This Acknowledgment of Debt Agreement (“agreement”) is used when the borrower acknowledges that he/she is indebted to the lender. On signature, this agreement becomes binding and the lender is now deemed a creditor and the borrower is deemed to be the debtor.

The parties record the capital amount, any interest that will be charged/accrued and any other costs (if applicable) in writing. The dates and period of payment are recorded as well, together with the consequences of non payment or adherence to the terms and conditions of the agreement.

A duly signed agreement will constitute a liquid document and judgment can be granted against the debtor should he /she be in breach of the agreement. In this agreement the debtor consents to judgment, should he/she be in breach of the agreement.

Example:
Jack lends R 10 000.00 to Simon. Simon acknowledges that he owes Jack the money together with interest. Jack wants to bind Simon to payment terms to which they have agreed to. Both Jack and Simon then enter into an acknowledgment of debt agreement confirming the debt amount, interest payable and the payment period that the parties have agreed to. Should Simon pay the agreed amount together with interest, Jack has received his money loaned together with interest.

In the event that Simon has failed to meet his payment obligations, Jack has a full recourse based on the strength of the agreement. Jack can instruct his attorney to issue and serve summons on Simon based on the agreement which is a liquid document. In the event that Simon does not pay the demanded amount, or fails to defend the summons, Jack can approach the court for default judgment against Simon.

A Cession Agreement maybe used where the rights and obligations under an agreement needs to be ceded to another person. By signing the Cession Agreement, the Cedent agrees to transfer to the Cessionary the right to claim money and or any other benefit owed to the Cedent in terms of the Agreement.
The reasons for ceding an agreement are varied, for example, could include security for a debt, restructuring of an organisation, the transfer of a business, or the purchase of a debt.

Example:
Sipho is renting retail premises from XYZ Properties, in which space he is operating clothing store. Sipho has handed over a rental deposit of R7500.00 to XYZ Properties in terms of the lease agreement.

Sipho sells the business to Thabo. They agree that Thabo will continue with the current lease after obtaining the landlord’s consent. They further agree that Thabo will pay Sipho the rental deposit held by the landlord together with the purchase price. Sipho and Thabo then enter into a Cession Agreement whereby Sipho cedes his right to claim the rental deposit from the landlord to Thabo.

Cohabitation refers to unmarried persons living together in a long term relationship, similar to married couples.

Cohabitation and Common Law marriages are not recognized in South African Law and couples are often mistaken that their Cohabitation is a Common Law Marriage.
The only way in which the couples rights and obligations are protected in such circumstances are through a cohabitation agreement.

It is advisable that this agreement be entered into in writing. This agreement can be concluded at any time during the relationship/cohabitation.

The agreement can be used to record the parties rights and responsibilities during the relationship with regard to income and expenses and the division of any joint property, maintenance payable (if applicable), rights to insurance and or pension funds and who will continue paying certain expenses and whom will be responsible for any debt, etc.

It is important that the agreement states that the parties are not in a marriage.

In the absence of any agreement, the parties will retain their own property and shall be entitled a share in proportion to their respective contribution of that property. Each party will have to prove ownership of their respective property and it is therefore advisable to retain proof of purchase.

Example:
Bob and Jane are not married to each other. They have however been living together as husband and wife for the past 8 years. 3 years ago, Bob and Jane entered into a cohabitation agreement, a few months before the birth of their child. In their agreement, they have specified the terms should their relationship end. Each party would retain and continue to pay for their respective motor vehicles. The house will be sold and the surplus after settling the home loan will be divided equally between the parties and all other movables will be divided by mutual agreement. Each party will retain their respective pension funds and with regard to the minor child, both Bob and Jane be co-holders of parental rights and responsibilities, with the primary place of residence for the minor child being that of Jane. Bob would retain the minor child on his medical aid scheme and will pay a monthly maintenance of R 1500 for the minor child. Both Bob and Jane will contribute equally in the education expenses of the minor child.

