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Thread: Property purchase and surety rights

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    just me duncan drennan's Avatar
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    Property purchase and surety rights

    I'm busy looking through an offer to purchase contract for a property, and was wondering exactly what this section meant. The context is for a juristic person buying the property and the signatory signing surety and co-principal debtor.

    The signatory hereby renounces all benefits arising from the following legal exceptions and privileges:

    non causa debiti – the right of the surety to require that the creditor must prove that there was a legal cause underlying the debt;

    de errore calculi – the right of the surety to require that the creditor must prove that there was no error in calculation of the debt owed to him by the debtor;

    revision of accounts – the right of the surety to require that the creditor must prove that the accounts need not be debated;

    no value received – the right of the surety to require that the creditor must prove that the debtor had received value from the creditor;

    beneficium de duobus vel pluribus reis debendi – the right of the surety to require that the creditor should have recourse against one or more other persons liable for the same debt jointly with the surety and not to proceed against the surety alone;

    beneficium divisionis – the right of the surety, where there is more than one surety for the debtor's obligations, to require that the creditor must not sue the surety for the full amount owing under the surety ship but only for a pro rata share of the debt;

    beneficium cedendarum actionum – the right of the surety to require that before the creditor sues him, the creditor must first cede his right of action against the debtor to the surety;

    or any other exceptions which might legally be taken by him against any claims made against him in his capacity as a surety as aforesaid, with the force and meaning whereof the said signatory declares himself to be fully acquainted.
    What are the implications of ceding all of these rights? What are the scenarios where one would want these rights?
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    Site Caretaker Dave A's Avatar
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    I hope you're still in negotiations.

    I'm trying to figure why this is all in the offer to purchase. Surety issues are between you and the financier. And heck, if you're making the offer, set out the terms you want and leave it to the seller to counter-offer. Although again, I'm not sure why sureties would be any business of the seller.

    EDIT: Thought occurs - It's a first sale?
    Quote Originally Posted by dsd View Post
    What are the implications of ceding all of these rights? What are the scenarios where one would want these rights?
    Much the same answer for both questions - you certainly don't want your juristic entity to default. Basically you'll be as easy if not easier to sue than the actual debtor you're standing surety for.

    Generally I start negotiations around sureties by getting out my ruler and black pen and drawing some lines. It's about the quickest way to establish just how negotiable the terms of the surety really are.

    A good option is to run it past a lawyer acting for you. The credibility leverage of having a lawyer draw those black lines can win some easy yards.

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    just me duncan drennan's Avatar
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    "I hope you are still in the negotiations" hehehe

    Yes, I'm just looking at putting down a deposit on a property that will be developed. It is the longest sale agreement that I have seen

    The little bit preceding it goes like this, which may help for the surety issue to make sense - effectively they want to ensure that the juristic person does what it has to to ensure the sale, which the signatory held surety if it does not,

    In the event of the said Company or Close Corporation or Trust or other legal person being duly incorporated or formed and adopting and ratifying the contract in terms of 1.1 and 1.2 above, then the signatory by his signature hereto, hereby interposes and binds himself in favour of the Seller as surety for and co-principal debtor in solidum with such Company or Close Corporation or Trustees of the Trust or other legal Person for the due and timeous performance by it of all its obligations as Purchaser in terms of the contract. The signatory furthermore guarantees that such Company or Close Corporation or Trustees of the Trusts or other legal person will comply with all its obligations as Purchaser in terms of this contract and furthermore indemnifies the Seller against any damages that it may suffer as a result of the breach of any of the terms of this contract by such Company or Close Corporation or Trustees of a Trust or other legal person. The signatory hereby renounces all benefits arising from the following legal exceptions and privileges:

    ...
    There are a whole bunch of other things that I've slowly been crossing out with my black pen. And lots of other things that I want to query with the agent. Even though they want you to use their conveyancers, I'm starting to suspect that it may be more prudent to find my own....
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    Site Caretaker Dave A's Avatar
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    I suppose the length of the agreement is because of all the penalty clauses should the developer default...

    There is a fairly strong case for going with the conveyancer of choice for the development - there's a lot of co-ordination involved. But having your own legal counsel handy for bouncing queries off or cracking the whip if needed doesn't hurt.

    Remember, the conveyancer's priority is to protect the rights of the seller anyway.

    A pity Sieg isn't in your part of the world.

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    Silver Member Eugene's Avatar
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    Duncan - as an attorney I have often come accross these common law exceptions (must say that I also recently signed a deed of sale containing all these terms). Honestly: I think that 98% of attorneys do not know what they mean and the other 2% are taking a chance. Will go through my civil practice notes when I have time and try to offer some indication and in which context they should be read.

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    Site Caretaker Dave A's Avatar
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    It's the first 4 that I find the most troubling. Particularly in the circumstances. The other 3 really are very common in sureties. (I'm not saying fair, just very common).

    Of all of them, renouncing the no value received benefit is to me the most "interesting" inclusion in the list.

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    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    Of all of them, renouncing the no value received benefit is to me the most "interesting" inclusion in the list.
    Yes, that one was the one that jumped out at me too.

    If I read it as a whole, the way I would understand it is that if a situation occurs where the signatory was called in as surety, the signatory would have no right to dispute the amounts or the validity of the claim.
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    Quote Originally Posted by dsd View Post
    What are the implications of ceding all of these rights?
    I am not a lawyer, but to my lay person's understanding the creditor is making it really easy for himself to get a judgement against you without having to prove anything more than simply making a statement.

    If you sign away those rights, the creditor can get a court of law to pronounce judgement against you, and presumably the court will not required of him to prove that his information about your debt is correct. Basically, by signing this, you're saying to the judge (in your absence) "Your Honour, I trust this creditor completely and I agree with everything he might say".

    This creditor is not interested in merely protecting his interests -- he is interested in being able to sue your pants off at the drop of a hat.

    The best kind of agreement is one that is fair to both parties. The above agreement favours only the creditor. It is malicious, in my opinion.

    What are the scenarios where one would want these rights?
    Well, presumably these rights are there for a reason, and the reason is surely to protect the interests of both parties in a legal action. By giving up rights, you are giving up protection of your interests. The only scenario in which you would not want these rights is one in which you don't particularly care about your interests... and if you're that kind of person, then you're either a squanderer or a religious nut. But that is just my opinion.

    non causa debiti – the right of the surety to require that the creditor must prove that there was a legal cause underlying the debt;
    Scenario:
    You pay off the debt. As far as you know, there are no further debts. The creditor decides to sue you for some imagined debt. Normally the onus would be on the creditor to prove that there is debt.

    By signing away this right, you are placing the onus on yourself to prove that there is not any debt. If you fail to prove it, then the creditor's claim (that there is debt) is upheld by the court.

    Tell me, in what world is this a good thing?

    de errore calculi – the right of the surety to require that the creditor must prove that there was no error in calculation of the debt owed to him by the debtor;
    Scenario:
    The creditor installs a cheap, foreign, off-the-shelf accounting system on his computer. One thing leads to another, and finally the computer tells him that you owe him a lot of money, even though you really owe him very little. Presumably the court would normally not be satisfied with just "according to my records back at the office" as sufficient proof of the amount owing.

    By signing away this right, you are placing the onus on yourself to prove that the creditor's records are faulty. If you fail to prove it, then the creditor's claim (regardless how he arrived at that figure) is upheld by the court.

    Again, I'm no lawyer, but these things look pretty stupid from my side of the fence.

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