Suretyship Agreements

Question 1

Define surety ship

Answer 1

An agreement by means of which one person renders himself liable towards a creditor for the proper compliance of the debtor

one person is liable for the debt of another

Question 2

Obligations of The Surety are as follows

Answer 2

Performance of the debtors obligation - To pay a debt that the debtor has failed to

When obliged to pay - when called upon to pay

Continuing suretyship- may be a series of deals

Interest and legal costs - dependent on a surety documents

Death of insolvency - If the surety dies his estate is due to pay

Question 3

suretyships may be taken by

Answer 3

Companies
Trusts
partners
and spouses married in COP

Question 4

Spouses married in community of property

Answer 4

Section 15(2)(h) of the Matrimonial Property Act 88 of 1984 provides that a spouse married in community of property (COP) may not bind himself/herself as a surety without the written consent of the other spouse while the marriage exists.

When spouses are married in COP, they have one joint estate and in the past, banks did undertake suretyships in accordance with section 15(2)(h). So, a suretyship could be taken by a wife in favour of her husband if she had assets, such as life policies registered in her name.

Question 5

Nedbank v Van Zyl 1990 (2) SA 469 (A).

Answer 5

Debts incurred during their marriage and which were unpaid as at dissolution of their marriage were recoverable from both former spouses to the marriage, but subsequent amounts advanced by Nedbank to Van Zyl on overdraft constituted his own separate liability.
The court went further and said “the fact that the wife may have assets outside the community… does not seem to alter the basic identity between surety and principal debtor”.
The court did, however, state that the terms of the wife’s suretyship may be wide enough to cover the husband’s post-nuptial debts, but there must be proof that such debts were, in fact post-nuptial debts, i.e. the husband’s debts incurred after divorce.

Question 6

DISCHARGE OF SURETY

Answer 6

1. Termination of suretyship obligation
2. Termination of principal obligation
3. Conduct prejudicial to surety.