DURING my many years of private practice, I have encountered several individuals who have been left destitute and penniless after rushing to sign deeds of suretyship with little understanding of the implications of their action.
Only when the messenger of court or sheriff of the High Court would have pounced on them and attached their assets to recover the principal debtor’s dues towards the creditor, will they spring into action.
On many such occasions, such action will be belated since their signature to the suretyship documents would have sounded the death nail.
It becomes necessary therefore, to bring into light the hazards that a suretyship document pauses to those good Samaritans who may be persuaded to assist those seeking to acquire goods on credit or to borrow loans.
By definition, a “suretyship” is a contract in terms of which a person (“the surety”) undertakes to the creditor of another (“the principal debtor”) that if the principal debtor fails to perform the principal obligation, the surety will perform it. It is therefore, a contract formed between the creditor and the surety.
A more illustrative example may be captured in the following fact situation.
A, a relative of B has gone to Edgars stores to acquire clothing items on credit, and the shop has placed the condition that such credit can only be extended if a surety undertakes to indemnify the creditor through a deed of suretyship.
A then approaches B, his cousin, with a request for B to sign the deed of suretyship (which on many occasions is part of the credit forms that A is called upon to complete.)
Without applying his mind to the meaning of a suretyship, B proceeds to append his signature, most crucially, driven by the feelings of humanity for his relative.
This document at times is signed by B in the faith that A will obviously not default on the installments and that no danger will accordingly visit him.
Time passes and A defaults on the monthly installments that he would have been expected to pay towards Edgars stores.
Consequently, when suing A, Edgars stores will join B as a defendant based on the suretyship and may end up getting judgment even without his knowledge.
After the Sheriff’s execution process, all hell will break loose after B would have discovered his indiscretion of signing the deed of suretyship. Carelessness and at times outright negligence on the part of B results in his misery.
Having committed to indemnify the creditor in the event of the principal debtor defaulting, B will lose complete interest in the matter the moment he signs the document. A diligent surety would be expected to constantly check on A to ensure that he is up to date with his installments towards Edgars stores.
In the event that A would have become financially indisposed, B would have to take up the installments without first having to wait for the creditor to institute court action.
The obligation of the surety towards the creditor only arises in the event of the principal debtor’s default.
What the surety is expected to pay is limited to the extent of the principal debtor’s indebtedness such that if a larger portion of the debt would have been extinguished, the surety would be expected to pay the smaller portion of the debt remaining outstanding.
There is ordinary suretyship, then there is when a surety binds himself as both surety and co-principal debtor. In such a situation, the surety becomes jointly and severally liable with the principal debtor.
There are certain defences that are available to a surety but these are better not shared in this forum as they are material for consumption for legal minds.
Where a surety would have paid a debt on behalf of a principal debtor, there are certain remedies available to him and one such remedy is a claim against the principal debtor.
Such a claim will be for the capital debt that would have been paid to the creditor as well as interest and legal costs.
In the event of the surety having suffered damages, like in a situation where his goods would have been attached, removed and auctioned, he can also claim compensation.
Where the principle debt has been discharged by operation of law, like through prescription, automatically, the suretyship also lapses. It also lapses by the simple fact of the principal debtor settling all his indebtedness towards the creditor.
It must be made clear that the principal debtor’s insolvency does not release the surety because the very purpose of requiring a surety is to make sure that payment to the creditor is done in the event of the principal debtor failing to pay.
The major lesson to be learnt is that, a suretyship should not be signed unless one is fully aware of the consequences of his actions.
Further, once signed, there must be a consistent monitoring of the principal debtor to ensure that his obligations towards the creditor are settled.
The unpleasant experience of one’s act of kindness turning into bitterness and regret is not right and must be avoided at all costs.
Muza is a Harare-based legal practitioner. He writes in his personal capacity.