Wide-ranging renunciation of benefits clauses remain commonplace in contracts of suretyship. Such clauses serve to ensure that sureties agree to renounce the defences the law otherwise allows. However, in terms Regulation 32 of the National Credit Act, 2005, the Minister of Trade and Industry, by virtue of Section 171 of the Act, has prescribed that three defences can no longer be waived by consumers in a credit agreement. These are the exceptio errore calculi (the defence of a wrong calculation), the exceptio non numeratae pecuniae (the defence that money was not paid over) and the exceptio non causa debiti (the defence that no cause of action exists).

The National Credit Act, 2005, does not apply to all contracts of suretyship. The contract of suretyship, which is a ‘credit guarantee' as it is defined in Section 1 of the Act, is a contract that meets certain criteria set out in Section 8(5) of the Act. Effectively, the Act will apply (barring a few exceptions) where the surety undertakes to ‘satisfy upon demand any obligation of another consumer in terms of a credit facility or credit transaction' to which the Act applies. The requirement is that the principal agreement is a credit agreement as defined by the Act.

By including a general renunciation of benefits clause in such a suretyship agreement, creditors will be at risk of the provision being severed from the rest of the agreement or altered to render it lawful, if it is reasonable to do so. Alternatively, a court may declare the entire agreement unlawful on the ground of the unlawful provision.

It is therefore advisable to review your suretyship contracts to make the necessary adjustments where necessary to avoid being met with a myriad of defences when calling on sureties to perform.

Written by: Robyn Shar, Candidate Attorney at Deneys Reitz