When a married couple decide to divorce each other, and the couple have mutually consented to the divorce, the couple generally enter into a settlement agreement stating the terms of their divorce with respect to any minor children, assets, liabilities, insurance and pension funds and may even state which party will be liable for the costs of the divorce.
The settlement agreement is attached to the Divorce Summons. Should there be any minor children born of the marriage, the settlement agreement would have to be endorsed by the Family Advocate. The Family Advocate must be satisfied that any decision regarding the minor child has been made in the best interest of the minor child. On divorce, the settlement agreement is made an order of court. Contents of the settlement agreement include:

  • Rights, Responsibilities and Contact in regard to any minor children born of the marriage
  • Maintenance for the minor child/children
  • Spousal Maintenance (if applicable)
  • Specify Medical and Education expenses for the minor child/children
  • Division of the joint estate – property, moveables, vehicles, bank accounts etc.
  • Division of any pension fund and or insurance policy
  • Specify which of the parties that will be responsible for which debt

In order for a person to act on behalf of another person, he or she must have the necessary authority to do so. This authorisation is generally given in a form of a power of attorney.

A power of attorney is a formal document by which a person (“the principle”) authorises another (“the agent’) to act on his or her behalf in any juristic act – a juristic act is an act whereby legal relationships are created and which has legal consequences. Entering into an agreement on behalf of another would be one such example.

A power of attorney is not a contract but rather an expression of the principles wills that the agent has the necessary authorised power to act on his behalf. A valid power of attorney document binds the principle as if he personally engaged in that transaction/act and indemnifies the agent from any personal liability arising from that contract.

If the agent was not properly authorised to act on behalf of the principle, the principle acquires no rights and duties in respect of that contract and a third party can hold the agent personally liable for breach of warranty of authority.
In order for the power of attorney to be valid, the principal must have the necessary contractual capacity.

Example:
Thandie owns and operates several restaurants all across South Africa. She attends to almost all business contractual matters personally. She also travels abroad regularly on business. In her absence, business needs to operate as usual. Accordingly she has appointed Steven to be her second in charge to oversee the day to day operation and to engage in any contractual matter that may arise in her absence. In order for the contracts to be binding on Thandie and her business, Steven has to be duly authorised to represent Thandie. Therefore Thandie and Steven had to enter into a power of attorney agreement, thereby giving Steven the necessary power to act.

A lease agreement is generally entered into between a landlord and a tenant in respect of property leased or rented for either residential or business premises.
The terms and conditions of the lease agreement has to be specifically stated and agreed to. It is advisable that landlord and tenants enter into a lease agreement as there leaves little or no room for miscommunication regarding the terms of the lease, rental and payment details and use of the leased premises.
A lease agreement also allows for clarity regarding the termination of the lease period and vacation of the leased premises.
Essential components of a lease agreement are:

  • Full and Exact personal and contact details of both the landlord and tenant
  • Domicilium addresses of both parties
  • Duration of the lease
  • Commencement and termination date
  • Rate of Basic Rental due per month including due date of rental
  • Specify which of the parties shall be liable for electricity, municipal and other utility expenses.
  • Details of deposits to be held by the landlord
  • Clauses relating to subletting and cession of the leased premises
  • Details of the extent that the landlord will be responsible for maintenance and repairs of the leased premises
  • Details of each the Landlord and Tenant’s respective duties.
  • Specific details regarding any breach of the lease agreement

A letter of demand is usually addressed to the person/s whom you are claiming from. The demand can either be for payment of an agreed amount or for a person/s to perform a specific action in terms of a contract. This demand must be addressed to the responsible person/s indebted to you for either payment of a specified amount or for performance of a specific task. The letter must specify a time period for the other party to perform and inform them that failure to perform within a specified time will result in further legal action be taken against them.

Example of a demand for payment:
Mike is a supplier of office equipment. He sells his products to many client’s all over Durban. One of his client’s is Nancy. Nancy has purchased office equipment to the value of R20 000.00 from Mike. Mike has delivered an invoice for the sold goods to Nancy on delivery and has since sent her 2 statements via mail. Mike has also telephonically requested that Nancy settle the outstanding invoice numerous times. Mike has now decided to address a letter of demand to Nancy demanding that she settle the outstanding amount. Mike can address a letter of demand to Nancy because he has a definite amount that he is claiming for.

