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Month: November 2021

Do I still need to pay my debt after all this time?

November 25, 2021 / / Comments Off on Do I still need to pay my debt after all this time?

What is prescription?

As a general rule, prescription occurs when a debtor’s liability to pay a specific debt is extinguished as a result of the passing of a prescribed time period.

As soon as a debt prescribes, a debtor is no longer under any obligation to pay it.

It is still legal for the creditor to demand payment or even sue for a prescribed debt. The debtor will then, however, be able to raise the defence of prescription. It is for this reason, that debtors need to be aware of prescription – to protect themselves from debts they are no longer liable for. On the other hand, creditors must also be cognizant to pursue claims timeously.

The Prescription Act prescribes the time periods after which specific debts prescribe. Most civil claims prescribe after 3 years. There are however various exceptions hereto, but only a few is listed below:

  • Debts relating to negotiable instruments prescribe after 6 years.
  • Judgment debts, debts secured by mortgaged bonds and debts owed to the state, for example, prescribe after 30 years.

When does prescription start to run?

The abovementioned prescriptive periods start to run as soon as the debt is due. When the debt is “due” will depend on when the identity of the debtor is known and when the facts from which the debt arises are known to the claimant. Importantly, prescription will start running irrespective of whether the creditor is aware of his/her rights.

Can the prescriptive time period be delayed?

The prescription period can be delayed in certain circumstances in terms of the Prescription Act. A few examples include when the debtor is outside of South Africa, the creditor is a minor, or the debt is the object of a dispute in arbitration. Such a restriction will stop on, after, or within one year before the normal prescription period will end. If the latter happens, one year will be added after the date on which the restriction stopped.

The running of prescription will be interrupted by an acknowledgement of debt by the debtor and/or a summons being served by the creditor on the debtor, claiming performance in terms of the debt.

An acknowledgement of debt can take various forms and may be written or verbal. It is however advisable that creditors should reduce acknowledgements of debt to writing, because of its evidentiary value.

Conclusion

A debtor should not be burdened by a debt indefinity, especially since costs and interest will be added to the outstanding debt.

A creditor also benefits from the sense of urgency created by prescription, in that the recovery of his/her debt will be quicker.

Whether a debt is due by you or owed to you, it would be advisable to consult with your attorney to determine the best way forward.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Everything you need to know about suretyship agreements

November 25, 2021 / / Comments Off on Everything you need to know about suretyship agreements

A deed of suretyship is an agreement that is concluded by a creditor and a third party. The essentialia of this type of agreement are that the surety (third party) undertakes to be liable to the creditor for the due performance by the debtor of his or her obligations in terms of the principal debt. This type of agreement is normally only executed by the surety(ies) and not by the creditor or the debtor. Deeds of suretyship are often used in circumstances where a juristic person wants to enter into an agreement and where the creditor requires security for the juristic person’s performance in terms of the agreement. For example, many commercial lease agreements contain a clause which requires that the director(s) of a private company must bind themselves as sureties in favour of the landlord in order for the landlord to enter into a lease agreement with the private company as contracting party. This is to ensure that the landlord can have security for the payment of the rental monies in circumstances where the private company as tenant is unable to pay its debts. Creditors also often request a third party to sign as surety in circumstances where the principal debtor does not have a high-enough credit score.

This article will briefly discuss the requirements that must be met in order to successfully hold a third party liable as surety. The first requirement is that there must be a valid deed of surety. A deed of suretyship must adhere to the strict formal requirements as set out in the General Law Amendment Act 50 of 1956 (hereinafter referred to as “the Act”) due to the onerous obligations that it imposes of the surety. These formal requirements are as follows:

  • The deed of suretyship must be embodied in a written document. A person can thus not bind him- or herself as surety in terms of an oral agreement.
  • The deed of suretyship must be signed by or on behalf of the surety.
  • The deed of surety must set out the identity of the creditor, the surety, as well as the principal debtor.
  • The nature and amount of the principal debt must be capable of ascertainment by reference to the provisions of the deed of suretyship. The written agreement may be supplemented by admissible extrinsic evidence in this regard.

