The validity of a Suretyship embodied in a credit agreement

It is common for an application for the supply of goods or services to contain a clause that binds the signatory as surety for payment on behalf of the applicant.

A typical clause may read:

By his/her signature hereto, the signatory hereby interposes and binds himself as surety and co-principal debtor in solidum for the due faithful and punctual performance of all obligations undertaken by the abovenamed Applicant in favour of the Creditor, under renunciation of the legal exceptions of excussion and division, the full meaning and import of which he is fully conversant with.

In the matter of Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 the Supreme Court of Appeal held that the suretyship was invalid as the signatory had not known, or been informed that the document embodied a personal suretyship.

The Court was of the view that:

(1)  The suretyship agreement must have a prominent heading which proclaims that it is such.

(2)  The clause containing the suretyship must be conspicuous.

(3)  The form must identify that the signatory is signing in their capacity as surety.

(4)  The signatory must sign as surety.

Contact us should you wish us to review your credit agreement or if you have signed an agreement that, unbeknown to you, contained suretyship provisions.

Comments are closed.