Signing Surety – The Sting’s in the Tail
In the beginning you are totally relaxed. The bank won’t give your son/daughter/spouse/partner/company/friend a loan unless you sign surety and, as always, it seems perfectly safe at the time. So you ask yourself “What’s the harm? It’s just bank red tape. Johnny’s new business will fly. He’ll pay back every cent to the bank and I’ll have helped him. That’s a parent’s job isn’t it?”
But in the end you get stung. Your signature comes back to haunt you, because our law will generally hold you to what you sign, with very little wriggle room. A recent High Court case illustrates.
The mother, the son and the suretyship
- A mother signed an unlimited suretyship as “co-principal debtor” for her son’s bank debts totaling almost R4.8m from a home loan, an overdraft, and a credit card account.
- After her son’s estate was sequestrated the bank sued her for the shortfalls.
- The mother tried everything she could to evade liability. Her main defence was an attack on the validity of the suretyship, and she supported this with a string of claims, often self-contradictory. The bank official had misled her into thinking that she was signing not a suretyship but simply a consent form for an account migration. She hadn’t read the document. She had read the heading. Blank spaces in the document were filled in later. It conflicted with an oral agreement. It was limited not unlimited. Her signatures on other documents had been forged.
Let the signer beware – “I signed by mistake” won’t cut it
This defence, said the Court, amounted to a mistake on the mother’s part in signing the document. That’s a defence that our law won’t accept unless you can show that your mistake was both material and reasonable. You will have to prove that you had no intention of entering into the contract and that you were misled by a misrepresentation as to the nature of the document, or as to its terms.
Our law strongly presumes that if you sign a document you intend to enter into the transaction it contains, and the principle of “let the signer beware” (“caveat subscriptor” to the legal fraternity) makes it difficult to succeed with any form of “I signed by mistake” defence.
On the facts of this case the Court rejected the mother’s version of events as false, found that she knew exactly what kind of document she was signing and indeed intended to stand surety, and ordered her to pay the bank in full plus interest and costs on the attorney and client scale.