Deeds of Suretyship and the Consumer Protection Act: Escaping Liability Through Non-Compliance

Imagine signing a document to help a friend or a small business secure a loan, only to find yourself facing a hefty debt when they can’t pay.

This scenario is all too common with Deeds of Suretyship, where you promise to cover someone else’s debt. In South Africa, the Consumer Protection Act, No. 68 of 2008 (hereafter “the CPA”), offers a potential escape route if the creditor doesn’t follow its strict rules.

Our firm recently assisted a client in a matter where we successfully raised non-compliance with the CPA as a defence in order to render a suretyship unenforceable. We intend to elaborate on that matter further in this non-academic article/blog post to help you understand how to avoid liability if the creditor failed to adhere to the provisions of the CPA.

Disclaimer

This non-academic article/blog post is for informational purposes only and does not constitute legal advice in any way, manner, or form. It is intended solely to provide general guidelines on some factors to consider related to the subject matter. The information contained herein reflects the legal position as of the date of publication. However, readers should note that the law is constantly evolving and subject to interpretation. As such, it is possible that other legal practitioners may hold different views from those expressed in this article.

What Is a Deed of Suretyship?

A Deed of Suretyship is a legal contract where you, the surety, agree to pay a creditor if the principal debtor—such as a friend, family member, or company—fails to settle their debt. For example, if you sign as a surety for a startup’s loan, you’re responsible if the business defaults.

In most cases, such suretyships even go so far as to impose liability jointly and severally as surety and co-principal debtor. This means the creditor can hold you liable for payment even without first approaching the friend, family member, or company for whom you stood surety.

In South Africa, the General Laws Amendment Act, No. 50 of 1956, requires these agreements to be in writing, signed, and clear about the extent and duration of your liability. Accordingly, it is not possible to stand surety by means of an oral agreement.

Suretyships are common in both business (e.g., directors guaranteeing company loans) and personal contexts (e.g., helping a relative secure credit). However, they can become a financial nightmare if you’re not fully aware of the risks—especially if the creditor doesn’t comply with consumer protection laws.

What Is the Consumer Protection Act and When Does It Apply?

The Consumer Protection Act, No. 68 of 2008 (“CPA”) is South Africa’s cornerstone legislation for protecting consumers from unfair business practices. It ensures transparency, fairness, and accountability in transactions.

The CPA applies to consumers, defined as individuals acting for personal purposes or juristic entities (like small businesses) with assets or turnover below R2 million at the time of the transaction. In suretyship cases, the CPA comes into play only if either the debtor qualifies as a consumer — for instance, an individual signing for a personal loan or a small startup with limited assets.

If the creditor is a supplier (e.g., a bank offering credit), the CPA governs the agreement, imposing strict requirements to protect consumers from exploitative terms.

Requirements of the Consumer Protection Act for a Valid Deed of Suretyship

The CPA sets out specific requirements for contracts, including suretyships, to ensure they’re fair and transparent. Non-compliance can render the agreement void or unenforceable. Key provisions include:

• Plain Language (Section 22(1)(b) and Section 49(3)): The agreement must be written in clear, understandable language that an average consumer can grasp. Complex legal jargon buried in fine print violates this rule. In a recent matter we handled, our client (the surety) argued that the suretyship clause contained legal jargon and did not explain the obligations in understandable terms.

• Notice of Risk or Liability (Section 49(1)(b) and 49(4)(a)): Creditors must clearly inform the surety of any terms that impose risk or liability, such as the potential to pay the debtor’s full debt. This notice must be conspicuous—likely to catch an “ordinarily alert consumer’s” attention. In the same case, it was argued that the creditor failed to highlight the suretyship’s risks, as the clause was hidden among other standard terms, breaching this requirement.

• Fair Terms (Section 48): The CPA prohibits unfair, unreasonable, or unjust terms, such as unlimited liability or indefinite obligations. If a suretyship’s terms are excessively harsh, they can be challenged as non-compliant.

  
  

In the referenced case, the surety argued that the creditor’s failure to use plain language and provide conspicuous risk warnings violated Sections 22 and 49 of the CPA, rendering the suretyship defective. Importantly, the creditor bears the burden of proving compliance.

Non-Compliance Cannot Be Condoned

A critical point is that non-compliance with the CPA’s mandatory requirements cannot be condoned by any court—not even by an order of the High Court. The CPA’s protections are statutory, meaning creditors must strictly adhere to them.

In the referenced case, the surety argued that the creditor’s failure to comply with Sections 22 and 49 (plain language and risk disclosure) rendered the suretyship void—and no court could overlook these breaches.

It is further necessary to emphasise that a defence based on legislative non-compliance is legally valid and not a mere technicality, as confirmed by the Cape Town High Court in Tumileng Trading CC v National Security and Fire (Pty) Ltd (2012). If a creditor fails to meet these standards, the suretyship is unenforceable, and courts lack the authority to waive these statutory obligations.

Conclusion

This article has explored how the Consumer Protection Act can help you escape liability under a Deed of Suretyship when creditors don’t follow its rules. We started with an introduction to the risks of suretyship and the CPA’s protective role.

We defined a Deed of Suretyship as a contract holding you liable for another’s debt, governed by the General Laws Amendment Act. The CPA was introduced as a consumer safeguard, applying to individuals and small businesses with assets or turnover below R2 million.

We outlined the CPA’s key requirements for suretyships—plain language (Section 22), clear risk warnings (Section 49), and fair terms (Section 48)—using a real case where a surety challenged a creditor’s non-compliance. Finally, we noted that CPA non-compliance cannot be condoned by any court, reinforcing the strength of this defence.

If you’re facing a suretyship claim, check for CPA violations and consult a lawyer—your escape route might be closer than you think.