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KTH suretyship.pdf - General introduction to real security...

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General introduction to real security and suretyshipTheme 1: Introduction-A creditor may in certain circumstances demand some form security in orderto protect himself against the possibility of the debtor being unable to pay hisdebt.-A creditor may require that a third party should bind himself contractually forthe performance of the obligation, in which instance we are dealing with apersonal securityknown as suretyship.-If the debtor has assets, the creditor may request him to bind all or part of hisassets as security for the debt. In this case we are dealing withreal security.-If the debtor has a personal right or claim against a third party, he may alsocede this personal right or claim to the creditor as security, in which event theprinciples applicable toreal securityalso apply.-In most instances, real security is preferred to personal security due to theadvantage it has for the creditor.-In the case of suretyship, the creditor merely obtains an additional personalright against the surety which still entails the risk that he will neither getperformance from the principal debtor nor from the surety (who is also adebtor).-In contrast, in the case of real security, a specific thing (property) is separatedto secure the performance of the obligation by the debtor. The creditor withreal security therefore enjoys priority as to the proceeds of the thing overother creditors without such security.-Sometimes suretyship may be combined with real security where the suretyalso provides a mortgage bond over his property to the creditor by way of asurety bond.)-It is important to note that both personal and real security are dependent onthe existence of a so-called principal debt or obligation, which entails that thesecurity can only exist insofar and for as long as the principal debt exists.-For this reason, suretyship and real security are said to be anaccessorynature.This principle implies that there should be a valid principal obligationbetween the debtor and creditor for the security right to exist.
-The general enforcement procedure broadly entails the obtainment of a courtorder by the creditor against the debtor and thereafter in the event of non-payment of the judgement debt, the execution thereof.-Execution can inter alia be by any means of an attachment of assets. Butwhere the debt is unsecured, the creditor is at risk that the debtor may nothave the means to meet the judgement debt.

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Term
Fall
Professor
S van wyk
Tags
Debt, Existence, Surety, Debtor

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