To Pay Or Not To Pay
contractual Debt And Prescription Thereof

TO PAY OR NOT TO PAY
CONTRACTUAL DEBT AND PRESCRIPTION THEREOF


Candice Grace

The meaning of prescription

In terms of the Prescription Act[1] (hereinafter referred to as “the Act”) prescription is described as the period of time available in order to pay off a debt (i.e. the obligation to pay money). As soon as the period lapses, the debt is considered to be extinguished.[2]

It is important to note that the person responsible for paying the debt is referred to as the Debtor and the person receiving payment of the debt is referred to as the Creditor.

Prescription period starting date

Section 11 of the Act[3] states that the prescription period available for contractual debts (referred to as “normal debts”) prescribes three years from the date when the debt becomes due. This date is usually stated in the contract as the obligation to make payment.

The Supreme Court of Appeal (SCA) in Apalamah v Santam Insurance Co[4] also confirmed that a debt is only due when it can be recovered by the Creditor. A debt becomes recoverable once the Debtor has an obligation to perform immediately. This date is usually stated in the contract as the obligation to make payment or the date when payment is due.

Therefore, prescription starts from the date when payment is to be made and runs for a consecutive period of 3 years thereafter.

Instances where a prescription period may be delayed

The prescription period may be delayed in circumstances where the facts of the matter inhibit a Creditor from instituting an action against the Debtor. The Act lists these impeding facts as follows[5]:

  1. The Creditor is a minor / was a minor or declared insane by an order of court;
  2. There is a court order declaring that the Creditor is mentally unfit;
  3. The Creditor is a person under curatorship;
  4. The Creditor is prevented by superior force including any law or any order of court from judicial interruption of prescription;
  5. The Debtor leaves South Africa for a period of time;
  6. The Creditor is married to the Debtor;
  7. The Creditor is in a partnership with the Debtor and the debt arose as a result of the partnership;
  8. The debt is a dispute in an arbitration;
  9. The Creditor is a juristic person (company, co-operative or close corporation) and the Creditor is a member of the governing body of such a juristic person; or
  10. The executor of a deceased estate has not yet been appointed.

The impediment causing the delay must have taken place within 1 year pending the date of prescription. The prescription will thus be delayed and the 1 year will be added on to the prescription period.[6] Consider the following example: A contract stipulates that the debt is payable (becomes due) on the 20th of January 2015. Ordinarily, prescription will start from the stipulated date of payment and prescribe 3 years later, on the 20th of January 2018. On the 20th of January 2016 the debtor leaves South Africa on a business trip for 12 months and returns on the 20th of July 2017. The return date of the Debtor will be within the 1 year period before the normal prescription period will prescribe. Therefore, 1 year is added from the date on which the delay occurred, making the new prescription date the 20th of July 2018.[7]

Instances when the prescription period may be interrupted

Prescription may be interrupted either by acknowledgment by the Debtor[8] or by judicial interruption.[9]

For purposes of determining interruption by acknowledgment, the bench in Petzer v Radford (Pty) Ltd[10] stated that “acknowledgment must amount to an admission [by the Debtor] that the debt is in existence and that he is liable. Furthermore, the admission must cover every element of debt and should exclude any defence as to its existence”.

Should an interruption occur as a result of acknowledgment by the Debtor, the Prescription will start afresh either from the day of interruption, the date on which the debt becomes due again or any date agreed upon by the parties as a result of postponement of the date payable.[11]

Conclusion

Prescription is available to Debtors as a preventative remedy as it prevents Creditors from instituting old claims and  provides certainty to Debtors as to whether a debt is still owing or not. A prescription period is not always easily determinable and every factor relating to the contract should be considered. Therefore, a Debtor wishing to rely on prescription as a defence should always consult with a legal practitioner.[12]

[1] Act 68 of 1969

[2] Section 10 of the Prescription Act 68 of 1969; see also “Prescription” available at www.legalwise.co.za (01/06/2017)

[3] Act 68 of 1969

[4] 1975 (2) SA 229 (D)

[5] Section 13 of Act 68 of 1969

[6] Anye Jansen van Rensburg “Prescription of debt” available at www.schoemanlaw.co.za (30/01/2018)

[7] Prescription available at www.legalwise.co.za (01/06/2017)

[8] Section 14 of Act 68 of 1969

[9] Section 15 of Act 68 of 1969

[10] 1953 (4) SA 314 (N) at 317

[11] JH Eugenè Joubert “The story of the dead Springbok OR Prescription – the next chapter in the NCA debt saga” available at www.rebels.co.za (31/01/2018).

[12] Anye Jansen van Rensburg “Prescription of debt” available at www.schoemanlaw.co.za (30/01/2018).

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

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