This blog was co-authored by Adrienne Hendricks (Candidate Attorney).
In two recent High Court judgements (First Rand Bank Limited v Initiative for Specialised Resource Management and Billion Property Developments v Nevzomark), the court considered whether initialling a suretyship agreement complies with the signature requirement in Section 6 of the General Law Amendment Act (the Act), which provides that a suretyship agreement must be in writing and signed by or on behalf of the surety.
In both cases, the surety initialled each page of the suretyship agreement but did not sign in full.
In Initiative for Specialised Resource Management, the court noted that the main function of a signature is to “authenticate the identity of the signatory” and “to evidence an intention to be bound”. The court found that the modern trend in respect of signatures emphasises the intention to be bound. On the facts, there was no issue as to the identity of the surety or his intention to be bound. Therefore, the court concluded that the suretyship agreement complied with the Act.
In the Billion Property Developments, the court held that the rule, let the signatory beware (caveat subscriptor), provides that the surety is deemed to have known that he was named as a surety in the lease agreement by signing the lease agreement and attaching his initials to the suretyship agreement. The surety was found to have accepted the obligations arising from the suretyship agreement which was accessory to the lease agreement. By signing the suretyship agreement, the surety undertook to be liable for the debts of the principal debtor under the lease agreement.
The courts’ approach emphasises the intention of the party to be bound as a key factor when considering the signature of a party to a suretyship agreement.
The full judgments can be accessed here: