Ideally, when you contract with a trust, the agreement should be in the name of the trustee or trustees acting on behalf of the named trust. But where the trust is named as a party to the contract that does not render the contract invalid. This is the welcomed finding by the Supreme Court of Appeal in Standard Bank v Swanepoel NO.

The court pointed out that a trust is a legal institution of a special kind. It is a legal entity or institution or arrangement even though it doesn’t have a legal personality.

In this case the Harne Trust unsuccessfully tried to escape liability for an overdraft and the trustee tried to escape liability under a suretyship because the agreements were entered into in the name of the trust and not the trustee.

There are two lessons to take away.

If you don’t want defences raised against your claim make sure that you describe the contracting parties exactly according to the name (and if possible registration or identity number) of the legal person involved in the transaction. Secondly, where possible, get a guarantee rather than a suretyship. Guarantees can be made to survive a defence relating to the validity of the principal agreement because they are not subsidiary in nature.