Example of a demand to perform a specific action:
Linda has entered into an agreement with Bloo Pools and Gardens to build her a new pool and landscape her garden surrounding her pool for a contract amount of R 50 000.00. Linda has paid the full contract price to Bloo Pools. Bloo Pools have not completed the contract in its entirety and are still to complete tiling around the pool and attend to the landscaping of the garden. Linda has called Bloo Pools numerous times for them to attend to the completion of the contract. Bloo pools have ignored Linda’s numerous requests.
Linda is now addressing a letter to Bloo Pools giving them 7 days to complete the contract, failing which she will institute further legal action against Bloo Pools.

A Non Disclosure Agreement (“NDA”) is a legal contract by which one or more parties agree not to disclose confidential information that they have shared with each other as a necessary part of doing business together. The NDA is a contract in which parties agree not to disclose information such as confidential material, knowledge, trade secrets, databases and any other sensitive information covered by the agreement. The NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets.
NDA’s are generally signed when companies, individuals or other entities intend doing business with each other and would require access to the privileged information in order to understand the business and consider the business proposal for the purpose of evaluating the potential of the business.
It is also possible for an employee to sign and NDA with an employer on commencement of employment if the employee will have access to the employer’s confidential information and any trade secrets of the company.

Example 1:
Company A intends to purchase a certain division of Company B. In order for Company A to evaluate the feasibility of acquiring the business from Company B, Company A would require access to certain confidential information from Company B. Company B may be reluctant to divulge this information with the fear that their trade secrets maybe made public. Company B may then insist that Company A enter into a NDA with Company B before such confidential information can be made available to Company A.

Example 2:
Peter is employed as a production manager at ABC Industries. Within the scope of Peter’s employment, Peter will receive training and the necessary skills development in producing a key product of ABC Industries. Peter will also gain knowledge and have access to various trade secrets in this particular industry that will be made available to him by ABC Industries. Under these circumstances, it would be critical that ABC Industries enter into a NDA with Peter when Peter is entering into a contract of employment with ABC Industries. In the event that Peter resigns from ABC Industries and decides to go work for a competitor, Peter would not be able divulge any of confidential information and trade secrets that he has gained during his employ at ABC Industries.

When one is purchasing a house or any other immovable property, an offer to purchase must be completed by both the seller and the purchaser. The conditions of sale are terms inserted into the Offer to Purchase by both the Buyer and Seller. Commonly, these conditions of sale include: subject to finance and bond approval, subject to a sale of another property, and subject to the specialist inspection approvals.

An Offer to Purchase must include a condition that the sale is subject to a bond approval being obtained within a realistic amount of time. Once a home loan has been approved by your Bank, you should notify the Estate Agent to ensure that your offer becomes valid and this will enable the buying process to continue. Property is normally sold voetstoots, meaning you buy the property with all defects and faults. However, a condition of sale can often include the repairing of faults by the Seller, should the Buyer wish to negotiate this in the Offer to Purchase.
The following are necessary contents to any purchase and sale agreement:

  • Full details and particulars of the seller, purchaser and if applicable, the selling agent
  • Domicillium of all parties
  • Occupation Date
  • Purchase Price and details of any deposit that needs to be paid
  • Is occupational rent applicable, if so, the amount must be stated
  • Any other clauses or special conditions pertaining to the particular sale
  • Details of all fittings and fixtures that will remain on the property

A Partnership is an association of between two and twenty people who are contractually bound to each other to operate a business together with the intention of making a profit. Each partner will need to contribute either funds, goods or services. The partners will have to agree to share profits in accordance with the Partnership agreement signed.

A Partnership is simple to set up as it does not have to be legally registered at the Registrar of Companies. The only requirement from the State is that a stamp duty be paid in connection with the Partnership agreement.

Characteristics of Partnerships

  • Each partner must make a contribution to the Partnership
  • It does not have a juristic personality separate from the partners. Each partner can bind the Partnership
  • If the Partnership’s estate is sequestrated, the estates of the partners can follow unless the partners undertake to pay the debts of the Partnership
  • The profits and net assets are usually distributed amongst the partners on dissolution of the Partnership in proportion of their respective interests
  • The life of the Partnership is not separate from the lives of the partners (so if one partner dies, leaves or is declared personally insolvent the Partnership becomes null and void)
  • On dissolution, the assets are liquidated, creditors are paid and partners must stand in for any shortfall
  • The Partnership is not a “person” for tax purposes and is not taxed as a company would be
  • There are no statuary audit requirements

Types of Partnerships

  • General/ordinary Partnership:  Here the partners are jointly and severably liable for the debts of a Partnership

Example:

John and Bob decide to form a Partnership in business that services and repairs motor vehicles. John has the necessary funds required to set up the business, whilst Bob has the necessary skills and expertise to service and repair the motor vehicles. Both partners will be jointly and severably liable for all expenses and debts in the business and at the same time shall share in the profits of the business.

