The lender should have had a stipulation that if the price of btc were to rise to a certain amount that the loan needs to be repaid or the collateral will simply be kept by the lender to cover the loan, and then used that 50 eur to purchase sufficient btc. Or when the loan became overdue, the lender should have used the collateral to cover as much of the loan as it could as of when the loan was originally due, especially if the borrower was no longer responding to PMs
For starters, nobody should lend to someone with a history of defaulting loans. No, the lender doesn't need to stipulate anything around the price of BTC. If the borrower takes the payment in bitcoin and agrees to make the repayment in bitcoin, that's the end of it. How did this 50 (or 100??) Euro's come about? Bank transfer? Mailed him a note?