General

Sureties and Debt Review

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.

8 thoughts on “Sureties and Debt Review

  1. Good day

    In a previous business venture, if I signed as a surety on a supplier’s credit application, on behalf of a business that has since gone into liquidation. The requested “credit limit required” as stated on the cr application document was R10,000.00. The total valued owed to the supplier is R23,000.00. Am I legally bound as the signed surety, to pay the additional R13,000.00 if I signed only for the limited amount.
    Regards
    Will B

    1. Good day Mr Will B

      It would be dependent on what the terms of the agreement were when you signed the surety agreement. You are more than welcome to send through the signed surety agreement to jenny@hvdmgroup.co.za so that we can advise you accordingly as there is various surety agreements that one can enter into

      Regards
      Jenny Rossouw