  • Anonymous (sleeping) Partnerships: the anonymous partner is not known to the public and liable to the partners for the pro rata share of debts.

Example:

Tshepo decides to invest in a business that is currently operating with 4 partners. The 4 partners decided to sell 20% of their business to Tshepo. Tshepo agrees to purchase the 20% stake,  provided his shareholding is not made public. Only the partners will know of his shareholding. However Tshepo will be liable to the partners for 20% of any of the business debt.

Commanditarian Partnership: the partner commandite is purely a financial participant with a restricted liability-similar to a shareholder in a company. He shares in the profits and losses, but his liability is restricted to his specific contribution or an agreed amount.

An agreement of sale is a written agreement signed by both the buyer and the seller (and also by the seller’s spouse if he/she is married in community of property), whereas an offer to purchase may be either oral or written. If it is in writing and signed by the buyer and accepted by the seller, an offer to purchase constitutes a binding agreement of sale, whereas an oral offer is not binding.

An agreement of sale should include the following:

  • Full details of both the seller and the purchaser
  • A full description of the goods being sold.
  • Purchase price and any deposits payable should be noted.
  • Details of delivery
  • Confirm when risk, benefit and ownership will pass to the buyer
  • State whether there are any existing defects, or whether the goods are being sold “voetstoets”
  • Domicillium of the parties

A restraint of trade is an agreement between an employer and an employee, or a provision in an employment contract that restricts an employee from being employed by a competitor of the employer, or establishing a business in competition with the employer following termination of employment.

A purchaser of a business may also request that the seller sign a restraint of trade agreement in order to prevent the seller from competing with the purchaser in a similar business within a specified vicinity of the existing business.

A restraint enables one to protect the proprietary information of its business: trade secrets, confidential information, trade connections, customers and clients, as well as the goodwill of the business.

Though every person has the right to choose a trade, occupation or profession freely, restraints are legal and very much enforceable in South Africa. Restraints will only be invalid and unenforceable if deemed unreasonable. An employee alleging that a restraint is unreasonable bears the onus of proving this in court. Restraints are considered unreasonable if they are in conflict with public policy and the public interest. In this regard, it is important to determine whether public policy requires that the restraint of trade be maintained or rejected.

The enforceability of a restraint of trade is, therefore, dependent on various factors, and there is no generic approach. Each case will be determined based on its own set of facts.

Example 1:

Vusi is a specialty chef in authentic African cuisine. Vusi works for Juluka Restaurant, a restaurant which specializes in traditional African cuisine. Juluka Restaurant is situated in Long Street, Cape Town. Long Street is renowned for restaurants, pubs and nite clubs. There is other specialty African cuisine restaurant in Long Street. Vusi has resigned from Juluka and the owner of Juluka insists that Vusi sign a restraint of trade agreement to prevent Vusi from working at the neigbouring restaurants. In terms of the agreement, Vusi will be permitted to work at other restaurants outside a 5km radius of Juluka Restaurant.

Example 2:

Selvan has just sold his Garden services business to Harry. The business was servicing 3 neigbouring suburbs in Durban. One of the conditions of the purchase of the business was for Selvan to sign a restraint of trade agreement in which agreement, Selvan will not open a new garden services business in the same areas that he was previously servicing with the business that he has sold.

An agreement of sale of a motor vehicle is a written agreement signed by both the buyer and the seller when a motor vehicle is being sold.

An agreement of sale of a motor vehicle should include the following:

  • Full details of both the seller and the purchaser
  • A full description of the motor vehicle being sold.
  • Purchase price and any deposits payable should be noted.
  • Details of delivery
  • Confirm when risk, benefit and ownership will pass to the buyer
  • The seller needs to warrant that he is the titleholder and that he is entitled to sell the motor vehicle
  • State whether there are any existing defects, or whether the goods are being sold “voetstoets”
  • Any special conditions of that need to be noted
  • Domicillium of the parties

In order for a person to act on behalf of another person, he or she must have the necessary authority to do so. This authorisation is generally given in a form of a power of attorney.

