Question 4
S buys a car for R 20 000 from J. S’s friend, Lebo, enters into a
contract of suretyship with J to secure S’s debt for the amount
of R 10 000.
Which ONE of the following statements is correct?
1. The contract between J & L will only be valid if it is in
writing and signed by or on behalf of the surety.
2. L has bound herself as surety for S’s debt and is therefore
liable for the total amount of the outstanding balance.
3. The contract between J and L is not binding since S was
not a party to it and he does not know of its existenc
2. L has bound herself as surety for S’s debt and is therefore liable for the total amount of the outstanding balance.
The correct statement is:
2. L has bound herself as surety for S’s debt and is therefore liable for the total amount of the outstanding balance.
To determine which statement is correct, let's break down the given information and analyze each option:
1. The contract between J and L will only be valid if it is in writing and signed by or on behalf of the surety.
This statement is partially correct. In general contract law, some contracts must be in writing to be enforceable, such as contracts for the sale of land. However, suretyship contracts, like the one between J and L, do not always require a written agreement. Suretyship contracts can be valid even if they are verbal or implied, as long as certain legal elements are met. Therefore, option 1 is incorrect.
2. L has bound herself as surety for S's debt and is therefore liable for the total amount of the outstanding balance.
This statement is correct. In suretyship, the surety (in this case, Lebo) agrees to take on the responsibility of paying the debt if the debtor (S) fails to do so. By entering into the contract of suretyship with J, Lebo has agreed to be responsible for the debt of R 10 000. If S fails to pay, J can hold Lebo liable for the outstanding balance. Therefore, option 2 is correct.
3. The contract between J and L is not binding since S was not a party to it, and he does not know of its existence.
This statement is incorrect. The contract of suretyship is a separate contract between J and L, and it does not require S's direct involvement or knowledge. As long as J and L have entered into a valid suretyship agreement, it is binding between them. S's lack of participation or knowledge does not invalidate the contract between J and L. Therefore, option 3 is incorrect.
Based on our analysis, option 2 is the correct statement.