Summary of Business Law 210 (2015)
Notes were made using both the slides and book (Business Law 4th edition) to flesh out the summary notes.
Table of contents included for quick navigation.
Covers chapters 18, 19, 20, 24, 25, 27, 29, 30, 31, 32, 33, 34, 35, 36
Organised by main headings, subhea...
Chapter 34 – Introduction and Sequestration .......................................................................................... 38
Chapter 35 – Effect of Sequestration ....................................................................................................... 44
Chapter 36 – Administration of insolvent Estates, Composition, Rehabilitation, Offences and Corporate
Insolvency ................................................................................................................................................. 53
,Chapter 18 – General Introduction and Suretyship
SURETYSHIP
Para 18.01 to 18.05
Creditor ask security to protect himself
If the debtor cannot pay
Two general types of security
1. Personal security (e.g suretyship)
o 3rd (debtor) party binding himself contractually to original obligation
o Can be ceded
2. Real security (examples?)
o Demand to give assets as security
Real security is better
With personal security you have 2 personal rights and both might not be able to pay
Real right – an object is identified to secure in place of the performance
Accessory nature
A principal debt must exist before a security can exist
A valid principal obligation must exist
Application of National Credit Act 34 of 2005 – surety always involves credit
,Suretyship – nature & formation
Para 18.06 – 18.09
What is suretyship?
A Contract
Where a 3rd party binds himself to the creditor
o 3rd Person who takes responsibility for another's performance of an undertaking
For proper performance of debt of another
Nature of suretyship – accessory obligation
Primary obligation→ principal debt
Can only exist for as long as the main obligation exist
Formation of suretyship
Requirements for a valid contract
Contract between principal creditor and debtor
Principal debtor need not be aware
o NB may affect right of recourse if against debtor’s wishes
o Surety can’t claim back from original debtor
Formalities – General Law Amendment Act 50 of 1956
o Terms must be reduced into writing & signed by surety
o Must state identity of all the parties
o Nature of secured obligation + extent to which it is secured
,Consequences of suretyship
Para 18.10 -18.15
If debt is due & payable – can claim from debtor or surety
Do not have not have to claim from debtor first
Benefits of Suretyship
Benefit of excussion
The process whereby a creditor must proceed against a principal debtor before proceeding
against a surety or subsidiary debtor.
Benefit of division
If more than 1 surety
If creditor demand payment from more than 1 – claim that it is divided pro rata among the
sureties
Benefit of cession of actions
If a surety has performed – They have a right to claim, that all securities that the creditor had,
o Must be transferred by cession
Can refuse payment until debtor has ceded.
Right of recourse against co-sureties –
o Can claim pro rata from other surety
Right of recourse against principal debtor –
o Have the right by operation of law to claim from original debtor
Situations in which some benefits not available:
Bind self as surety & co-principal debtor
Impractical to insist on benefit
Renunciation – where the surety said he will not use the benefit
, Para 18.16 – 18.17
Termination of suretyship
Payment of principal debt
Material alteration of principal debt to the prejudice of suretyship
Expiration of time
Termination of suretyship agreement
E.g. compromise or release
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