We have in previous articles pointed out the importance of a suretyship as security to a creditor, given that with the limited liability of companies and close corporations creditors can often find themselves in an undesirable position when it comes to debt recovery.

For such an agreement to be valid and binding it is essential that the general requirements of a contract are satisfied, namely the surety must–

1) Have the capacity to form such an agreement.

2) Accept the offer to secure the creditor.

3) Have the intention to secure the creditor.

We have also previously looked the potential problems of incorporating a suretyship into the body of the standard terms and conditions of a credit application in light of the Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA) judgment where 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.

A full analysis of the case can be found here.

But over and above that one has to take careful note as to how the suretyship is completed.

Section 6 of the General Law Amendment Act 50 of 1956 requires that a contract of suretyship will only be valid if the terms thereof are embodied in a written document signed by or on behalf of the surety.

According to Sapirstein and Others v Anglo African Shipping Co (SA) LTd 1978 (4) SA 1 (A) what the above section requires is that the following four; be embodied in a written document;

1) The identity of the Creditor.

2) The identity of the Surety.

3) The identity of the Principal Debtor.

4) The nature and amount of the Principal debt.

In Fourlamel (Pty) Ltd v Maddison 1977 (1) SA 333 (A), the court held that this meant that , if the deed of suretyship did not contain the names of the creditor, principal debtor and co-surety when it was signed by the surety, it was not a valid deed of suretyship in terms of section 6.

This principal was qualified by the court in Jurgens and Others v Volkskas Bank Ltd 1993 (1) SA 214 (A), which held that:

Section 6 of the General Law Amendment Act was silent as to when the surety's signature had to be affixed to the document, and it was immaterial whether the surety signed the document only after all the material terms had been written therein or, as in the instant case, the surety signed the document first and thereafter, by his own hand or that of his agent, completed the document by filling in the material terms: in either case the surety's signature served to authenticate the document.

From a practical point of view this means that creditors should when a suretyship is submitted to them by a surety:

a. Ensure that the proper parties are indentified in the document in the correct place (for example that the name of surety has not been put in the space for principal debtor); and

b. not accept incomplete suretyships from sureties and then completing the details themselves.

Either of the above two actions could result in a court holding that the suretyship is an invalid.