Homework Help Question & Answers

Mrs Solly signed as a surety for her nephew that wanted to start a panel beating company.Mrs Soll...

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 borrowsmoney 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

0 0
ReportAnswer #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 suretyship does 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 creditor is not privy or party to. The moment the surety fully answers to the creditor for the obligation created by the principal debtor, such obligation is extinguished. At the same time, the surety may seek reimbursement from the principal debtor for the amount paid, for the surety does in fact “become subrogated to all the rights and remedies of the creditor.”
Benefits to a surety: the surety will always have the right of subrogation where the surety can step into the shoes of the principal & use the contractual rights of the surety in order to recover the cost of making the payment or performing on behalf of the principal even in case of no express agreement between the principal & the surety.
If the principal debtor is aware that his debt is going to become due & starts disposing his properties in order to prevent the surety from seizing the surety can compel the principal to settle the debt & release him from the obligation to make the debt payment.

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 gets 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 & 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.

Add Homework Help Answer
Add Answer of:
Mrs Solly signed as a surety for her nephew that wanted to start a panel beating company.Mrs Soll...
Your Answer: Your Name: What's your source?
Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
More Homework Help Questions Additional questions in this topic.
Need Online Homework Help?
Ask a Question
Get FREE EXPERT Answers
WITHIN MINUTES
Related Questions