Suretyships are a branch of law, which can be rather complex. In my practice, I've found that it's little understood by most lay people, especially when it comes to the legal defences that may be available to a surety. Suretyship contracts invariably contain clauses which states that, not only does the surety agree to waive certain defences available to him, but that the surety fully understands the meaning and effect of the defences, which he is waiving. In truth, almost all surety signatories don't have the slightest idea what the defences really mean. The fact that it is in Latin doesn't help matters much.
Firstly, we need to understand what is a suretyship contract. Simply put, it's a contract which allows a creditor, such as a bank, the right to recover payment of the debt from a third party (the surety), in the event the borrower (called the principal debtor) defaults on payment of the debt. A suretyship contract must be in writing. It must identify the parties namely the creditor, the surety, and the principal debtor. There must also be a valid debt owing by the principal debtor to the creditor.
We briefly unpack below the meaning of some of terminology applicable in suretyships.
Beneficium divisionis: The defence where a co-surety can insist that debt is divided between all sureties and he only be liable for his pro rata share of the debt.
Exceptio non causa debiti: The defence that there was no cause for the debt or that it did not exist.
Exceptio errore calculi: The defence of an error in calculation of debt.
Beneficium ordinis seu excussionis: The defence where a surety can compel the creditor to recover the money from the principal debtor first before proceeding against the surety.
De duobus vel phuribus reis debendi: This when there are two or more sureties who are jointly and severally liable, then either of them can be sued for the whole debt.
Exceptio non numeratae pecuniae: This defence is that the money was never paid to the principal debtor.
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