Andrew and Mary owe ABC Bank R100 000. The bank requires security for payment of the debt. Andrew and Mary grant a mortgage over their house in favour of the bank. They agree in the mortgage deed that ABC Bank, without intervention of the court, may sell the house in execution if they do not pay their debt. They further agree that the bank may keep the house and have it registered in its name if they do not pay their debt. Discuss the validity of the mortgage agreement between Andrew, Mary and the bank with reference to case law. ACCORDINGTO SOUTHAFRICANLAW(5)
Based on the given information, the mortgage agreement between Andrew, Mary, and ABC Bank is valid in South African law.
In South Africa, a mortgage is a contract in which a debtor (Andrew and Mary) grants a creditor (ABC Bank) a right to claim and sell a property if the debt is not paid. It is a common practice for banks to require security, such as a mortgage, when granting loans.
The fact that Andrew and Mary agreed in the mortgage deed that ABC Bank may sell their house in execution without court intervention indicates that they acknowledged and agreed to this condition. This is in line with Section 56 of the South African Deeds Registries Act, which allows for the sale of mortgaged property without court intervention if the mortgage contract grants such powers to the creditor.
Furthermore, the agreement between Andrew, Mary, and ABC Bank allows the bank to keep the house and have it registered in its name if the debt is not paid. This is often referred to as a "dual or alternative hypothec" and is recognized and enforceable in South African law. A well-known case that supports this is ABSA Bank Ltd v Houdama (2002), where the court upheld the bank's rights to take ownership of the property upon default.
It is important to note that the validity of a mortgage agreement depends on compliance with all legal requirements, such as proper execution of the deed and compliance with any formalities prescribed by law. However, based on the information provided and the general principles of South African law, there is no apparent reason to question the validity of the mortgage agreement between Andrew, Mary, and ABC Bank.