Question

Mrs Solly signed as a surety for her nephew that wanted to start a panel beating company. Mrs Solly’s nephew has being lying about his business doing poorly and continuously borrows money from Mrs Solly. Due to this lie, Mrs Solly does not want to fulfil her obligations in terms of the Suretyship Agreement. Legally advise Mrs Solly on the following:

1.1 The nature of a Surety Agreement

1.2 The benefits available to a Surety

1.3 The various ways in which a Surety Agreements may be terminated

Answer 1

• A surety ship requires the principal debtor to whom the surety is bound by way of ancillary obligation of segregate identity from obligation between the debtor & creditor.
• The surety ship don bind the surety to the creditor. Inasmuch as the latter is vested with the right to proceed against the former to collect the credit in lieu of proceeding against the principal debtor for the same obligation
• At the same time, there is also a legal tie created between the surety and the principal debtor to which the credit' or is not privy or party to.
• The minute the surety fully answers to the creditor for the obligation created by the principal debtor, such obligation is extinguished.
• At the alike time, the security may seek compensation from the nearly everybody significant debtor for the quantity paid, for the security does in fact turn out to be Subrogated to all the rights and remedy of the creator, advantage to a safety
• the surety will always have the right of Subrogation where the insurance be able to step into the shoes of the main & use the contractual rights of the surety in order to recover the cost of manufacture the payment or performing on behalf of the major even in case of no state agreement between the main & the surety.
• If the principal debtor is aware that his debt is going to become due & starts disposing his property in order to prevent the surety from seizing the surety can force the principal to settle the debt & release him from the obligation to make the money owing figure
• Surety or guarantee can be terminated in various ways:
• Guarantor's death: the guarantor will not be in force on receipt of notice of his death by the bank Revocation by guarantor.
• The guarantor can cancel the continuing guarantee by notice the creditor as future transaction. Debtor's death the surety gets automatically terminated on debtor's death.
• The creditor can receive the amount from debtor's estate. In case of default by legal heir amount can be demanded from the guarantor.
• Insanity f the surety: if the creditor comes to know the surety's sanity. the agreement gym terminated.
• Fraud: guarantee obtained by fraud or misrepresentation is invalid. Debt payment if the debtor himself makes the payment on due date the agreement gets terminated.
• Agreement changes: when the creditor makes agreement changes with the debtor then guarantee is discharged.
• Negligence of the creditor if creditor does any act which is to be done for benefit of the surety 8 doesn't do.
• The surety will be discharged. Unauthorized time extension: if the creditor provides time to the debtor for payment without the knowledge of the surety, the surety becomes terminated. Discharge of debtor.
• By any agreement between the creditor and debtor or any act if the principal debtor is discharged then surety will be automatically discharged.
• Bank amalgamation: If two or more banks amalgamate the guarantee will cease for all future transactions unless there is an agreement.