Surety Agreement Signed

by Jill & Cathy on October 10, 2021

The guarantor undertakes to vouch for the debtor and, consequently, to be legally liable to the debtor if the debtor does not comply with a provision of the franchise agreement. In practice, most guarantee agreements provide that the guarantor undertakes as guarantor and accomplice. In such cases, the obligations of the guarantor are equivalent to those of the principal debtor and he is jointly and severally liable to the creditor. A consequence of the signature, both as guarantor and co-endet, entails the renunciation of the benefits of the excussion. This means that the creditor does not need to first try to collect the claim from the principal debtor before imposing the agreement against the guarantor, a particularly painful agreement for the guarantor/accomplice. The biggest problem I encounter in my dealings with clients is either that they don`t know what debts they have signed a guarantee for (normally for a company), or that they don`t know the sum of the debts to which they are subject as collateral, or that they forget to take care of the guarantees in the event of liquidation or divorce. Also remember if a member of a close company or the director of a company resigns to agree with the creditor that this member will be discharged as guarantor, otherwise the member/director will remain liable as guarantor, even if he has resigned. If you ever find yourself in a situation where you need to be a guarantor for another party, be sure to make sure you know the identity of the parties involved, the nature and extent of the debt, and the period for which you can be held liable. In this regard, it should be noted that “continuation of guarantee” clauses are often included in credit agreements relating to the guarantee. They may be able to commit the guarantee on the debt of the principal debtor in the long term and thus engage the guarantee for debts that may be due at any time in the future, even if this guarantee is no longer linked to the debtor. A practical example is that a manager of a company makes a long-term commitment as guarantor of that company`s debt to a given supplier or service provider, following a guarantee. In such a case, this guarantee can be successfully maintained in a surety contract, even after leaving the employment of the company in question – a very unpleasant surprise that could be to wait long after the signing of the initial guarantee contract the reckless guarantee. Another classic example in which people sign a guarantee is when a husband and wife or two people buy real estate together.

Both parties will engage as guarantors and principal debtors and no bank will give a loan if this is not the case. The General Law Amendment Act, 50 of 1956, provides that a valid contract of guarantee must be contained in a written document signed by or on behalf of the guarantor. The existence of a principal obligation is a prerequisite for the validity of a guarantee contract. . . .

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