Abstract
The nettlesome matter of operative mistake and suretyships tucked away in credit applications tends to find its way into the law reports on a rather frequent basis. This phenomenon is hardly surprising because in the cut and thrust of modern commerce, and even more so in lean times, individuals are keen to apply for credit on behalf of the corporate entities which they represent, but less eager to stand in for these debts when they cannot be serviced. From the contractual perspective of mistake, these cases tend tofollow a familiar pattern. Commonly, a member of a close corporation or director of a private company applies on behalf of the close corporation or company, as the case may be, for some or other form of credit from another party. Usually, within a business context, credit will not be granted without some form of security, and in these instances more often than not the representative is required to agree to a personal suretyship in favour of the creditor, which is often embodied in the credit application form itself. Oncethe representative has appended him or her signature to the application form, he or she inexorably finds himself or herself simultaneously bound as surety and co-principal debtor, the formal requirements for a suretyship agreement having been complied with (as prescribed by s 6 of the General Law Amendment Act 50 of 1956). On the whole older case law displays a reluctancy on the part of the judiciary to excuse a surety on the basis of material mistake in such circumstances, but in Brink v Humphries & Jewell (Pty) Ltd (2005 2 SA 419 (SCA)) the Supreme Court of Appeal adopted a far more lenient approach in favour of the surety, and perhaps heralded a not too subtle change in the law. This note examines the way in which the courts have adjudicated similar cases, and specifically whether more recently they have reinforced the generally stricter approach of old or been prepared to follow the path which Brink seemed to have cleared.
Highlights
The nettlesome matter of operative mistake and suretyships tucked away in credit applications tends to find its way into the law reports on a rather frequent basis
The more lenient approach taken in Brink has yet to find favour with the courts (compare generally Langeveld v Union Finance Holdings (Pty) Ltd supra; and Cecil Nurse (Pty) Ltd v Nkola supra), who seem to prefer a fairly strict application of the caveat subscriptor rule in circumstances where signatories have undertaken personal suretyships for credit extended to the corporate entities which they represent
The courts have likewise remained true to the traditional sentiment that a person will not lightly be relieved from liability under a contract which he or she has signed (compare eg, Hartley v Pyramid Freight (Pty) Ltd t/a Sun Couriers supra; Absa Bank Ltd v Erasmus supra; Dole South Africa (Pty) Ltd v Pieter Beukes (Pty) Ltd supra; and Kuehne & Nagel (Pty) Ltd v Breathetex Corporation (Pty) Ltd supra)
Summary
The nettlesome matter of operative mistake and suretyships tucked away in credit applications tends to find its way into the law reports on a rather frequent basis. This phenomenon is hardly surprising because in the cut and thrust of modern commerce, and even more so in lean times, individuals are keen to apply for credit on behalf of the corporate entities which they represent, but less eager to stand in for these debts when they cannot be serviced. This note examines the way in which the courts have adjudicated similar cases, and whether more recently they have reinforced the generally stricter approach of old or been prepared to follow the path which Brink seemed to have cleared
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