A power of attorney is a formal document by which a person (“the principle”) authorises another (“the agent’) to act on his or her behalf in any juristic act – a juristic act is an act whereby legal relationships are created and which has legal consequences.

In a Special power of attorney agreement, the principle authorises the agent to act on his/her behalf on a specific act/s.

Entering into an agreement on behalf of another on a particular transaction would be one such example.

A power of attorney is not a contract but rather an expression of the principles wills that the agent has the necessary authorised power to act on his behalf. A valid power of attorney document binds the principle as if he personally engaged in that transaction/act and indemnifies the agent from any personal liability arising from that contract.

If the agent was not properly authorised to act on behalf of the principle, the principle acquires no rights and duties in respect of that contract and a third party can hold the agent personally liable for breach of warranty of authority.

In order for the power of attorney to be valid, the principal must have the necessary contractual capacity.

Example:

Sally owns and operates several shoe stores all across South Africa. She attends to almost all business contractual matters personally. She does not travel often, as she is always occupied with the day to day running of the business. In her absence, business needs to operate as usual. Accordingly she has appointed Louis to be her second in charge to oversee the day to day operation and to engage in any contractual matter that may arise in her absence.  The authorisation to act on her behalf would only be valid for the period that she is away. In order for the contracts to be binding on Sally and her business, Sally and Louis had to enter into a special power of attorney agreement, thereby giving Louis the necessary power to act within a specified time period  and that the authorisation would only be valid for the periods of the stipulated dates only. Any transactions or contracts entered into by Louis outside these periods will not be binding on Sally and her business.

A suretyship can be defined as a contract whereby a person, namely the surety, undertakes to the creditor of another person, namely the principal debtor, that as accessory to the principal debtor’s liability, the surety two will be liable for the debt.

Suretyship agreements are used in everyday business by creditors to decrease their exposure when extending credit by binding third party individuals or entities.

In the event that the principle debtor does not satisfy the debt, the surety or co-principle debtor shall be called upon to repay the debt.

Example:

Peter applies for a loan from ABC Bank to purchase additional equipment for his business. Peter does not have sufficient security to secure his loan facility with ABC Bank. ABC Bank will only grant Peter a loan if Peter will provide additional security to the bank in the form of a surety who will undertake to repay the loan should Peter be unable to pay the loan. Peter’s brother Tom has agreed to stand as surety and co-principle debtor for the loan that Peter has taken from ABC Bank. Should Peter fail or neglect to repay the loan, ABC Bank will be able to approach Tom to repay the loan.

South African labour law states that you must give your employees a written document that outlines in writing the terms and conditions of their employment. This is generally known as a contract of employment. All employees irrespective on the number of employees in your organization or the size of the organization must be provided with a contract of employment on commencement of their duties. Domestic workers, garden staff, drivers and other general employees too must be provided with an employment contract on commencement of their duties.

Section 29 of the Basic Conditions of Employment Act (BCEA), states that  anyone who works for you – whether they are full-time, contractors or temporary workers – must receive a document containing certain information regarding the conditions of their employment. This can take the form of a letter of appointment or you can create something more formal and suited to your business. By getting your employee to sign the document, you can avoid disputes about whether or not it was given and what it contains.

Information that must appear in the document includes:

Employer and worker Details

  • Employer’s full name
  • Employer’s address
  • Worker’s name
  • Worker’s occupation, or a brief description of the work

Employment details

  • Place/s of work
  • Date of employment
  • Working hours and days of work

Payment details

  • Salary or wage, or the rate and method of calculating wages
  • Rate for overtime
  • Any other cash payments
  • Any payments in kind and their value
  • Frequency of payment
  • Any deductions

Leave

  • Any leave the worker is entitled to. Refer to the BCEA if you’r unsure of what this is

Notice/contract period

  • Period of notice required for termination or
  • Period of contract

The law requires that the contents of the document must be explained to the employee in a language he/she understands. You must also update this employment document and provide the employee with a new copy when:

  • The law changes
  • You and your employee agree to changes in the terms and conditions
  • You increase the employee’s pay or benefits. In this regard, you can simply add a supplementary letter to the original contract, alternatively include an annual escalation clause in the contract of employment.
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