had forced the conversation sooner.

A cousin of Tarek's, Khalil, had recently joined the business part-time to help with bookkeeping and scheduling, and it was a conversation with Khalil, who asked Saskia in passing what percentage of the business she owned, that made her realize she did not actually know the answer. The business was beginning to turn a real profit for the first time, which was good news that also made the unanswered question far more consequential than it had been a year earlier. Saskia's own work as an independent contractor had taught her to be careful about what she put in writing before starting a job, and it bothered her that she had not applied the same instinct to her own money when a friend, rather than a client, was on the other side of it.

What made this urgent

As long as the business was losing money or barely breaking even, the absence of a written agreement between Saskia and Tarek cost nothing in practical terms; there was little to divide and little to argue about. The moment the business started generating a real profit, that changed. Every month the arrangement stayed undocumented was a month in which the value of Saskia's original contribution, and whatever share of the growing business it was meant to represent, became harder to pin down and easier for memory and goodwill to quietly reshape.

This is the pattern behind a legal claim called unjust enrichment: one person confers a benefit, the other receives it, and there is no legal basis, such as a contract, explaining why the person who received the benefit should be entitled to keep it without compensating the other. Ontario courts recognize this as a remedy where someone has been enriched at another's expense with no contract to justify it, but proving it after the fact means reconstructing, often years later and often through the other side's very different memory of events, what was actually promised. It is a real remedy, but a difficult and expensive one to rely on, and it works only after a relationship has already broken down enough for someone to sue.

The friendship between Saskia and Tarek made the risk sharper, not softer. Close, long-standing friendships are often where financial arrangements are least likely to be written down, precisely because raising the subject can feel like an accusation of bad faith between people who trust each other. Saskia said as much directly: she did not want to 'lawyer up' against someone she had known since childhood, and she worried that even asking for something in writing would be read as a sign she did not trust him.

What made the file urgent was the combination of a business whose value was actively climbing and a relationship where the natural instinct, avoiding an awkward conversation, was exactly the instinct most likely to leave Saskia unprotected if the friendship or the business later soured. The window to formalize things cheaply, while both of them were still on good terms and simply uncertain rather than in conflict, was closing as the stakes rose.

What we did

1. Reviewed Saskia's records of what she had actually contributed, working from bank transfers, receipts and invoices to establish a precise figure of roughly 58,000 dollars rather than relying on her general sense of what she had spent, since any written agreement needed to start from an accurate number both founders could confirm, and a figure Saskia could substantiate document by document would carry far more weight with Tarek than a round estimate offered from memory.
2. Discussed with Saskia what outcome she actually wanted, distinguishing between being repaid as a loan, holding an ownership percentage that would grow or shrink with the business, or some combination, since those options carried different tax and legal consequences she had never had to weigh before. Walking through each option with her own numbers showed that a pure loan undervalued the risk she had taken as an early funder, while pure equity ignored that some of the money had simply covered bills owed regardless of how the business performed.
3. Drafted a proposed agreement structured as a hybrid, treating a portion of Saskia's contribution as a loan to be repaid on defined terms and the remainder as capital earning her a fixed ownership percentage in the business going forward, reflecting both the money already spent and her ongoing stake in what she had helped build. This meant Saskia was not forced into an all-or-nothing choice, and it gave Tarek a document he could afford to sign, since the loan portion was sized to what the business could realistically repay.
4. Framed the conversation with Tarek around clarity rather than distrust, advising Saskia to present the agreement as protecting the friendship by removing an uncomfortable, unanswered question, rather than as a demand driven by suspicion, since how the proposal was raised mattered as much as its terms. This framing gave Saskia language she was comfortable using and reduced the chance Tarek would read the conversation as an accusation before he had even seen the numbers behind it.
5. Negotiated specific terms directly with Tarek, including a repayment schedule for the loan portion tied to the business's actual cash flow rather than a fixed deadline it might not be able to meet, and a defined process for what would happen to Saskia's ownership share if either founder wanted to exit later. Tying repayment to cash flow rather than a calendar date meant Tarek was not signing up for a schedule the business could default on in a slow month, which made the agreement easier for him to accept.
6. Addressed Khalil's role in the business within the same agreement, clarifying that his part-time bookkeeping work did not entitle him to an ownership stake unless the founders agreed to grant one separately, closing off a second undocumented relationship before it created its own ambiguity, since Khalil's part-time involvement had begun on exactly the same informal footing that had left Saskia's contribution unclear, and the founders had every reason to fix that pattern once rather than repeat it.
7. Finalized and had both founders sign a written partnership agreement, formally documenting the loan terms, the ownership split, and the process for future contributions or exits, converting an informal understanding between friends into an enforceable arrangement. Signing it while the friendship was still solid meant neither of them was negotiating from a position of resentment, and it gave both of them a document to point to instead of two different memories of what had been agreed.

The outcome

Saskia and Tarek signed the agreement roughly two months after her first call to our office, while the business was profitable but the relationship between them was still entirely amicable. The loan portion of Saskia's contribution began repaying on the schedule the agreement set out, and her ownership percentage in the business was formally documented for the first time since the venture began. Tarek's own reaction, once he saw the proposal, was closer to relief than resistance; he told Saskia he had been avoiding the subject for the same reason she had, worried that raising it himself would look like he was trying to shortchange her.

No dispute ever materialized. That is the point of the file: because the agreement was put in place while both founders were still on good terms and simply uncertain about their arrangement, Saskia never had to argue that she was unjustly enriching Tarek by leaving her money in the business with nothing to show for it, and Tarek never had to defend himself against an accusation he had never really considered. The conversation Saskia dreaded having turned out to be far less difficult than reconstructing the arrangement after a falling-out would have been, and reaching for the courts under an unjust enrichment claim, with its uncertain outcome and its near-certain cost to the friendship, never became necessary.

The business has continued to grow, with Khalil still working part-time under clearly defined terms that no longer leave his role open to a similar ambiguity later. Saskia's roughly 58,000 dollar contribution is now documented as a mix of a repaying loan and a real ownership stake rather than an open question resting on a childhood friendship, which is the outcome she asked for in that first, half-joking phone call. Saskia has since said the hardest part was never the paperwork; it was deciding to raise the subject at all with someone she had known her entire life, and having a clear, ready proposal in hand made that first conversation far easier to start.

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