A suretyship is a form of personal security given by a debtor (principal debtor) to a creditor in terms of which a third person (commonly known as the surety) bounds himself to perform the obligations of the debtor, if the debtor fails to do so.
The requirements and formalities of a surety are as follows:
1. The suretyship is a contract. A valid suretyship can only exist if the principal debt still exists. The surety will therefore only be liable once the indebtedness of the principal debtor to the creditor has been established.
2. The suretyship must also comply with the provision of the General Law Amendment Act 50 of 1956. This act in essence stipulates the following regarding suretyships:
2.1 The contract must be in writing
2.2 The identity of the parties must be clear
2.3 All three parties have to be different. In other words the debtor cannot stand surety for the same agreement as well.
In terms of the Debt Review and the implication of a surety in a credit agreement it is quite complicated as to whether or not to include the surety in the agreement in the Debt Review or not.
If a consumer goes under debt review and the consumer has been called upon in terms of the surety for the said credit agreement, then that agreement cannot be included under the debt review. The reasoning for this, is due to the fact that this specific debt cannot be included as the consumer is not a co-principal debtor. The Debt can only be included in the Debt Review if the Consumer is co-principal Debtor to the agreement.
It is therefore important to understand the jargon of the wording in surety agreements.