It is important to note that the deed of suretyship may be supplemented by incorporating another document to comply with the statutory requirements as set out above. This is often the case where a deed of suretyship accompanies a lease agreement, and where the deed of suretyship only meets the requirements when read together with the terms of the lease agreement.

There are further requirements that must be met in order to hold a surety liable in respect of a valid deed of suretyship. These requirements are the following:

  •  The cause of action must be one in respect of which the surety undertook liability. For instance: a surety who undertook liability for rental monies cannot be held liable for monies that are due by the principal debtor to the creditor in respect of another cause of action, such as monies advanced to the principal debtor by the creditor in terms of a separate loan agreement. The surety’s liability can also not exceed that of the principal debtor.
  •  The principal debtor must be indebted. A surety shall thus only be liable once the principal debtor is in default .

A deed of suretyship may also have to comply with further requirements depending on the circumstances. For instance, if the underlying agreement (i.e. the agreement concluded between the creditor and the principal debtor) is subject to the National Credit Act 34 of 2005, then the deed of suretyship shall also be subject to this Act. If the underlying agreement is exempt from the Credit Act, then the suretyship agreement shall be similarly exempt.

Another example of where other legislation impose further formal requirements is where the intended surety is married in community of property to his or her spouse. The Matrimonial Property Act 88 of 1984 requires that the spouse of such an intended surety must give consent in writing to the other spouse binding him- or herself as surety.

Reference List:

  • Amler’s Precedents of Pleadings
  • Drafting of Contracts 2018 notes by Legal Education and Development.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Resigning with immediate effect, or not?

November 25, 2021 / / Comments Off on Resigning with immediate effect, or not?

Employees often consider to immediately terminate their employment relationship due to a new opportunity arising or to avoid responsibility when faced with disciplinary procedures. Employment relationships are governed by an employment agreement or legal statutes, and in most cases both. If an employer and employee do not expressly agree on the notice period needed for either of them to terminate their relationship, section 37 of the Basic Conditions of Employment Act, 75 of 1997 (the Act)  provides for minimum notice periods. But what happens when the employee does not follow the notice period in the employment agreement and resigns with immediate effect?

The Labour Appeal Court address this matter in Standard Bank of South Africa Limited v Nombulelo Cynthia Chiloane (2021) 4 BLLR 400 (LAC). In this matter, the employee was said to have cashed a cheque without following proper procedures. It later transpired that the cashed cheque was fraudulent, which caused the employer a loss of just under R30 000. The employee was given notice to attend a disciplinary hearing. On the day that the employee received the notice to attend the disciplinary hearing, she handed her superior her letter of resignation, stating that she was tendering her “resignation with immediate effect”.

Standard Bank proceeded with the employee’s disciplinary hearing during her contractual notice period, but the employee argued that her resignation immediately terminated the employment relationship, and that Standard Bank was therefore not entitled to proceed with her disciplinary hearing. The chairperson of the disciplinary hearing rejected this argument and proceeded with the hearing. The employee and her attorney then left the disciplinary hearing, which proceeded in her absence.

The employee was ultimately found guilty of the misconduct and dismissed. After becoming aware of the dismissal, the employee launched an urgent application in the Labour Court to challenge the validity of the dismissal.

The Labour Court held that a resignation with immediate effect terminates the employment relationship immediately and Standard Bank was not permitted to hold the employee to her notice period. Accordingly, the Labour Court declared that the employee’s dismissal was null and void. Standard Bank, however, appealed the decision to the Labour Appeal Court.

The Labour Appeal Court held that if the contract provides for a notice period, the party that seeks to terminate the contract must give or serve the prescribed notice. A party’s failure to abide by their notice period thus amounts to a repudiation of the employment agreement. The Labour Appeal Court found that the employee’s reliance on her resignation being with immediate effect was not valid. Standard Bank was therefore within its rights to hold the employee to her notice period as prescribed in her employment agreement, and to proceed with her disciplinary hearing during that period.

