Chapter 12 Flashcards
Define a legal right.
A legal right can be defined as a privilege, given and protected by law, which gives one person a claim against another person.
Define simple joint liability.
A liability is a joint liability when a number of co-debtors have to perform to a creditor and the performance is divisible.
In this case, each debtor is responsible for paying their own share of debt.
In simple joint liability, is it true that if a creditor releases one of the co-debtors from performance, they automatically release the other co-debtors as well?
Not true.
What happens when a creditor releases one of the co-debtors for a joint and several debt?
The liability of the remaining co-debtors decreases proportionately.
Define joint and several liability.
This is a liability where each co-debtor can be liable for paying the full amount of the debt.
The creditor can claim the full amount from any one of the co-debtors.
What is a stipulatio alteri?
It is a contract that benefits a third-party, for example life insurance policy.
What is a cession?
A cession is the legal way in which rights that belong to one person can be transferred to another person. (it is the transfer of personal rights).
What is an agreement to cede called?
An agreement to cede is called a ‘transfer agreement.’
What is the cession procedure?
All that is necessary for a cession is the agreement between the cedent and the cessionary. The consent of the debtor is not necessary. The cession requires no formalities to be valid.
Who is cedent?
Cedent is the person who transfers his personal right to the cessionary.
What are the requirements for a cession?
There are six requirements for a cession:
• The cedent must be entitled to cede the right,
• The right must be capable of being ceded,
• The parties must intend for a cession to take place.
• Any formalities agreed upon by the parties must be complied with.
• The cession must not be unlawful.
• It must not put the debtor in a worse position.
Who are the parties to a cession?
Cedent and cessionary.
What are the two rights that cannot be ceded - considered illegal and why?
1) the right to a pension or retirement annuity.
2) an employee’s right to compensation for injuries that happen in the workplace.
These are illegal to protect people who are poor from giving away what little they have.
When are rights too personal to be ceded?
When it would make the duty more difficult or unpleasant for the debtor if a different person were to exercise that right.
Explain the restriction ‘debtor may not be prejudiced’.
You are not allowed to cede a portion of the debt without the debtor’s consent, because it will cost them more if they have to make two separate payments.
What are the two ways in which an agreement can prevent a creditor from ceding their right against the debtor?
1) At the time when their rights and duties are decided, the debtor and the creditor agree not to cede.
2) The cedent and cessionary at the time when they enter into the cession agreement, agree that there will be no further cession - the cessionary cannot cede their right to anyone else.
Cession of future rights is possible/impossible?
Possible.
What are the two types of cession?
Complete cession and cession as security for a debt.
Explain the type: complete cession.
A complete cession is an agreement that intends a right, as well as any advantages that go with the right, to be given away completely to somebody else (cessionary).
True or false: the cessionary is entitled to accept any amount please in settlement of the claim?
True, provided that the amount is not more than what the debtor owed to the cedent.
Define the type: cession as security.
When the reason for a cession is that the cedent wants to use a personal right that they have against someone to secure a debt towards a third-party (like a bank). In this case the cedent cannot exercise any of the normal rights of a creditor, but the right remains an asset in the estate of the cedent. This type of cession allows the personal right to be returned to the cedent once the underlying debt is paid.
What are the options available to parties when they decide that the terms of a contract are not suitable for their purposes?
The parties can reach agreement to change or terminate the rights and/or duties that they have in terms of a contract by:
• variation
• release
• delegatiom
• assignment
• novation
• compromise
Explain variation.
Variation means changing rights and duties. The contracting parties are generally free to make changes to the contract informally or by means of new agreement. However, sometimes there are formalities required when:
• The law requires for a specific type of contract to be in writing and thus any changes to this contract have to be in writing also,
• The contacting parties have agreed that any variation has to be in writing and signed by both parties.
Explain release.
Release means to relieve the parties of their duties. No formalities are required. It is as if the contract is cancelled, without anyone having a claim.
