Suretyship agreements: What are they and what are the requirements

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 upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Deceased’s will declared invalid, despite clear wishes

The Wills Act sets out the requirements for a valid Last Will and Testament. For a will to be valid, it must be signed and witnessed. What happens if the wishes of the deceased are clear, but the document does not meet the requirements of a valid will?

This was the heart of the matter in Estate Late Elaine Ilsia Williams and Others v Hendricks and Another, heard in the Western Cape High Court.

In this matter, the close relations of the deceased sought an order directing the Master of the High Court to accept as a will for the purposes of the Administration of Estates Act, a pro forma document signed by the deceased in which she gave instructions to a bank to draft her Last Will and Testament.

The nature of the bank document was consistent with its printed title, “Will Application/Aansoek om testament.” It is apparent from the terms of the document that the bank offers a service for the drafting of wills. The service is provided free of charge if the bank’s trustee company is nominated as the executor.

The deceased’s instructions to the bank in respect of the content of the will were framed as follows: “I would like to give my full estate to my son until he is of age as well as any other monetary payouts as a result of any claims.” It would appear that the deceased also wished her will to provide that the bequest to her son should be administered in a trust until the child attained the age of 21.

The will application form was completed by the deceased with the assistance of a representative of the bank on the day before she died. She was terminally ill with cancer at the time. The deceased passed away before her instructions for the drafting of a will were executed.

The applicants relied on Section 2(3) of the Wills Act: “If a court is satisfied that a document or the amendment of a document drafted or executed by a person who has died since the drafting or execution thereof, was intended to be his will or an amendment of his will, the court shall order the Master to accept that document, or that document as amended, for the purposes of the Administration of Estates Act, 1965 (Act 66 of 1965), as a will, although it does not comply with all the formalities for the execution or amendment of wills referred to in subsection (1).”

As is evident from the wording of Section 2(3) of the Wills Act, it is required of an applicant seeking an order of the sort contemplated by the provision to establish, amongst other things, that the document in question was intended by the deceased person to be his or her will. It is in that regard that the application runs into difficulty on the merits. Nothing specifically indicates that the deceased intended the document to be anything other than what it appears to be – an instruction to the bank to draft a will.

The court held that there was no evidence that the deceased intended the will application to be anything other than an application for a proper will to be drafted. Therefore, the applicants failed to prove the requirement that the deceased intended the document to be her last will and testament, as required by Section 2(3) of the Wills Act.

Courts are wary to declare documents that do not comply with the requirements of the Wills Act as valid wills. It is advisable to obtain professional assistance from an attorney or a fiduciary expert with the drafting of your Last Will and Testament.

Reference List:

  • Wills Act 7 of 1953
  • Estate Late Elaine Ilsia Williams and Others v Hendricks and Another [2021] ZAWCHC 66

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Must employees disclose their vaccination status?

While employers cannot force their employees to be vaccinated, there are various grounds for dismissing employees who object, provided that the employer has conducted a thorough risk assessment to determine the need for vaccination. They also need to provide every possible reasonable solution to accommodate them.

One of the grounds on which an employer can let go of an employee who refuses the jab is the refusal of sharing medical information if they wish to be exempt from their workplace’s vaccine programme for medical reasons. If an employee objects on medical grounds, they may be sent for medical testing to prove the veracity of their claims.

Employers must, however, ensure that they are obtaining the consent of their employees before they send them for medical testing and that all the provisions of the Employment Equity Act are closely complied with in relation to discrimination.

However, an employer can make the disclosure of medical information mandatory for a public policy reason. Employers can argue that mandatory vaccination and vaccination-related information are critical to the organisation and necessary for the company to continue its operations. An option would be for the inclusion of an employment policy or a workplace vaccination policy which states that vaccination and Covid statuses must be disclosed. If the employer can show that the non-disclosure of it prevents the company from operating, or that it endangers others, it can go as far as dismissing the employee.

In terms of the guidelines and directives of the Health Professions Council of South Africa, registered health practitioners can be approached for a patient’s medical details. Any personal information can, however, only be shared in alignment with the council’s ethical rules and regulations. Confidential information can only be shared with the express consent of the relevant parties. Any of the personal information can be shared if all parties expressly grant such permission.

However, in some instances, the law can require that medical professionals provide and/or divulge certain medical information without the consent of a patient, by way of a court order if required by law, and/or if the disclosure is in the public interest.

Although civil actions for breach of confidence are rare, the issue can be a minefield for the unwary. Thus, those who are about to reveal and/or compel the disclosure of confidential information should carefully consider their grounds for doing so and be clear that there is either consent, lawful authority, or some public interest justification.

Reference List:

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)