What is important to note from this judgement is the fact that unless the employer releases the employee from his/her obligation in terms of the employment agreement, the employee will commit a breach of agreement. Accordingly, the employee can also be held liable for damages suffered by the employer.

Employees will also expose themselves to a poor reference for future opportunities.

Should the employer, however, decide to accept the short notice, even when it contradicts the prescribed notice period, there will be no obligation on the employer to pay the employee beyond the last day on which they worked.

Accordingly, it will be best for employees to revisit their employment agreements prior to tendering their resignation or committing to any other opportunity. However, should the need arise for short notice, employees will have to engage with their employers to see if a mutual agreement can be reached to accept the notice.

Reference List:

  • Standard Bank of South Africa Limited v Nombulelo Cynthia Chiloane (2021) 4 BLLR 400 (LAC)2021) 4 BLLR 400 (LAC).
  • Steenkamp & others v Edcon Ltd (National Union of Metalworkers of SA intervening (2016) 37 ILJ 564 (CC).
  • Basic Conditions of Employment Act, 75 of 1997.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Why should I pay maintenance if I am not allowed to see my child?

November 25, 2021 / / Comments Off on Why should I pay maintenance if I am not allowed to see my child?

Upon the birth of a child, both parents automatically have a duty to support that child. The fact that the child is born to married or unmarried parents is irrelevant. The duty is apportioned between the parents according to their respective means.

S 15(1) of the Maintenance Act states that a court order for the maintenance of a child is directed at the common law duty of a child’s parents to support that child. Since this obligation commences upon the birth of a child, the father, for example, is not relieved of his obligation to pay maintenance if the mother does not seek to enforce it.

It is a common occurrence that parents use the right of access to a child as leverage not to pay maintenance and vice versa. Examples include when a father withholds child maintenance payments to the mother if he is unable to have contact with the child, or when a mother denies the father access to the child if he does not make payments towards the maintenance of that child.

A parent’s right of access to a child and the obligation to maintain the child, are two very distinct issues.

A parent may not withhold payment of maintenance if he or she is not allowed by the other parent to exercise his/her right of access to a child. The flip side of the coin is that a parent may not refuse the other parent access to a child when the latter does not contribute towards the maintenance of that child. This conduct is unlawful. Taking the law into your own hands is prohibited and proper legal procedure must be followed to exercise these rights.

If a parent fails to pay maintenance, the parent with whom the child resides, commonly referred to as the primary carer of the child, can approach the Maintenance Court to make an application for child maintenance. In determining the amount that the parent should contribute, the court will consider the standard of living of the child, the financial needs of the child, the income of the parents, the parent’s financial ability to pay maintenance and/or lack thereof.

In the event that a parent is refused access to a child, he or she can approach the Clerk of the Children’s Court to make an application for a parenting plan in terms of section 33 of the Children’s Act,  setting forth the terms whereby access to a child is granted. The parenting plan is essentially an agreement between the parents regarding the upbringing of the child, including but not limited to, access to the child, maintenance, and education.

The parents may agree and incorporate into the parenting plan the following:

  • The primary carer of the child;
  • Access to the child by the other parent, having due regard to, inter alia, weekends, school holidays, birthdays, special occasions, and transport arrangements;
  • The amount of maintenance payable including or excluding, inter alia, medical expenses, and/or school fees and expenses;
  • Consent and arrangements regarding travel outside the province, outside the country, etc;
  • Procedure to follow when a dispute arises in terms of the agreement.

The parties may opt to make a parenting plan an order of court and a parent who is not abiding by it can be held in contempt of court subject to exhausting all alternative methods of dispute resolution.

As a parent, you have the obligation to maintain your child and the right of access to your child. Although these issues are closely related, they remain two distinct and separate matters with different legal processes. Therefore, it is unlawful for a parent to withhold maintenance of a child when access to that child is refused and vice versa. 

Reference List:

  • Children’s Act 38 of 2005
  • Maintenance Act 99 of 1998
  • School for Legal Training: Attorneys’ Practice Study Guide Gawie Le Roux 2018

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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